Opinion - Financing the Recovery
The Global Infrastructure Investor Association (GIIA) represents 80 of the leading private investors and advisors in global infrastructure – an asset class that has seen continuous and steady growth over the past few decades.
GIIA members currently own and manage nearly US$1tn of infrastructure assets on six continents and it is fair to say that many of you reading this special report will only be doing so as a result of infrastructure owned by GIIA members – be that energy, transport or digital networks. In addition, we conservatively estimate that at any given point in time there is at least US$200bn of new capital ready to invest in infrastructure.
Following that theme, in the face of what has been a very difficult period for people all around the world, the infrastructure that supports modern society has continued to deliver essential services such as water, electricity & gas to communities 24/7.
Likewise, the role of fast and ultra-fast broadband has enabled many families to both work from home and school their children remotely – something that a few years ago could not have been contemplated with any level of efficiency – let alone with the advances we have seen.
Further afield, seaports and airports, (and in the latter’s case while suffering from massive revenue shortfalls) have been able to continue to operate around the clock bringing in essential supplies and helping reunite families.
In a great many cases, these assets are owned and operated by private companies and often ultimately, by our pension funds, helping deliver a long-term revenue stream for savers. Infrastructure investors are renowned as long-term stewards, wanting to help grow and nurture their investments, in line with ESG principles, often over decades. During the pandemic this ownership model also helped insulate governments from even greater levels of financial stress as investors “dig-in” for the long term and reach out to help the communities they serve.
As we emerge from the pandemic, many significant issues remain. Top of the list is, of course, climate change. In the UK alone a recent joint GIIA and PwC report suggests that an additional annual investment of £40-50bn per annum will be required every year for the United Kingdom to get on track to Net Zero. Globally this number can be multiplied several times over, illustrating the massive task that lies ahead of us all. Across key markets and economies we are seeing major policy announcements and spending commitments, but while the context may differ there is a golden thread that consistently appears – by combining government funds with private capital we can achieve much, much more, and faster.
Net Zero, while being a major issue is not the whole story. As our report with DLA Piper into the global Public Private Partnership market pointed out, the world’s infrastructure needs trillions of dollars to be spent in coming decades. Investment that can’t be met by already stretched Government balance sheets alone. Given this, it is essential that governments at local and national levels have access to multiple sources of funding. As the report points out, around the world public private partnerships are delivering investment in critical infrastructure, more often on time and on budget than that held publicly. This, combined with other funding models in the financing toolbox, gives countries access to hundreds of billions in private capital which can be quickly and efficiently deployed to deliver the smarter, cleaner, infrastructure needed for future generations.
As we look ahead to COP26 its safe to say that there is not a moment to lose to get the right frameworks in place to drive the future investment needed to deliver the infrastructure we all require.
Follow Lawrence Slade on Twitter @lawslade