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Foreword: Accelerating transformation

The infrastructure market has remained resilient in the face of COVID-19, save the obvious area of transport. Government stimulus packages around the world promise further activity with the UK, US and EU, for example, outlining ambitious infrastructure spending programmes.  As is often the question, will these eventuate? 

COVID-19 has also provided the backdrop for tougher controls on foreign investment. The likes of the UK, France and Australia have either introduced laws for the first time or reduced the thresholds for voting rights or transaction values.  However, that is not the case for all markets. Prior to the pandemic, protectionism appeared to be declining in the Middle East, CEE and APAC where the need for foreign capital is greater.  It is too early to tell what impact such regulations will have on capital flows in developed markets but on current transaction levels, it appears to be limited. Nevertheless, it is vital that infrastructure investors are fully aware of the broad scope of the controls when considering their investment plans.

There is significant attention on digital infrastructure and the pandemic demonstrated the need for investment in a balanced range of technologies. Cloud services and satellite connectivity will increase to deliver high speed internet anywhere in the world. 

Infrastructure has always played an important role in ESG, and these considerations are now the rule, not the exception. Net Zero plays a big part in government policy; disclosures are now mandatory requirements and projects that will reduce carbon emissions are being supported. Investment strategies are also being shaped by stakeholders as they start to voice their concerns, including by way of shareholder activism and litigation. 

The CMS 2021 Infrastructure Index has ranked 50 countries by their attractiveness for infrastructure investment and it paints a very positive picture. Singapore tops the leader board, bolstered by the unveiling of its Green Plan 2030 which aims to advance sustainable development and reduce the country’s carbon footprint. There are big spending plans in every region as governments seek to close infrastructure gaps, recover from the pandemic and stimulate their economies. 

Infrastructure markets remain buoyant and there is no sign of slowing down. 

Thank you to GIIA, who collaborated with us throughout, our research partners Capital Economics and our interviewees for giving up their valuable time to share their views on the infrastructure sector in their respective markets.

A rapidly changing landscape for infrastructure - reflections from GIIA

As investors around the world will testify, the landscape for infrastructure as an asset class has changed markedly over the last couple of years. 

The turbulence of the US and UK elections, Brexit, the changing of the guard at the European Commission and Parliament, Net Zero commitments and of course the global pandemic have all impacted a sector whose characteristics are traditionally built around stability, predictability and low risk. Ironically, it is perhaps because of this unprecedented period of uncertainty that the asset class has proved its worth once again and continues to grow exponentially.

This significant period of change has brought with it a smorgasbord of challenge and opportunity. The focus on decarbonisation and climate resilience is accelerating investor strategies related to current and future portfolios, whilst the world of ‘zoom’ has changed the way we work, probably for good, opening up even more opportunity for the ‘fourth utility’ of telecoms and data. Whilst the unwelcome hit on international travel will take time to recover, the interregnum has perhaps provided the breathing space for aviation to make essential progress on its sustainability agenda.

Yet, as the world spins ever faster, many of the longstanding issues remain. Governments around the world are turning to infrastructure as a key part of their post pandemic economic recovery plans, but in many cases the role of private capital in those plans is not clear. Billions of dry powder remains ready to be deployed to work alongside the public sector if policy makers make the right decisions about funding models and pipelines.  Regulators continue to grapple with striking the balance between near term consumer pressure and enabling essential long-term investment. Governments want an ever-increasing slice of the inward foreign investment pie whilst putting in place protectionist policies to enable them to intervene if they don’t like the colour of the money. Treasury officials are under pressure to raise corporate tax revenue to pay down massive public borrowing whilst simultaneously competing as destinations for international capital.

As the membership body for the leading investors in infrastructure, GIIA is engaged with policy makers in the key markets on all these issues, and more. With nearly USD 1trn of infrastructure assets under management, through 1,700 individual assets across 66 countries, GIIA members are analysing the investment environment around the world on a daily basis.  In addition to representing the investor viewpoint in our global advocacy programme, we are working in partnership with many of the leading advisors to the sector to bring market insights and thought leadership to our members to help with their understanding of the issues and opportunities ahead.

We are delighted to have been able to work with CMS on this report and hope it brings new insights for our members.

Lawrence Slade, CEO, GIIA
Jon Phillips, Director, Corporate Affairs, GIIA

Key contacts

Kristy Duane
Co-Head of the CMS Infrastructure & Projects Group
T +44 20 7524 6568
Dr. Nicolai Ritter
T +49 30 20360 2509