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.

NEW BLOG – Infrastructure challenges and opportunities

By Lawrence Slade, CEO GIIA

Welcome to my first blog of the new decade, and what a decade it promises to be.  As we head into the 20’s the challenges for societies and their political leaders around the globe are growing exponentially.

Infrastructure, as never before is at the heart of the debate, and of course remains at the very heart of our everyday lives.  Without it, we could not get to work, our phones wouldn’t function – social media would halt, lights would not switch on and water would not run – and of course much, much, more.

There are calls for infrastructure renewal, calls for new infrastructure to cope with growing populations.  Rightly there are calls for infrastructure that takes account of climate change, that will help for example the European Union and the United Kingdom meet their 2050 Net Zero targets.  There are calls for responsible investment and better ESG standards and reporting.  It is a complex picture that varies from region to region and country to country.

Just this week though we started to see how some of this might be achieved with the European Union publishing its Green Deal Investment Plan and Just Transition Mechanism at the heart of which are plans to see €1 trillion invested over this decade.  In the UK, following the December election and on the back of positive comments from the Prime Minister we hope to see more details of the UK infrastructure plans in the Chancellors Budget on 11th March this year.  Over in the USA it is great to see the National Governors Association taking forward its 2019-2020 Chairs Initiative – Infrastructure: Foundation for Success, under the leadership of Maryland Governor Larry Hogan.  Further afield from Australia to India there are projects and plans aplenty.

But time is not on our side.  Infrastructure projects by their very nature do not happen overnight.   Yet the challenges faced by society need urgent action so how can this conflict be resolved?

Happily, we do have most if not all the solutions to hand.  Companies skilled in delivering massive projects, technical innovation that speeds up project delivery, innovative funding models and an appetite globally to finance new infrastructure.  What is missing are the long-term policy frameworks to encourage and support supply chain growth, investment in skills, investor confidence, greater innovation, and faster planning and regulatory approval.

Of course, infrastructure delivery has not always been plain sailing, with unfortunate examples of where things have gone wrong across both public and private sectors.  But instead of focusing on the negative and the past, we should learn from these and work together across Governments, regulators and the global infrastructure community to create an environment fit not just for today but for generations to come.

The team at GIIA are determined to push this agenda forward in 2020 around the world – please do get in touch if you would like to become involved in our work – and make sure you register for our upcoming seminar with Ashurst and KPMG on the 18th February and lets start planning for the future.

GIIA / Ipsos Mori Global Infrastructure Index 2019

GIIA, in partnership with Ipsos MORI, has today released the results of the 2019 Global Infrastructure Index (GII),  the largest survey of its kind, looking at public attitudes towards infrastructure around the World.

Key findings from the survey:

  • 76% of citizens see investment in infrastructure as vital to economic growth, but 60% don’t believe their country is doing enough
  • Europe scored the lowest satisfaction rating for all regions with 29%, behind Asia Pacific (47%), Middle East and Africa (44%), North America (38%) and Latin America (31%)
  • In a list of 14 infrastructure sectors, airports had the highest level of satisfaction at 67% followed by digital infrastructure (55%) and water supply and sewerage (also 55%) while electric vehicle charging was last with 24%
  • When asked about future priorities for infrastructure, investment in solar energy topped the list with 42%
  • 64% of people across the globe were comfortable with private investment in infrastructure if it means the country gets what they need, while those supportive of foreign investment outnumbered those opposed by 3:1 if it leads to better quality infrastructure
  • 59% of people would prefer technical experts to make decision on new infrastructure compared to only 21% who believe politicians should mostly make these decisions

Speaking on the release of the results GIIA CEO Andy Rose said:

“This research reinforces 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 that countries needs.”

“Satisfaction with current infrastructure tends to be higher where the private sector plays a prominent role, notably airports and water, and it is encouraging that the majority are comfortable with private investment in infrastructure.”

Click here to read GIIA’s Press Release

Click here for the full global results

3rd Annual Airport Investment Symposium

GIIA, in partnership with Airports Council International (Europe) yesterday hosted the 3rd Annual Airport Investment Symposium in Brussels. The event brought together airport operators, investors, financial advisors and airlines with representatives from the European Commission and European Investment Bank along with Member States.

With an expected airport investment gap in Europe of €12.3bn over the next five years, combined with figures showing Europe already accounting for more than 50% of the World’s congested airports, it is crucial for Governments and regulators to work with the private sector to unlock new sources of investment.

GIIA Director of Corporate Affairs Jon Phillips said:

“Airports play a critical role across Europe in helping to deliver sustainable economic growth. Investors stand ready to deliver the funding to meet customer, capacity and environmental improvement projects that will enable the aviation sector to meet future challenges – including achieving Net Zero carbon emissions. But policy makers and regulators need to ensure the right framework is in place to facilitate this essential investment.” 

Airports Council International Director-General Olivier Jankovec addressed the Symposium stating that the current investment gap threatened the sector’s ability to meet decarbonisation plans and said that the focus of regulators needed to be carefully considered.

“Today’s priorities should be about sustainability, capacity and consumer interest. It is high time regulators start focusing on these, rather than airlines interests,” said Jankovec.

 

 

 

 

GIIA / MMC Risk Roundtable

MMC’s Director of Insights, Blair Chalmers looks back at the joint GIIA / MMC Risk Roundtable held recently in London.

Marsh & McLennan Companies and the Global Infrastructure Investor Association hosted an infrastructure investor roundtable discussion in London on 25 September 2019.

View slides from GIIA / MMC Risk Roundtable 

The morning began with a welcome from Jon Phillips of the Global Infrastructure Investor Association and Martin Bennett of Marsh JLT Specialty.  Then Blair Chalmers of Marsh & McLennan Insights set the scene by delivering an overview of the key takeaways for investors in infrastructure from the Global Risks Report 2019, a publication that Marsh & McLennan Companies has supported the World Economic Forum on for the last 14 years. Whilst environmental and cyber related risks were dominant from a global perspective, it was clear that infrastructure investors are also exposed to a broad range of economic, geo-political, societal and reputational risks as well.

Neil Duchesne, a Senior Partner from Credit Specialties at Marsh JLT Specialty provided insights with respect to political risks in developed markets.  Neil presented case studies which highlighted the trend of increasing geo-political and economic uncertainty in previously considered ‘safe’ countries.  One case examined the current status quo in the United Kingdom where the rise of radical, populist parties could threaten a change in utility ownership and regulatory supervision.  Another showed that whilst China’s Belt & Road Initiative (BRI) was initially expected to be almost entirely focused on emerging markets, 12 EU markets have already signed MOUs with China with respect to the BRI, with Italy expected to be the first G7 nation to join.  The ongoing and escalating trade war between the US and China continues to erode investor confidence, raise EP&C costs and increase the chance of direct export embargos.  Neil showed that whilst concerns about political risks in developed markets are a hot topic, as high as they have been for a while; Lloyd’s political risk claims data from 1997-2017 shows that over USD$660 million of claims were paid out in Western and Central Europe.  Whilst concerns are currently high, the reality of the political risks in developed countries has always been there.  Recommended mitigation strategies included close monitoring of government activities in jurisdiction of interest, developing a detailed understanding of a firm’s supply chain and risk exposures, and conducting extensive legal due diligence on all contractual matters.

Sarika Goel, Principal at Mercer presented infrastructure investor takeaways from Mercer’s latest ‘Investing in a Time of Climate Change’ report. The third edition of the report was released in 2019 and states that investing for a 2ºC scenario is both an imperative and an opportunity.  Whilst infrastructure assets face the greatest exposure from physical risks in the long run from climate change, infrastructure also has a high positive exposure to transition risk.  Sarika also shared findings from Mercer’s European Investor Asset Allocation Survey, which gathers insights from c. 900 asset owners representing approximately $1 trillion in AUM.  The most recent survey shows that 55% of asset owners are now considering ESG risks in their investment decision making process (up from 40% in 2018). However, separately, only 14% currently consider climate change risks.

In concluding, Sarika highlighted three types of investors with respect to climate change.  There are the ‘Unaware Future Takers’ who ignore risks and opportunities linked to systemic risks, to the potential detriment of long-term returns.  Then there are the ‘Aware Future Takers’ who consider systemic risks in portfolios, taking action across and within asset classes and industry sectors.  Lastly there are the ‘Future Makers’ who build upon the aware future taker position and make a concerted effort to influence systemic, market-wide actions aligned with ideal real world outcomes. These are the investors who are working individually and collectively to advocate for a 2 degree Celsius aligned world from both businesses and from governments.

Andy Perry, Principal at Oliver Wyman, spoke on the topic ‘The Future of Renewables Investing’. He began by showing how forecasts for the growth in renewable energy (RE) generation capacity have been underestimating the true growth each year for the last decade.  In addition, the cost of renewable generation has been falling so quickly that subsidies are disappearing because RE generation is competitive on a standalone basis.  Andy explained that this is indicative of the RE industry coming to the end of the first of three phases of development, namely it has earned the ‘right to compete’ on a levelised cost competitive basis.  The industry is now moving into the second phase where there will be a ‘Focus on Flexibility’ that will dominate in the period 2020 to 2030/35.  This period will see a significant value shift from generation volumes sold in the wholesale market to flexibility and capacity services that ensure availability of generation when it is needed and the ability to optimise against price in the market.  The third and final phase is focused on a move to a net zero energy system made possible through a combination of means including cheap home solar, local EV and home storage, affordable large-scale cheap RE generation and potentially carbon capture technology and H2 as a means of supporting globally traded flexibility.

It is unclear exactly how the market will evolve in the coming decade, but what is clear is that using flexibility to control renewables output will be critical to optimising returns.  In closing, Andy laid out a number of potential business models with this is mind.  The first option would be to have RE and assets which allow flexibility to be jointly developed at the same site by the same owner/investor.  Another would be to invest in multiple RE and flexibility assets in different locations which would be operated in unison as part of a portfolio.  A third is for a joint PPA with a profile guarantee, where there is a contractual agreement for remote flexibility assets to smooth RE output for the off-taker. The last option was for the sale of RE into a 3rd party VPP platform, whereby the VPP takes responsibility for optimising output in tandem with separately procured flexible capability.

Guillaume Thibault, Partner at Oliver Wyman, closed out the morning with his presentation on ‘Future Mobility Trends’.  Guillaume explained that mobility, whether through the movement or goods or people, is a fundamental pillar of the global economy and represents 16% of GDP.  Advances in technology, combined with a multitude of trends and disruptions have massively change the mobility landscape.  There are now significant environmental, societal and economic impacts at stake depending on the way in which future mobility dynamics play out.

What is clear however is that investment will continue to pour into the mobility sector, with mobility market growth expected to outperform global GDP growth by 30% by 2030.  In the same timeframe, physical exports are forecast to rise 40% globally and international tourist arrivals will grow by 70%.  With 50% of future ground mobility expected to come in the form of shared vehicles, this will have a significant impact on the cities of the future which much develop ways for all mobility components to be interconnected.  Dedicated communication infrastructure will be needed to absorb the increasingly large data requirements. Investors need to recognise that there is a value shift happening in the industry, with Oliver Wyman predicting that by 2030 only 20% of the mobility industry value will be in manufacturing.  Over 50% is expected to come from mobility meta-platforms.

In conclusion Guillaume highlighted how energy and transport providers will likely need to resort to coalition building as this will increasingly become a pre-requisite for success in a world where everything is increasingly connected but no one organisation can be a leader across the board.  Additionally he stated that more flexible and open-sourced governance approaches will be required in the future.  This applies to urban master planning, regulatory regimes and project financing.

This event was the third infrastructure investor roundtable hosted by the Global Infrastructure Investor Association and Marsh & McLennan Companies in 2019, following roundtables in Tokyo (June) and New York (July).

The Global Risks Report 2020 will be released in January 2020 and GIIA and MMC will continue to collaborate on additional resources linked to significant infrastructure investment risks and opportunities.

 

GIIA Members join NGA delegation to Australia

A delegation from the National Governors Association recently visited Australia on a fact finding trip as part of the NGA’s year-long initiative on Infrastructure. GIIA plays an active role on the National Governors Association Advisory Panel on Infrastructure and its members were leading contributors on the visit.

NGA Chair Governor Larry Hogan and the delegation met with senior Australian officials to discuss the Australian experience in using private finance to provide roads, mass transit, ports and other infrastructure and included meetings with senior Australian Government officials including the Deputy Prime Minister.

Speaking on the visit, IFM’s Tom Osborne said:

“While the Australian infrastructure investment framework and practice differs in some important ways from the United States, there were nonetheless useful lessons to be shared about project prioritisation and winning public support for private investment in public assets. The opportunities to interact locally with seasoned practitioners of public-private partnerships from both government and the private sector was valuable.”

Through its partnership with the NGA, GIIA present members with opportunities for engagement with Governors and state officials with an interest in unlocking private investment in US infrastructure.

GIIA appoints Lawrence Slade as Chief Executive

PRESS RELEASE – Wednesday September 18th, 2019 

Global Infrastructure Investor Association (GIIA) has announced the appointment of Lawrence Slade as its new Chief Executive.

Lawrence, currently Chief Executive of Energy UK, will start his new role at GIIA on 1st January 2020 succeeding Andrew Rose who announced at the Association’s Annual General Meeting in March this year his plan to step down as GIIA’s inaugural Chief Executive at the end of 2019.

Commenting on the appointment, GIIA Chairman Christopher Frost said:

“Lawrence brings a wealth of experience and expertise in the global energy sector and I am delighted that he will be joining GIIA. I look forward to welcoming him to his new role and working with him to take GIIA on to the next phase of its international development.

On behalf of the Board and wider membership, I would also like to pay tribute to Andy Rose who has successfully established GIIA as the authoritative voice for the infrastructure investor community, building an unrivalled global membership and increasingly global footprint for our advocacy and engagement work. We are very pleased that Andy has agreed to continue as an expert advisor to GIIA.”

Speaking on his appointment Lawrence Slade said:

“I’m honoured to be asked to take on this important role and build on the great progress Andy and the team have made. With billions of infrastructure investment needed around the world, I am excited by the global nature of GIIA’s mission and the scale of opportunities for the sector. I look forward to getting started and working with our members and stakeholders.”

Andrew Rose said:

“It has been a privilege to have been GIIA’s first Chief Executive and see the Association grow its membership and global voice. We have built an excellent team and I am delighted that Lawrence has agreed to take on the role to expand GIIA’s international presence. I look forward to continuing to support the Board, Executive and Members in promoting the role of private investment in delivering sustainable infrastructure for future generations.”

GIIA is grateful to Marcus de Luca and the team at Heidrick & Struggles and also to Clifford Chance for their support in the appointment process.

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Biographical notes:
Lawrence Slade joined Energy UK in 2011, becoming Chief Executive in January 2015. He has been involved in the energy industry since the late 1990’s working in countries all over the world. Lawrence is a member of the UK Government’s Committee on Fuel Poverty, an Advisory Board member of Connected Kerb, a Board Trustee and Audit Committee member of the Money Advice Trust (who run the National Debtline and Business Debtline) and is also a Fellow of the Energy Institute.

About GIIA:
GIIA is the membership body for the world’s leading institutional investors. With more than 70 members, we work with governments and other stakeholders to boost the role of private investment in providing infrastructure that improves national, regional and local economies. GIIA members have investments in 1,300 assets, across 49 countries, totalling $660 billion of infrastructure assets under management.