Seizing the future

Looking at what will shape the infrastructure space going forward is clearly an exciting exercise – not least because the trends are firmly rooted in the present.

Regular readers of our annual Future of Infrastructure report know it holds a special place in the Infrastructure Investor team’s heart. Sure, one of the reasons for that is linked to the fun nature of crystal-ball gazing. But the main one is because the trends discussed here are firmly rooted in the present.

Future of Infrastructure is not about pie-in-the-sky daydreaming – it’s about the trends that stand a strong chance of shaping the asset class’s future. It’s also about giving readers the insight to harness those trends.

For example, almost everyone these days will agree technology is having a meaningful impact on the asset class, creating new opportunities but also significant disruption. However, as the IFC makes clear, investors need structured frameworks to effectively deal with the impact of technology.

“We need to develop in-house ‘innovation muscle’ to continuously evaluate the threats and opportunities presented by technology disruption,” the IFC Global Infrastructure Fund’s Viktor Kats and Deepali Bahl argue.

That kind of “innovation muscle” requires flexibility, which is a concept InstarAGF develops at length. As chief executive Gregory J. Smith elegantly outlines, “many current tools for infrastructure finance and evaluation are more deterministic in nature, and do not account for uncertainty and flexibility”. Needless to say, that prescriptiveness risks stifling the kind of innovation the asset class sorely needs.

You will have got a strong sense of the need to brace for more accelerated change in what is seen as a traditionally stable asset class. Some of that change will be imposed by regulators and politicians, as we outline in our analysis of growing restrictions to foreign investment. “Governments will be much more assiduous and thoughtful about striking a balance between attracting foreign investment and creating suitable restrictions on deals which truly raise national security concerns,” Kirkland & Ellis’s Mario Mancuso told us. Let’s hope they get it right.

Finally, no edition of this report would be complete without looking at the latest trends driving the ongoing energy transition. But, while previous editions have focused on the emergence of new technologies, we look at a trend anchored in the past: the repowering of existing renewables assets.

Opinions diverge as to how big an opportunity repowering is and it’s true that it varies market by market. But as a long-term trend, making the most of existing assets by using new technology seems to be here to stay – in renewables and beyond.

This article is part of our Future of Infrastructure supplement. Please click here to view the entire report.