Infrastructure investors rise to the challenge of Covid-19

As the World responds to the ongoing health emergency of Covid-19, infrastructure investors are stepping up to meet the challenge, providing much needed assistance, relief and support to their employees, customers, supply chains and communities.

We have seen many great examples of support for communities through the provision of much needed medical equipment, use of facilities for medical testing operations and production of critical supplies, significant financial contributions and flexible payment terms for customers,” said Jon Phillips, GIIA’s Director of Corporate Affairs.

With already constrained Government budgets rightly focusing on the enormity of the health emergency caused by the virus, the private sector will have a vital role to play in the economic recovery efforts that will surely follow. GIIA is in active dialogue with policy makers in the key markets in order to position the role of private investment in infrastructure as a fundamental element of their economic recovery plans and a vital part of that story is to be able to demonstrate the highest principles of responsible asset stewardship and corporate social responsibility.

GIIA has collected examples from around the world to illustrate the extent of the support our members have provided, including:

APG

To combat the corona pandemic and its socio-economic impact, APG on behalf of its pension fund clients has invested nearly €90 million in Covid-19 response bonds, earmarked for financing of a range of emergency measures, including expansion of healthcare services, and support to SMEs. These bonds can also provide for financial help to local governments and medical equipment and healthcare companies facing unprecedented demand due to the pandemic.

Aviva Investors

Aviva is donating £5m to NHS Charities Together, to support the welfare and wellbeing for NHS employees, volunteers and patients, assist patients leaving hospital and help fund long-term mental health support for NHS workers. The firm is also donating £10m to the British Red Cross, as well as supplying surplus stock of hand sanitisers, rubber gloves, antiseptic wipe pod refills and face masks to key worker organisations and charities.

British Columbia Investment Management Corporation

BCI contributed C$75,000 to the Rapid Relief Fund created by the Victoria foundation, which aims to support residents in Greater Victoria throughout the Covid-19 crisis. BCI staff also made individual donations, while the executive management team contributed an additional C$50,000.

Blackstone

Blackstone is contributing US $15m to Covid-19 relief efforts in New York. $10 million will go to the New York State COVID-19 First Responders Fund, which will deploy emergency aid and resources where they are needed most. The fund will also support food, transportation and housing assistance for healthcare workers on the frontlines of the fight against the Covid-19 outbreak.

CDPQ

CDPQ is also donating CA$300,000 among 5 selected charities while also deploying its financial and operational expertise to help companies in developing and structuring innovative financial solutions.

Corsair

Yorkshire Water has made a commitment not to use the Government’s furlough scheme for any of its employees and will retain all staff during the Covid-19 pandemic. Yorkshire Water is also continuing to offer support to customers who are facing financial difficulties as a result of the crisis, including special tariffs and payment holidays.

Credit Suisse

Credit Suisse is offering bridging loan solutions and access to credit for SMEs in Switzerland to help stave off the economic effects of Covid-19. The loan conditions are extremely favourable and there is no aim to earn income but any net profits will be donated to projects to support other Swiss companies.

DWS

DWS have donated EUR 1 million to various charities and foodbanks across Italy, Spain, the UK, Germany and the US. They have also set up part of their website for other donations as part of a collective effort to fight Covid-19.

Goldman Sachs

Goldman Sachs has pledged US $25 million as part of the Goldman Sachs Covid-19 Relief Fund to support communities in most urgent need globally, with the firm contributing to match employee donations up to an additional $5 million. $1 million of this is being deployed to Barts Charity, which funds Barts Health NHS Trust, the organisation behind the new NHS Nightingale Hospital at the ExCeL convention centre in East London.

IFC Asset Management

IFC is increasing the amount of financing for companies to help fight the outbreak. IFC’s Board of Directors on Tuesday approved an additional $2 billion in fast-track financing, bringing the total to $8 billion in support to help sustain economies and protect jobs.

IFM Investors

IFM is demonstrating its appreciation of healthcare workers on the front-line of the Covid-19 pandemic and supporting local restaurants in the process. It is buying food from restaurants, such as Outback Steakhouse, which is delivered to frontline healthcare workers. They are also delivering to locations such as Memorial Sloan Kettering Cancer Center to keep up morale for frontline staff.

KKR

KKR & Co. has created a $50 million fund dedicated to supporting frontline workers and mitigating the financial hardship created by the pandemic. The fund will be used to help first responders and health workers, and in various financial relief efforts aimed workers and small businesses in the communities where it invests.

Macquarie Group

Macquarie Group is allocating $A20 million in charitable donations to the Macquarie Group Foundation to support a select number of non-profit organisations working to combat Covid-19 and provide relief to affected communities. The first organisation to receive $A2 million of the allocated funds will be The Global Foodbanking Network, which is providing vital hunger relief to vulnerable populations in places of active Covid-19 outbreaks around the world.

Marguerite

Fraport Greece and Copelouzos Group are actively participating in the Covid-19 support effort by donating 500,000 surgical facemasks in support of the health system with needed medical supplies. Management and staff of the two organizations have thanked all the health sector and civil protection employees for their service and contribution to their communities.

Morgan Stanley

In March, Morgan Stanley announced a $10 million cash commitment in aid to support Coronavirus relief efforts. Funding will support critical frontline medical responders globally as well as community providers serving those economically impacted by the crisis. The first three grants of $2 million each were announced for Feeding America, the CDC Foundation, and the World Health Organization’s Covid-19 Solidarity Health Fund.

PGGM

PGGM has invested more than €20 million in the Nordic Investment Bank’s €1 billion Response Bond with proceeds of the bond helping to finance projects that help alleviate the social and economic effects of the coronavirus pandemic in NIB’s eight member countries: Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden.

Swiss Life

Nortegas, a natural gas distribution company in Spain which Swiss Life has a stake in, have donated the equivalent of 52 tonnes of food to regional food banks in Spain while also extending payment terms to customers and small businesses.

New Policy Working Groups

During March and April, GIIA established three member working groups to focus on the key markets of the UK, EU and US as part of an overarching strategy to position members as a key part of the response to the global COVID-19 emergency. All groups have now met virtually and are implementing a programme of activity in each region with a focus on supporting governments as they seek to get their economies up and running again.

The UK Working Group met on 22 April and provided direction on a set of policy positions ahead of a meeting with the newly appointed Minister of State for Investment, Lord Grimstone on 23 April. We are now in the process of taking forward the actions from that important Ministerial dialogue, including a possible Minister/member roundtable in coming weeks. Members are also feeding in to a workstream with Department for International Trade and Department for Business, advising them on the investor provisions within a proposed UK-EU Comprehensive Free Trade Agreement.   GIIA has also been working with sector trade bodies for aviation and water to support members’ interests and we are closely monitoring developments in other sectors such as energy.

The EU Working Group met on 16 April and will be working with the GIIA Executive Team to develop themes for a virtual workshop with officials within the Cabinet of EC President von der Leyen, coming weeks. The group are also coordinating a response to consultations on the Green Deal Climate Pact and the renewed European Sustainable Finance Strategy; it is also feeding views in to the Invest EU programme’s non-paper on draft investment guidelines for the bloc.

The US Working Group met on 8 April. Members are proactively taking part in a drafting sub-group that is coordinating a submission to senior decision makers on Capitol Hill. The submission will outline appropriate funding mechanisms, policies and regulatory changes necessary to incentivise private investment in infrastructure and support the economic recovery efforts of the US federal and state legislatures as they begin to emerge from the crisis in the months ahead.

Members can access notes from all of GIIA’s Policy Working Group meetings by accessing the members-only section of the website and visiting the relevant forum. Click here to access members-only section.

If you require a member login for the forum please contact Tim Horan.

 

 

Smart Cities and the Global Digital Infrastructure Revolution

Writing for GRESB Insights Series, John Kavanagh, Head of Policy and Public Affairs & Max Worthington, Policy / Research Executive look at the move to smart cities and the digital infrastructure revolution. 

As the world begins to emerge from the global COVID-19 pandemic and lockdown measures are eased in the months ahead, the attention of decision-makers will begin to shift towards the need to stimulate the recovery and to get economies up and running again. The crisis has already taught us many things, but perhaps one of the most poignant lessons is on the importance of digital infrastructure in sustaining economic activity.

Millions around the world have been able to continue to work virtually, coordinating tasks using applications and software which are ultimately reliant on a robust physical digital infrastructure network. Microsoft Corporation recently announced that its Teams software had set a new daily record of 2.7 billion meeting minutes and the number of video calls on the platform increased 1000 percent in March 2020.¹

The crisis has also shone a light on those countries struggling to keep pace with the digital infrastructure revolution. According to the US Federal Communications Commission, more than 21 million US citizens remain without any broadband connection at all; this lack of connectivity exacerbates the challenges faced by ordinary US citizens when relying on remote communications in an era of strict social distancing.

The Opportunity

The opportunity to harness the shift to digitalization is colossal. The McKinsey Global Institute (MGI) estimates that an additional USD 13 trillion could be added to global GDP by 2030 through digitalization, automation, and Artificial Intelligence (AI) as these technologies create new ventures and productivity gains, which in turn lead to reinvestment. It is important to remember though, that technology-enabled infrastructure relies on a partnership between public decision-makers and private investors that have the capital to deploy and unrivaled expertise in project management and delivery to make this a success.

According to the United Nations Department of Economic and Social Affairs, an estimated 68% of the world’s population will live in urban areas by 2050.² By 2030 alone, the world is projected to have 43 megacities with more than 10 million inhabitants, making the transition to technology-enabled management of urban growth an increasingly pertinent policy issue for all levels of government administration around the world.

Smart Cities can form a part of the policy response to the challenges resulting of increasing urban population densities and the knock-on effect on housing, transportation, waste, water and energy network infrastructure. Most definitions of a smart city include the use of digital technology to improve efficiency of services, the integration of information and communication technologies and sensor-enabled Internet of Things (IoT) solutions to manage a city’s assets and processes.³  According to the European Commission, the Smart Cities project market is expected to exceed USD 2 trillion by 2025 – with Artificial Intelligence forming a key cornerstone of the growth.⁴

Smart Cities can also change the nature and economic models used in infrastructure, relying on technology to improve the quality of life for citizens. Connected mobile applications put an unprecedented volume of real-time data into the hands of users to optimize existing urban systems and allow users to make informed decisions. ⁵

Digital intelligence can reduce congestion on roads, minimize waste and energy usage, provide disaster early-warning systems, optimize emergency service responses and provide infectious disease surveillance – among many other benefits.⁶ In their research on the digital solutions for Smart City living in 2018, MGI found that the public sector would be the natural owner of 70 percent of the technology applications they surveyed; but 60 percent of the initial investment required to implement the full range of applications would come from private actors. ⁷

The Smart City Infrastructure Fund

To provide a tangible example of successful public-private cooperation on Smart Cities, we can look towards the Smart City Infrastructure Fund. The fund was established by APG, a Netherlands based pension investor and GIIA member, and Whitehelm Capital in November 2018 to provide long-term funding for Smart City infrastructure projects enabling cities and communities to become more inclusive, safe, resilient and sustainable and helping governments to provide more efficient urban services to communities whilst also meeting decarbonization targets. ⁸

They agreed to partner with SiFi Networks America Ltd (“SiFi”) to invest over USD 75 million in the deployment of Smart-City ready digital infrastructure in the City of Fullerton, California. This partnership will enable the rollout of the largest privately funded open-access fibre network in North America. Ron Boots, the Head of Infrastructure at APG, notes that “the ultimate objective of the fund is to improve quality of life and meet the needs of cities, allowing city officials to interact directly with the community, to improve physical infrastructure and how essential services are delivered”.

The roll-out of FiberCity™, SiFi Network’s next generation of telecommunications, in Fullerton will provide a significant upgrade to internet speeds and could equip more than 55,000 homes and 5,000 businesses with high-speed fibre connectivity. ⁹ It will also facilitate the proliferation of new Smart City solutions in key urban services, usually the domain of public actions, such as traffic control, street lighting and emergency services. Additionally, the fibre network will provide a platform for the future expansion of 5G mobile and Internet of Things networks into the area.

The Future

Smart Cities help to provide us with a case study in success for how the public and private sectors can work together to realize the benefits of the global digital infrastructure revolution. However, despite their successes, they only represent the tip of the iceberg for what could be achieved with closer working and understanding between the public and private sectors in this important policy area. As governments deal with the immediate aftereffects of the COVID-19 pandemic and seek to get economies up and running again, they would be well placed to proactively engage with their private sector partners to leverage the transformative potential of private capital and realize the opportunity of the global digital infrastructure revolution in the years ahead.

¹ NASDAQ website (April 2020) Microsoft’s (MSFT) Teams Sees Growth Amid Coronavirus Scare
² UN Department of Economic and Social Affairs (2018), 2018 Revision of World Urbanization Prospects
³  OECD, (2019) Enhancing the contribution of digitalisation to the Smart Cities of the future
⁴ European Commission (2018), Smart Cities
⁵ McKinsey Global Institute (2018), Smart Cities: Digital Solutions for a More Liveable Future
⁶ OECD (2018), Enhancing the Contribution of Digitalisation to the Smart Cities of the Future
⁷ McKinsey Global Institute (2018), Smart Cities: Digital Solutions for a More Liveable Future
⁸ White Helm Capital (2019), First Investment of Smart City Infrastructure Fund
⁹ APG (2019) APG and Whitehelm invest in California fibre network

New Blog: Fight for net zero goes on, despite crisis

Writing for Utility Week CEO Lawrence Slade says even in these difficult times, utilities must continue to focus on the need to reduce emissions and the shift to a zero-carbon economy.

Our lives have changed completely in the space of just a few short weeks. Perhaps, in terms of how we work and manage our lives, things will never quite go back to normal, with more flexible working across thousands of roles and companies becoming the norm.

Uniquely, everyone in the country is affected. This will bring many challenges, not least to the National Health Service, whose staff deserve our heartfelt thanks for their amazing efforts, but also to those working to ensure the essential infrastructure that we all rely on, including electricity, gas, water, broadband and tele­coms networks, remains operational over this difficult period. The robustness of our utilities is something that, as a sector, we should be proud of.

But while it is understandably difficult to look beyond the next few weeks, we must. The underlying issues we faced before the Covid-19 crisis remain. For many reasons it is a blessing that we are emerging from winter, with the warmer weather able to bring respite on a number of fronts.

While this is welcome, many of our properties are still poorly insulated and thousands of families are living without modern levels of comfort. Furthermore, reduced incomes and sudden bill shocks as a result of economic volatility will not help, making it certain that many families will need further short-term help to manage debt in the coming months, as well as long-term solutions such as the provision of energy efficiency. Linked to this, of course, is the need to reduce our emissions and the longer-term move to a zero-carbon economy. The urgency to act is still there.

To meet the challenge of climate change, we know that many billions of pounds need to be invested in our infrastructure over the coming decades. Unfortunately, time is not on our side.

The chancellor’s moves to support the economy will provide vital respite for many businesses and families and will need to continue for some time. But, as has happened at other times of national emergency, it is important that we also look ahead to the future. We need to look at how we will get our economy moving again and how we invest in our communities to ensure value is created for all stakeholders.

Before the crisis hit, 2020 was, as the National Infrastructure Commission said, shaping up to be a year of decisive action. Reports suggested that the budget would give long-awaited clarity on infrastructure investment, building on the announcements in November that laid out how much money was to be invested in our infrastructure and how that could be split between the private and public sectors.

This was to be seen as a new start, with investment expected to be made in infrastructure projects across the UK – part of the process of “levelling up” our society away from an historical focus on investment in the South.

Moves to allow onshore wind and solar projects to bid in the contracts for difference auctions were welcome, likewise the move to speed up the roll-out of fibre-optic cabling for better broadband connectivity, but we need to keep the momentum going.

Addressing climate change, making the investment in new – and upgrading existing – infrastructure and delivering a clean, carbon-free economy is something that future generations will thank us for. When we surface from the current crisis, we have the opportunity to reset society’s relationship with the built environment and pull the country together.

Combining government funding with that available from the private sector will allow us to achieve much more, much faster. Utility projects do not happen overnight; rather they take years of planning and building before delivery. As a country, whether it is across our energy, water or telecoms networks, we need to plan and to act to ensure that the right long-term strategy is in place.

A strategic dialogue between government, devolved administrations and the private sector will ensure that private capital is deployed where it is most needed to aid economic recovery. To be absolutely clear, the government’s immediate priority must be to respond to the health crisis by ensuring our hospitals and hard-working staff are provided the necessary equipment needed to save lives.

But at the same time, working together we can begin the important job of delivering the infrastructure needed to propel the country’s economy.

Private investors stand ready with capital to deploy to support these public sector-led initiatives, as well as offering unrivalled expertise in project management and delivery.