Growing US infrastructure deficit necessitates a new paradigm

Fitch Ratings, one of the three ‘Big Three’ credit rating agencies, has announced that any US government plan for renewing and advancing essential infrastructure requires a new paradigm to adequately address the infrastructure funding deficit.

Fitch Ratings observes that ‘While a source of adequate and sustainable funding is a critical component, a results-oriented, objective and strategic approach to investment, along with responsible stewardship of the public purse, are paramount. Increased spending without a strategic, comprehensive approach to infrastructure investment based on national priorities will not go far in addressing the continued deterioration of critical economic assets.’

Private capital could provide a link between critical priorities to available resources, providing a sustainable source of funding.

GIIA Fitch Ratings Summary

Infrastructure investors and advisors gather for GIIA Annual Seminar

The 3rd GIIA Annual Seminar, sponsored by Ashurst, KPMG and Marsh, was held on Tuesday 18th February in London and focused on the emerging opportunities and risks for infrastructure investors in the UK and Europe under the theme ‘The Fog is Lifting.’

Simon Jack, the BBC News Business Editor, launched the afternoon seminar with his keynote address which touched on broad themes including Brexit, net zero carbon targets and the need for big business to improve its image. Highlighting the lingering uncertainty over Brexit, he predicted that fog would not truly lift until the end of the UK transition period at the end of 2020 – and a potential ‘Australian style’ no-deal Brexit.

Following on, James Stewart, Global Head of Infrastructure Practice at KPMG, chaired a panel on the topic of ‘Opportunities for infrastructure investors post-Brexit.’ Joining him on the panel were Ed Clarke, Co-Founder & Managing Director, Infracapital, Steven Pugh, Principal, Hermes, and Simon Jack, Editor, BBC Business. In a wide ranging discussion, the panel considered how underlying public discontent with aspects of the infrastructure sector, the ongoing uncertainty over Brexit and more aggressive regulation in the utility sector had combined to create a less attractive investment environment in the UK in recent years. The panel agreed that whilst the threat of nationalisation had receded in the short term, there remained an important task for the sector to earn its social licence to operate.

Blair Chalmers, Director at Marsh & McLennan Advantage Insights, then took to the stage to launch a new interactive online tool for infrastructure investors, developed in association with GIIA, which outlines the complex landscape of interconnected global risks facing the infrastructure sector. He also outlined how shareholder expectations are changing in response to the climate challenge and how investors need to develop profit-sustainability synergies.

Kay Swinburne, former MEP and current Vice Chair of Financial Services at KPMG, moderated an all-female panel titled ‘Unpacking the EU Green Deal: What does it mean for infrastructure investors.’ The panel, comprised of Anna-Marie Slot, Global Sustainability Partner, Ashurst; Anna Davreux, Senior Vice President of Financial Services at FleishmanHillard, and Elena Giannakopoulou, Vice President of Strategy & Partnerships at John Laing Group, discussed the politics driving the EU Green Deal and how those policies could be influenced by investors through increased engagement and consultations.

The seminar concluded with a fireside chat between Jonathan Oxley, the CEO of UK Regulators Network, and Michael Burns, a Partner at Ashurst. In an intriguing discussion, Oxley discussed the importance of independent regulation, and the need to the rebuild trust between the regulators, investors and the customer. The discussion focussed on the need to make the UK an attractive place to invest but also the need for asset owners to meet society’s requirements on responsible stewardship.

GIIA and Marsh & McLennan launch Global Risks for Infrastructure Map

Against a backdrop of continued macroeconomic uncertainty, societal instability, weaponized cyber capabilities, acute environmental threats and geopolitical frictions, infrastructure investors will need to be adaptable to ensure the longevity and security of their assets.

View the Global Risks for Infrastructure Map 

The 2020 Global Risks for Infrastructure Map, produced by Marsh & McLennan Advantage Insights in partnership with GIIA, provides some guidance for investors looking to navigate the choppy waters ahead. The Map provides investors with a view of the key risks and includes a curation of case studies evaluating ways in which these risks have affected infrastructure assets in recent years.

In the coming months, Marsh & McLennan Advantage Insights and GIIA will also release in-depth reports on two crucial global risks facing the infrastructure sector: climate change, and the emergence of transformative technologies.

The first, Global Risks for Infrastructure: The Climate Challenge takes a closer look at the impact of climate-induced physical and transition risks on the infrastructure sector, and will outline viable mitigation solutions and strategic opportunities for investors.

While the second report, Global Risks for Infrastructure: Transformative Technologies, provides a focused overview of the ways in which transformative technologies are changing the infrastructure sector, and provide frameworks that investors can consider for future-proofing their assets.

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