Global Infrastructure Investments and why are they important to an investor?
The Global Infrastructure Investment sector is familiar and has been around for decades. Its design concept is to use private capital to assist governments worldwide in delivering high-quality essential assets and services to the communities they serve.
What has recently changed is that world organizations, such as the World Economic Forum and the G7 with its Build Back Better World, have identified a significant infrastructure gap in developed and developing countries worldwide. High-quality infrastructure projects contribute to the improvement of societies. Economic growth, local jobs, and strong and vibrant communities are all recognized as essential benefits of these projects.
Disciplined infrastructure investments are central to mitigating global disruptions, supply chain disruptions, evolving societal and environmental priorities, and rapid urbanization.
Investors in this sector, working in support of governments, can be instrumental in a profound and positive role in realizing world-class infrastructure. Experts identify that a society’s infrastructure improvements are crucial to building resilient communities and well-being.
Define Infrastructure.
Infrastructure includes roads, railways, airports, power generators, telecommunications, utilities, schools, and hospitals. These projects are generally large, expensive, and can be outside the funding capacity of the communities they serve without the additional capital support of the private sector.
Why are they important?
The global pandemic has posed new challenges in recent years, with the full effects still uncertain and playing out worldwide for years to come. Many countries, India and China, for example, have shifted from agricultural to industrial and urban societies. Countries need new, modern infrastructure to facilitate changes in their societal existence.
How significant is the need?
The Organization for Economic Co-operation and Development projects that the investment needed to meet growing worldwide infrastructure demand will equal 3.5 percent of world GDP through 2030 – totaling more than U.S. $55 trillion.
The American Society of Civil Engineers has estimated that U.S. infrastructure funding needs alone are $5.9 trillion over a ten-year period from 2020 to 2029. (1)
What is the benefit for the investor?
Infrastructure projects are typically large, expensive, and long-lived. Their size becomes a barrier to entry for competing projects, thereby protecting the investment capital. Revenue streams are substantially stabilized with inherent pricing power, not to mention the potential for project capital gains.
Infrastructure investments offer a variety of risk and return profiles. Infrastructure investments range from low-risk regulated assets to moderate-risk loosely regulated entities such as energy production.
“Investing in global infrastructure can enable investors to further diversify their portfolios with an income-generating asset class that typically exhibits a low correlation to traditional investments while offering a hedge from inflationary pressures.” (2)
Is it a good time to invest in infrastructure?
There is a clear opportunity for discerning investors in infrastructure, both now and for decades ahead, as demand for essential assets and services outstrips government budgets and shifts to a decarbonized future.
What’s the trend for 2023?
Notably, as of 2023, these five significant trends – cloud, big data, the internet of things, blockchain, and artificial intelligence – have reshaped the national U.S. landscape, representing just one aspect of the larger domestic and international infrastructure sector.
(1)National_IRC_2021-report.pdf infrastructuereportcard.org
(2)Susan Dambekain, COO and Co-Founder, Capital Innovations, LLC, Cantor Perspectives
Kenneth Millar is the managing partner of Solomon Real Estate Investment Group, a firm dedicated to purchasing representation, products, and services of investment options in the alternative investment market. Unless noted otherwise, Solomon Real Estate Investment Group receives compensation from the Sponsors they represent.
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