Amidst growing pressures on public purses, the world is facing a $106tn infrastructure funding gap – a gap that only private capital will truly help governments bridge.
A new Global Infrastructure Investor Association (GIIA) report, produced by member law firm Freshfields, closely examines the international regulatory and transaction landscapes in the world’s largest infrastructure investment markets.
Competing for Capital is vital reading for everyone involved in shaping policy or making decisions that impact the attractiveness of investing in critical infrastructure – allowing for detailed comparisons of the state of play in France, Italy, Spain, Germany, the Netherlands, Canada, the United States, United Kingdom, and Australia, as well as the European Union.
Amidst competition to attract highly mobile capital, governments around the world are offering steadier returns, more co-investment or risk-sharing, and introducing processes to streamline projects. But as countries compete for this capital, there is divergence in how investment environments are shaped and reshaped.
The report highlights several risks which undermine investor confidence and deter investment even where opportunity exists:
- Across the board, planning, permitting and consenting delays are seen as a binding constraint
- Retroactive action is increasingly being taken, with jurisdictions moving the goalposts on existing projects with previously agreed returns, lifespans, and operating models
- International divergence in openness to and delivery of public-private partnerships
- Patchwork project pipelines put jurisdictions at a competitive disadvantage
Countries must look outside of their borders to how both their neighbours and competitors are already deploying solutions to these risks. And with global economic uncertainty, energy shocks, and the requirement to evolve at pace to the needs of an increasingly digital world, governments must understand the race they are in for capital.
The simple existence of tools to attract and protect private investments is no longer enough. Investors are instead looking for credibility, consistency, and durability in how these tools and mechanisms are executed.
Governments need to clearly demonstrate their ability to deliver if they stand a chance in competing.
Jon Phillips, Chief Executive of GIIA, said:
“Only private capital can close the world’s infrastructure funding gaps – financing the assets that keep economies connected, powered, and growing into the future. But ambition alone isn’t enough to secure this.
“In competing for long-term infrastructure capital, governments must instead show they can create a stable, consistent investment environment. Investors are raising funds at record levels, but this will only land where rules are clear and frameworks credibly deliver.
“Anyone shaping decisions that affect the attractiveness of national infrastructure investment can’t afford to only look inward. In the global race for capital, the right solutions will already be working elsewhere, and governments must be willing to learn from them.”
Jessamy Gallagher, Partner and Co-head of Energy and Real Assets, and Alastair Mordaunt, Partner – Freshfields, said:
“Infrastructure capital is global, mobile and highly selective. Investors will back the jurisdictions that can turn policy ambition into investable opportunities.
The formula is increasingly clear: investors need stable frameworks, visible pipelines, proportionate regulation and planning and permitting systems that enable projects to be built. The challenge is execution.
As capital compares markets in real time, credibility has become a competitive advantage. The markets that can convert policy certainty into investable opportunities will be best placed to secure the long-term funding their infrastructure needs.”
Read and navigate the full report on the Competing for Capital microsite.