When Professor Jeffrey Sachs, the leading economist and director of the Earth Institute at Columbia University, asked for the help of infrastructure asset class professionals in saving the planet, it didn't seem absurdly disproportionate to the capabilities of those present.
Sachs was speaking at the 2014 version of the Infrastructure Investor Berlin Summit and was addressing a packed room – a very large and packed room. The sea of faces listened intently as Sachs spoke of the “unmet challenges” of sustainable development as unprecedented global temperature rises jeopardise our collective way of life.
Infrastructure could be a vital force for good, he insisted, in a new global economy primarily driven by investment-led rather than consumer-led growth. At this, heads were nodding – this was a confident crowd up for a challenge. “Save the world? Sure! Where do I sign up?”
It wasn't until the opening panel that just a little anxiety seeped into the Hilton Ballroom. Giving it the title “Bubble trouble” was a test of nerve. All present were suddenly being invited to consider the practical implications of the wall of capital that appears to have descended on the asset class.
Thankfully, those up on stage offered some soothing balm for those now worried that the prospect of an overheated market would prove to be that rarest of things – a Berlin party pooper.
Peter Taylor of Australia's Hastings Funds Management highlighted the need to tie governments to contracts where there is a risk of negative interference. He specifically referenced his own firm's negotiations prior to its investment in Sydney Desalination Plant, where the historic ability of the New South Wales government to change terms of reference was removed. The basic point being that, whatever the pressure on returns, never be tempted to compromise on risk as a compensatory factor.
Another antidote to more intense competition was put forward by Charles Woodhouse of superannuation fund QSuper when he referred to the organisation's ambition to move quickly when the right deal comes along. QSuper has taken a practical step towards the realisation of that goal by boosting its tax and structuring resource to allow it to be better placed to meet deadlines.
Others alluded to the exploitation of niches as a counter-measure to the perceived flocking to core infrastructure opportunities. Talk of niches may prompt entirely healthy sceptical responses. Nonetheless, when Gavin Merchant of UK pension fund USS referred to his firm's positioning as a partner of choice for foreign groups wanting to invest in the UK, it sounded perfectly reasonable given recent regulatory unpredictability in a market long perceived as a relative safe haven.
A few examples of sensible-seeming strategic manoeuvres do not of course mean that everyone has a convincing response to the challenges posed as capital allocation hikes support a larger and more competitive infrastructure asset class. 2014 has the feel of a watershed year. And that's both exciting and scary.