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.

 

Critical infrastructure must remain operational

The impact of COVID-19 is being felt around the world, not least on the critical national infrastructure that societies depend on to function. Along with the absolutely vital efforts of health professionals working tirelessly to protect life, thousands of employees of critical national infrastructure such as energy, water, and internet networks are working to maintain these essential services for all. However, as with other areas of our national economies, parts of our infrastructure are now under intense pressure.

In these unprecedented times it is now more important than ever that our critical national infrastructure remains operational.

Because it is this infrastructure that will be crucial in forming the policy-based solutions to tackling the virus over coming months. Airports, in particular, are feeling the strain of travel bans and an unprecedented decline in air traffic, with Airports Council International estimating that, in Europe alone, airports could lose upwards of €2bn in the first quarter of the year at a time when their ability to facilitate trade and repatriate families will be essential. Our seaports, too, will be tested like never before but have an indispensable role to play in keeping trade flowing, which includes much needed food and medical supplies. Similarly, national water, energy and digital networks will be called upon to cope with increased demand as we battle the effects of COVID-19.

We know that governments around the world are grappling with how to respond in the face of such a devastating outbreak that has reached into every corner of the globe. And we have seen them respond with a variety of economic packages aimed at stimulating economies and staving off the worst-case modelling. But governments are unable to respond to a challenge of this magnitude alone.

A strategic dialogue between governments and the private sector can ensure that private capital is deployed where it is most needed to aid in the recovery efforts. 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 while simultaneously stabilising financial markets and maintaining an attractive investment environment. But at the same time, the private sector can begin the important job of delivering the infrastructure needed to propel countries’ economic recoveries. Private investors stand ready with the capital to deploy to support these public sector-led initiatives as well as offering unrivalled expertise in project management and delivery.

GIIA urges governments to work closely with their partners in the private sector who have the expertise to help respond to the short-term challenges and work to ensure we emerge with clear long-term plans to deliver the critical national infrastructure needed for the clean, zero carbon future we all want for future generations.

Global Infrastructure Investor Association (GIIA) members operate in 55 countries across 6 continents and are responsible for more than $780bn worth of assets under management. They bring much needed innovation, efficient management, customer-focused service, responsible stewardship and sustained investment to the infrastructure our communities depend upon. 

COVID-19 Update

Following the recent advice from the Government on COVID-19, GIIA colleagues are working remotely for the foreseeable future and are contactable by phone and email in the usual way. Physical meetings will be replaced by webinars and phone calls where possible.

We understand that the current situation will inevitably have a significant impact on global infrastructure investors and as such GIIA’s work on behalf of our members continues unabated.

If you have any queries please contact us at info@giia.net

Op-Ed: People want to see the community benefits of infrastructure

GIIA CEO Lawrence Slade, writing for The Times says that ‘people are less concerned about who owns and operates infrastructure as long as they can see the wider community benefits’.

“Around the world billions of people rely on infrastructure, to get them to work, to get food to market, to power their homes and businesses, and to support and provide access to the internet and connect families over thousands of miles.

But infrastructure is under pressure like never before. In every jurisdiction the Global Infrastructure Investor Association (GIIA) is engaged, infrastructure investment and renewal is high on the agenda. In the United States, the National Governors’ Association (NGA), under the chairmanship of Maryland governor Larry Hogan, is leading an initiative to support infrastructure investment at state level. As advisory council members to the NGA, GIIA is pleased to be playing its part in bringing the right players to the table to explore ways to unlock more private-sector investment in US roads, airports, telecoms, water and renewable energy.

European Union president Ursula von der Leyen has set out a vision for a new Green Deal for the EU bloc. This assumes that the private sector will play a significant role in supporting the transition to a carbon-free economy through greenfield and brownfield investment. GIIA looks forward to continued dialogue in Brussels as the details of the Sustainable Europe Investment Plan are developed.

The UK has traditionally been seen as one of the most attractive markets for infrastructure investors – more than one third of all our members’ stakes are in the UK – but the signals from the last government and opposition during 2019 undermined investor confidence. If the new Johnson government wants to leverage the private sector to help deliver its infrastructure ambitions, including meeting net-zero targets, climate resilience and addressing digital connectivity, then that confidence could quickly return. But there is need for clarity around the mechanisms to achieve that.

Although the political and economic context for infrastructure investment varies considerably across the world, there is much commonality around the issues to be addressed. People expect timely, good-quality infrastructure at affordable prices. They are less concerned about who owns and operates infrastructure as long as they are treated fairly and can see the wider community benefits.

In research we published with Ipsos MORI last year, the Global Infrastructure Index questioned 20,000 people from 28 countries on public attitudes to infrastructure; the biggest survey of its kind. The results were clear. Three quarters (76 per cent) of citizens see investment in infrastructure as vital to economic growth, but 60 per cent don’t believe their country is doing enough. Some 64 per cent were comfortable with private investment in infrastructure, if it means the country gets what it needs. While those supportive of foreign investment outnumbered those opposed by 3:1, if it leads to better quality infrastructure. Meanwhile, 59 per cent would prefer technical experts to take decisions on new infrastructure compared to only 21 per cent who believe politicians should mostly take these decisions.

These results reinforce the view that the debate over ownership of our infrastructure distracts from what really matters to the public, which is getting the environmentally friendly, quality and resilient infrastructure countries and communities need.

It is the role of government to champion the mechanisms it chooses to deliver infrastructure renewal and investment, and to create the right framework that works for investors, customers and communities. It is for the private sector to respond by bringing innovation, efficient management, customer-focused service, responsible stewardship and sustained investment. Where those ingredients are in place, countries will make the best progress in tackling the many complex infrastructure challenges ahead.

As the membership body for the leading investors in infrastructure, we will make sure we, and our members, are at the heart of our infrastructure renewal.

 

Budget infra focus welcomed, but more clarity needed around role for private capital

GIIA CEO Lawrence Slade has today welcomed UK Chancellor Rishi Sunak’s Budget that heralds a new dawn for publicly financed infrastructure across the length and breadth of the United Kingdom.  The Budget is set to raise net investment to three times the average seen over the past 40 years with £600 billion committed in this parliamentary term.

“Understandably, today’s Budget has a considerable focus on the efforts of the UK Government in supporting those individuals and industries affected by the ongoing impacts of the coronavirus. However, the infrastructure commitments laid out in the Chancellor’s Budget are unprecedented in their scale and will drive economic growth across all the UK’s regions,” said Slade.

“The Government has promised an enormous investment of public funds into UK infrastructure and this is to be welcomed. What is still required, however, is a clear roadmap for the role that the private sector should play in this infrastructure revolution.”

GIIA members are making significant, and ongoing, investment today in the infrastructure today that families and communities rely on across the length and breadth of the UK. These include:

  • Major investments in 17 of the UK’s 20 airports which account for 94.4% of total passengers
  • Supporting almost 120,000 jobs in the nation’s privately owned ports
  • Supplying 2/3rds of UK households water needs
  • Providing an additional 14 million households with full fibre internet while continuing to invest in 5G technology

“Only through strong collaboration between Government and the private sector can we ensure delivery of the modern, innovative and environmentally responsible infrastructure that the UK needs for future generations.”

“GIIA will continue our engagement with the UK Government on the development of a policy and regulatory framework which encourages the role of private investors in delivering such an ambitious infrastructure strategy that benefits all of the UK.”

Infrastructure Investor Global Summit postponed

As members may have seen, PEI have announced the postponement of the upcoming Infrastructure Investor Global Summit in Berlin due to ongoing concern around the Coronavirus (Covid-19). As such, GIIA has made the decision to postpone our Berlin Reception which was due to be held on March 18th.

Please note an email will be sent to Members shortly with further information about the GIIA Annual General Meeting.

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.

Stay up to date with the latest news from GIIA by following us on Twitter and LinkedIn.

Government engagement in UK and Brussels

With the recently re-elected Boris Johnson Government in the UK and the new Commission in Europe both looking to address the delivery of infrastructure early in their respective terms, it has been a busy start to 2020 for GIIA.

Ahead of the March Budget, GIIA has written to Chancellor Sajid Javid welcoming his promise of an ‘infrastructure revolution’ as well as the Government’s acknowledgement of the vital role private capital will play in delivering the country’s £600bn infrastructure pipeline to 2050.  We have called for enhanced dialogue with the private sector over the funding models envisaged to achieve the UK’s infrastructure aspirations, not least in relation to the Net Zero commitments which promises to have profound impacts on the wider economy.

January also saw GIIA in Brussels to meet with senior representatives from the European Commission including from President von der Leyen’s Cabinet, where coordination of the EU Green Deal will take place, and Commissioner Gentolini’s Cabinet which has responsibility for the InvestEU programme and the Sustainable Europe Investment Plan. GIIA intends to play a prominent role in facilitating discussions on the delivery mechanisms for the recently announced  EU Green Deal and in particular the opportunities available to private investors. We look forward to discussing these and other opportunities with member companies at our annual seminar in February.

As always, members who wish to share their views and participate in any of GIIA’s workstreams are encouraged to get in touch.