Recently, I had the pleasure of attending the PEI Infrastructure Investors’ Council in Versailles, France. Many of the world’s leading infrastructure investors were represented at this extraordinarily informative conference.
While many topics were covered, I was struck by a collective concern/exasperation shared by investors and sponsors alike with a perceived increase, on a global basis, in governmental/political actions that are hostile to infrastructure capital investment — such as a government changing its rules retroactively after such rules have been relied upon.
It seemed that to a greater or lesser extent, all at the conference had been impacted by this — even if not directly then because of their inability to underwrite such risks going forward. In the past, such risks were usually associated with emerging countries, not with the mature democracies of Europe and North America. But of late, worries have increased about the actions of those within mature democracies. This fear of unprincipled governmental action is a huge impediment to the massive infrastructure investment needed in the 21st Century, not only in Europe/North America but throughout the world.
When government acts in an amoral fashion, the human progress in which we all believe, work so hard to achieve and in which we invest, is poisoned at source. Thoughtful progressives of the 21st Century cannot and should not abide this in quietly. We need to wield an enormous and yet largely, to date, latent and passive power to protect our shared objectives – which are also shared by, and essential for, the happiness of the overwhelming majority of mankind.
Our collective goal should be to create a force of opinion so strong globally that politicians and bureaucrats think twice before taking unprincipled action against members of the infrastructure investment community.
One approach might be to have a standing committee of investors and sponsors who would review egregious examples of governmental behaviour submitted by participating investors/sponsors and who would periodically publish/update a list of “Jurisdictions Potentially Hostile to Infrastructure Capital Investment”.
The committee would, of course, invite presentations from all sides to a controversial action and would avoid what are essentially legal disputes, where facts or law are still at issue. The purpose of the committee would not be to function as a court but to render an advisory opinion to the public at large when government has acted in a manner that is potentially hostile to infrastructure capital investment. However, where a legal judgment is rendered against government in a dispute involving infrastructure investors, such judgment would be relevant to assessing that government’s potential hostility.
The committee’s opinions would be published and noted by investors, lenders, rating agencies, sponsors – all the constituencies vital to infrastructure development. Jurisdictions making the list could remove themselves from it by taking actions to correct the perception of potential hostility. But the simple recognition by governments that the institutional investment community is monitoring unprincipled behaviour might have some preventative benefits.
Trade union support
Another avenue for preventative benefit would be a far more organised and coordinated liaison between infrastructure capital and organised labour than currently exists. Presently, sponsors and investors frequently approach organised labour on an ad hoc, project-by-project, basis for their support. No local chapter of a building trades union would want its jurisdiction to be on the list of Jurisdictions Potentially Hostile to Infrastructure Capital Investment. When an issue is brewing, closer coordination here would help enlighten politicians and bureaucrats as to the consequences of unprincipled actions.
I believe that those responsible for unprincipled actions should fear exposure both locally and globally to those they are really hurting by their actions – pension funds, life insurance companies and often their own constituents or close cousins. Sunshine can be an effective disinfectant. And, in the words of one of the Founding Fathers of my own country, Benjamin Franklin: “We must hang together, gentlemen….else, we shall most assuredly hang separately.”
Starwood Energy Group Global, LLC