After all the wisecracking about ‘infrastructure week’ and the running joke that – much like Charles de Gaulle said about Brazil – the ‘US is the infrastructure market of the future… and always will be’, the country finally has an infrastructure bill.
Given the mountain he had to climb to get to where we are today, President Biden is entirely right to call the bipartisan infrastructure bill a “once-in-a-generation” opportunity. Of the internecine struggle that almost derailed it, we’ll say only this: it would’ve been a Dem shame if the bill had failed to pass in Congress.
But pass it did, so on to the question on everyone’s minds: does it really matter for the industry? We think it does.
When looking at the bipartisan infrastructure bill, it’s tempting to fixate on everything it’s not. At $1.2 trillion in size – including $550 billion in new spend – it is a long way from the $2.59 trillion the American Society of Civil Engineers says is needed just to keep US infrastructure in good repair. The bill is also not particularly friendly toward the private sector – and a world away from the ‘oven-ready’ government PPP programmes of yesteryear.
All of this risks missing the forest for the trees, though, because the most important thing the bill does is put infrastructure firmly on the agenda. With eight years of spending ahead of us – and a still unfunded multi-trillion dollar need – infrastructure is going to be at the forefront of the minds of federal and local government officials, pension administrators, financiers, you name it. Plus, its role as a job creator and GDP multiplier will be front and centre for all to see.
It is now up to the industry to make the most of this key first step to ensure that institutional capital – of which there is $18 trillion of US pension assets alone – plays its role as a crucial piece of the US infrastructure puzzle. For that to happen, a change of mindset is needed; one that sees the industry engage more robustly in the public policy debate.
When we discussed this with Sadek Wahba, I Squared Capital chairman and managing partner, onstage at our recent Global Summit, in Berlin, he was unequivocal: “Overall, as an industry, we’ve been extremely passive – and that’s a shame. Collectively, in this room, we probably employ close to a million people. We serve hundreds of millions of people every day in terms of the infrastructure we manage. We need to be much more vocal.”
Wahba, of course, has not been shy about engaging in the policy debate, and has been tireless in discussing his comprehensive proposals for channelling private capital into US infrastructure. He’s not entirely alone – IFM Investors has also done a good job of touting the benefits asset recycling could bring to the US – but this level of engagement is definitely the exception.
The status quo is best encapsulated by something Brookfield Asset Management chief executive Bruce Flatt said earlier this year, when he argued that the “less drama” there is with respect to private infrastructure funding, the better. “Because when there are big plans, often nothing happens. And therefore, just the slow and steady monetisation of infrastructure is the best way countries can get it done.”
He’s not necessarily wrong. But this feels like one of those moments where, if the industry is willing to seize the day, it can turn private capital into a permanent fixture of the US infrastructure landscape.
To put a twist on a popular song: even if the industry is getting what it needs, sometimes it’s worth trying to get what it wants.
Infrastructure Investor’s New York Forum is back and in-person on 16 and 17 November, so join us to discuss the bipartisan infrastructure plan and the latest trends in the North American infrastructure market.
Also, a reminder that we are accepting submissions for our 2021 Global Awards until 19 November. So, if you haven’t submitted your milestones for this year, click HERE to do so.
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