1 Pandemic-driven change
‘Acceleration’ is the word commonly used to describe how covid is hastening the already growing influence of mega-trends such as technology and digitisation on investment decisions. Pre-pandemic, infrastructure owners might reasonably have expected a much longer, gentler transition period in which to fully adapt portfolios and strategies for a very different looking future that, at the time, seemed two or three decades away. But there’s a sudden dawning that tomorrow’s world is far closer than imagined.
2 Energy transition will pick up pace
It’s a sad truth that, without huge changes to the way we live, we are heading towards climate catastrophe. With domestic energy use ramping up as more people live, work and play remotely, the need for cleaner more efficient energy has become ever more pressing. So, let’s applaud the fact that more investors are playing their part in reversing the trajectory by backing energy transition from fossil fuels to renewables. Infrastructure Investor fundraising data shows this sector has grown as a favoured home for private capital in recent years and predicts this to flourish further in 2021.
3 Digital domination lies ahead
Society’s reliance on all things tech and digital grew stronger in 2020 as we all hunkered down at home, with broadband usage reportedly doubling in many parts of the world at the height of lockdown. Matt Evans, global head of digital infrastructure at AMP Capital, highlights how quickly things have changed: “Even a year ago, the case for fibre to the home was highly questionable. Now it’s a no brainer.”
We can only guess the extent to which the world will return to pre-covid norms. But the consensus is that the need for connectivity and reliance on tech and data will only intensify, which is why in this report we hear of data centres shaping up to become the asset class choice of the future for many investors. Infrastructure Investor fundraising data shows digital infrastructure and telecommunications receiving a greater slice of the pie, up 11 percent since 2018 and predicted to rise further in 2021.
4 Transport transformed
Amid lockdown, daily commutes to the office and business and leisure travel came to a virtual standstill. Passenger numbers have struggled to recover to pre-covid levels, hindered further by a second round of restrictions on people movement in October and November. Is the future for the sector as bleak as the figures would suggest?
Many assets in the sector remain publicly owned and governments may be keen to shift them off increasingly stressed balance sheets.
This could put private investors in pole position to pick up the mantle of transforming the sector and making planes, trains and automobiles fit-for-purpose for a future world and, critically, cleaner and greener. “People will always want to travel, and this sector remains attractive,” says John Bruen, senior managing director at Macquarie Infrastructure and Real Assets.
5 Asia-Pacific to attract more capital
Infrastructure Investor predicts capital allocation to Asia-Pacific will grow from 1 percent to 10 percent in 2021. Why? According to the Asian Development Bank, the region’s contribution to world GDP is expected to grow from just over 30 percent in 2020 to 52 percent by 2050.
A growing affluent middle-class population will demand more and better infrastructure. Music to the ear of investors looking for tomorrow’s opportunities.
“It is the phenomenal growth we’re seeing in the region that makes it an extremely exciting market opportunity,” agrees Frank Kwok, MIRA’s head of Asia-Pacific.