GIIA welcomes new CBI report ‘Investing in Infrastructure’.

GIIA was pleased to contribute to the CBI’s new report titled ‘Investing in Infrastructure – Sourcing the Finance to Build Back Better’.

We welcome the acknowledgement of the vital role that private investment plays in delivering the modern, efficient and socially responsible infrastructure needed for future generations and the 13 recommendations the report makes.

In particular GIIA welcomes those recommendations calling on the Government to provide more clarity around the role they see for private investment in delivering many of the nation’s major infrastructure projects.

Speaking on the release of the report, GIIA CEO Lawrence Slade said:

“At a time when Government spending is rightly focused on both the social and economic recovery from the coronavirus pandemic, the private sector has the expertise and innovative ideas, and  stands ready to help address the UK’s long term infrastructure challenges while playing a significant role in the UK’s economic recovery.”

The full CBI report can be viewed here

NEW REPORT | Global Risks for Infrastructure – The Climate Challenge

GIIA, in partnership with Marsh & McLennan, is pleased to release the second in a three part analysis of global risks for infrastructure investors. Looking at the Climate Challenge, this report discusses the specific risks to infrastructure investors under each of the key risk categories outlined by the Task Force on Climate-related Financial Disclosures, as well as crucial levers for achieving climate resilience at both the portfolio and asset level for the infrastructure sector.

Click the image below to read Global Risks for Infrastructure – The Climate Challenge

Physical risks related to climate change are becoming a crucial risk category for infrastructure owners and operators. Natural disasters are already a leading cause of infrastructure disruptions in high-income nations, and climate change is expected to exacerbate these disruptions. In addition, increased urbanisation is heightening concentration of infrastructure assets in high risk areas.

Applying the three mutually reinforcing levers discussed in this report can provide infrastructure investors with a launchpad for developing a dynamic and future-ready climate resilience strategy.

 

The first instalment of this series illustrated the risk landscape for infrastructure with the release of the 2020 Global Risks for Infrastructure Map while the upcoming final instalment will explore the impact of transformative and disruptive technological innovations on the infrastructure sector, with an expected release in Q4 2020.

GIIA response to FT article on ESG

GIIA has published the following response to Brad Cornell’s opinion piece in The Financial Times (16th July, 2020) titled ‘The ESG concept has been overhyped and oversold’

Infrastructure investors increasingly believe that key to their commercial success is a focus on the principles of ESG investing, to manage risk, improve the performance of assets under management, and enhance their corporate reputation. It is not just a question of doing the ‘right’ thing, although in today’s society that is pretty fundamental to maintain your ‘social licence’; investing through the ESG lens for the long term also makes good business sense. A way to look at ESG investing is through the 7 R’s model (credit to Wayne Visser, Professor of Integrated Value and Chair in Sustainable Transformation at Antwerp Management School), in the way that it lowers risk, improves reputation, fosters resilience, increases resource efficiency, anticipates regulation, supports recruitment and increases revenues.

Good ESG performance should not be seen as a one-off. Companies that improve their ESG performance go on a journey that results in continued improvement, adding value year after year. Making decisions without ESG information is also risky and, in some cases, could be seen to constitute a disregard for fiduciary duty.

Investors that have embedded ESG into their decision making should not be “called on to make judgments on social issues that they are not empowered to make, nor equipped to handle”. Effective executive decision making is actually informed and empowered by the extent to which an organisation is engaged with the societies within which it operates. Companies that have enhanced engagement with their stakeholders are likely to make better informed, well-rounded decisions.

Infrastructure investors are consciously choosing to invest for the long-term with ESG at the core of their investing strategies, because they know it is the way to build long term value for stakeholders and shareholders.

New Infrastructure Pulse Survey

GIIA, in partnership with Alvarez & Marsal, is pleased to launch the new GIIA Infrastructure Pulse Survey for both the European and Americas markets. This quarterly survey aims to provide a regular temperature check of sentiment in the sector and to monitor emerging trends.

Click here to view the results of the Europe Infrastructure Pulse Survey

 

Click here to view the results of the Americas Infrastructure Pulse Survey

Speaking on the release of the Survey, CEO Lawrence Slade said:

“We are excited to work with Alvarez & Marsal on the Infrastructure Pulse Survey which will monitor some of the key trends and issues affecting the infrastructure investment space in both Europe and the Americas. We are confident this will become a valuable market tool in understanding what is happening in the sector.”

Against a backdrop of Covid-19, a number of interesting common themes emerged from the first survey:

  • Most respondents raising capital expressed a neutral or marginally positive view of the
    fundraising environment.   For those investing new capital, almost three quarters of respondents indicated that infra debt markets remain favourable for funding of new infrastructure deals in both geographies.
  • In terms of general outlook and views of the impact of Covid-19, respondents highlighted the only positive impact of Covid-19 was in communications infrastructure (due to the increased criticality of connectivity as more work from home), which continued the overall positive outlook for the sector.  Unsurprisingly, the most negative outlook was noted for airport transactions and oil & gas related midstream assets.
  • Respondents indicated that the most positive outlook in Europe was for the Nordics, Iberia and Germany, whilst in the Americas the most positive outlook was in the USA. The most negative sentiment was reserved for Greece/Cyprus, Eastern Europe, and Mexico.
  • ESG is emerging as an important consideration for investors and their LP’s across both the Americas and Europe.  Covid-19 and other events in 2020 are likely to accelerate the ESG agenda with a flow through to investment criteria.

Results from the next quarter’s survey are anticipated in mid-October.

GIIA Members’ Assets Exceeds $750bn

The 2020 edition of the GIIA / EY Global Asset Database reveals that GIIA members assets under management has exceeded US$780bn – comprising more than 1,500 assets across 55 countries.

This is an increase of more than £120bn since 2018/19.

The GIIA / EY Global Asset Database shows that GIIA members own, operate and invest in:

  • More than 100 airports serving more than 1 billion passengers annually
  • Utility companies serving 86.3 million customers
  • 321 ports moving more than 500m tonnes of cargo
  • 56,100MW of wind power, 18,600MW of solar power and 12,400MW of hydro power and biomass

CLICK HERE TO VIEW THE 2019/20 GIIA / EY GLOBAL ASSET DATABASE FACTSHEET

Speaking on the release of the GIIA / EY Global Asset Database CEO Lawrence Slade said the results showed the value of private investment in infrastructure.

“At a time when Government balance sheets are under enormous pressure, the private sector has the available capital, experience and innovative ideas to deliver the environmental and socially responsible infrastructure needed for future generations.”

GIIA’s global membership has also continued to increase in 2019/20 with the addition of members from across traditional markets as well as Japan and India.

 

GIIA is grateful to EY for their support in putting together this information.

 

Financing America’s Infrastructure Future

GIIA CEO Lawrence Slade spoke about the opportunities for US States to drive inward investment through partnerships with private infrastructure investors during a panel discussion convened by the National Governors Association on 24th June.

The Infrastructure Financing Summit, a centre-piece of National Governors Association Chairman, Governor Larry Hogan’s year-long Infrastructure: Foundations for Success initiative, focused on leveraging private sector investments, and how governors can help ensure that their states have access to the full range of infrastructure financing options.

Joining the panel with Lawrence were Governor Doug Ducie, Arizona, Governor Ralph Northam, Virginia and Global Head of Corporate & Business Development for Cintra, Carlos Ugarte.

Noting that private infrastructure currently has a proportionately smaller role in the US when compared to other markets around the World, Lawrence said there are multiple funding models that could be deployed to suit specific circumstances for individual states, including more rural states.

“Working with private investors will allow individual States and Governors to access significant funding that comes with unrivalled experience about how to economically manage, develop and operate both existing and new infrastructure and responsibly add value to communities,” said Slade.

Watch the full panel here – Financing America’s Infrastructure Future (Panel 1)

Investable Infrastructure Senior Leadership Group

GIIA hosted the first of a planned series of meetings between international investors and Lord Grimstone of Boscobel, Minister of State for Investment on June 24th. More than a dozen international investors gathered on a virtual roundtable with the Minister and senior officials from the Department for International Trade to discuss the important role that private investment will play in supporting the economic recovery to the COVID-19 pandemic, creating jobs, and delivering the infrastructure we need for future generations.

This was the first in a series of engagements for the Investable Infrastructure Senior Leadership Group planned through the rest of 2020 and beyond, where GIIA will be working with the Minister in his joint portfolio across the Department for International Trade and the Department for Business Energy and Industrial Strategy to seek to identify the opportunities and most effective mechanisms to support more investment into UK infrastructure.

The Investable Infrastructure Senior Leadership Group exists to convene senior figures from industry, domestically and internationally, who have a clear remit to invest in UK infrastructure. Members are drawn from across GIIA’s global membership.  Those represented at the first meeting are collectively responsible for over US$300bn in assets under active management across 43 countries.

New GIIA member case studies launched

We have launched a new resource on our website, looking at GIIA member case studies from around the World that are delivering real societal benefits.

Compiled with support from KPMG, and using the framework of the UN Sustainable Development Goals, these case studies demonstrate the way in which infrastructure can be a positive force in local communities across the globe.

View case studies here

From renewables projects in India that are supporting local health clinics, to the world’s first electric ferry in Norway to an innovative system of fish ladders in New York, these are just a few of the examples of GIIA members helping to tackle sustainability challenges.

Speaking on the launch of the case studies resource, GIIA CEO Lawrence Slade said:

“Around the World, GIIA members are rising to the challenge of creating and delivering sustainable, innovative and environmentally friendly infrastructure that is needed for future generations.”

Richard Threlfall, Global Head of Impact and Global Head of Infrastructure at KPMG, commented:

“The success or failure of nearly three-quarters of the Sustainable Development Goals depend on infrastructure. Governments and global capital markets need to take quicker actions and work in greater collaboration in a way that is environmentally sustainable, socially impactful and resilient.”

GIIA will continue to add further case studies in coming weeks.  Members interested in submitting a new case study should email thoran@giia.net

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.