How covid will change infrastructure investment

Back in June, Infrastructure Investor asked 10 leading market experts to predict how the pandemic would transform the asset class. Here’s a snapshot of what they said.

Sustainability gathers pace

“We must rebuild in a resilient and sustainable way. Most governments have called for stimulus plans involving infrastructure. In Europe, a combination of the Green Deal investment focus (already the key part of the EU budget), the need for resilient social infrastructure tested by the crisis and the already relaxed Maastricht rules for budgetary policy are likely to create a real acceleration in sustainable infrastructure investment.”

Thierry Déau, founder and chief executive, Meridiam

Rising interest in utilities

“Utilities in a regulated environment are becoming interesting again. That’s also because more municipalities, which may own utilities, have funding constraints, as they need to spend on healthcare and unemployment. We see that in the Nordics and the US. We see a lot of evidence of things that were in discussion around utilities now accelerating.”

Gordon Bajnai, head of global infrastructure, Campbell Lutyens

ESG grows

“The first sizeable reduction in greenhouse gas emissions in decades … will put even more momentum behind the principles of sustainability that underscore environmental, social and governance criteria. Members of pension schemes will want to know that the correct balance is there. Insurance companies will want to know that risks to [the] long-term viability of an investment have been thought through.”

Rosheen McGuckian, chief executive, NTR

Digital attracts investors

“Owners of heavily frequented infrastructure, such as train stations and airports, will need to consider further investment in constrained-access areas and crowd-intelligence technologies to minimise lengthy queueing and overcrowding. Employee travel behaviour, both in commuting and more broadly, is likely to evolve in the ‘new normal’, with greater investment from businesses in data bandwidth, video conferencing and collaborative ‘cloud-based’ tools. Digital infrastructure across telecoms and data centres will face greater demand and will continue to attract interest from infrastructure investors.”

Michael Hanna, head of infrastructure, Australia, IFM Investors

More government partnerships

“We expect there may be unique opportunities to partner with governments to support economic recovery and repairing the public balance sheet. As attention turns towards economic recovery, fiscal stimulus will increasingly focus on accelerating the pipeline of productivity-enhancing infrastructure projects. It is an ideal time for governments to increase their commitment to long-term ‘nation-building’ priorities, such as energy decarbonisation and network resilience, digital connectivity, transport network capacity and water security.”

Matina Papathanasiou, deputy head of global infrastructure, QIC

Renewed focus on alpha

“Alpha will shift back into focus for the rational infrastructure investor. It is impossible to imagine a world where we will not continue to cook meals, turn on the lights or run the tap. Infrastructure is essential, and the recent weeks and months have brought this fact squarely back into focus. So, downside resilience has been demonstrated across most infrastructure sectors. But should that be a cause for celebration? Or should investors demand more? I believe they should.”

Esther Peiner, managing director, private infrastructure Europe, Partners Group

Mega-trends shape opportunities

“Infrastructure investment opportunities will be shaped by megatrends related to demographics, policy, technology and, increasingly, sustainability. The pandemic will strengthen these trends and we intend to lean into them. For example, we believe that the green energy transition is likely to accelerate further, and consequently renewable power will continue to be the most active infrastructure sector in terms of dealflow.”

Anne Valentine Andrews, deputy head of real assets, BlackRock

New initiatives create momentum

“Looking at where opportunities may originate, I think it will be similar to what we saw in 2007-08: industrial companies that will face cash liquidity issues will have to sell some core infrastructure assets. That, combined with public deficits and a recession, will require governments to launch new initiatives to invest in the sector. As a result, I think infrastructure will gain more momentum.”

Mathias Burghardt, head of infrastructure, Ardian

Green transport accelerates

“[A] trend that could be accelerated is clean transport. Transport causes significant pollution, and no clean alternative is currently available for air travel. In the near term, pent-up desire for mobility could outweigh any environmental concerns. Nevertheless, we expect the preference for greener transport to accelerate.”

Laurence Monnier, head of quantitative research – real assets, Aviva Investors

Agri tech grows

“One of the ‘green shoots’ to have emerged as a result of the pandemic is the development of new sustainable infrastructure sub-sectors. Indoor vertical farming is set to disrupt traditional agriculture and will ultimately become a part of infrastructure investors’ portfolio allocations. In today’s environment of uncertainty, it is at the vanguard of ‘new’ infrastructure that has wide public support ”

Jeffrey Altman, senior advisor, Finadvice

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