It is fast forward for infrastructure, as the need to upgrade existing assets and make them sustainable is driving investors’ demand, delegates heard at Real Asset Media’s Infrastructure Summit: Investment Opportunities in European Infrastructure briefing, which was held online yesterday.
“Infrastructure is the fastest growing asset class and real estate comes second,” said Thomas Veith, partner real estate, PricewaterhouseCoopers. “International capital is looking at the sector and there is a real race for investments.”
According to a PwC study, infrastructure assets under management will double to $2 trillion by 2025 in the worst-case scenario, increase to $2.1 trillion in the base case scenario and grow to $2.2 trillion in the best case scenario, reaching the same level as real estate AuM.
“The infrastructure market has a wide spectrum of sub-sectors so it can be difficult to define,” said Veith. “Each sub-sector has its own characteristics and requires a unique set of skills and expertise.”
Five infrastructure segments identified
PwC has identified five segments: Social infrastructure, which includes hospital, social housing and schools; transport and logistics, comprising roads, railways, ports and car parks; energy, including generation, transmission and distribution which incorporates gas networks and oil pipelines; renewables, which ranges from wind to solar to battery to waste; and finally telecom and digital infrastructure, which includes mobile networks, fibre networks and data centres.
The ESG theme now runs across all five segments and increasingly infrastructure funds support the transformation agenda of public and private stakeholders.
“In all private markets ESG is very important,” said Veith. “It is seen as a value component that has to be factored in, not as a burden or a cost.”
ESG is a hot topic around the globe, but in Europe it has added momentum because of EU taxonomy, as regulations kick in.
“The EU is a pioneer in pushing the green agenda forward,” said Veith. “Unfortunately now it’s losing speed because each of the 27 countries at national level has to define how the taxonomy will be integrated in local laws.”
Post-Brexit UK is likely to take a pragmatic approach and move things forward quickly, positioning itself ahead of the UN COP-26 Climate Change Conference it is hosting in November.
There are positive signs outside Europe as well. ESG is high on US President Joe Biden’s agenda and some $2 trillion is set to be invested in infrastructure upgrades. China has the green bond projects and other countries from Malaysia to Australia are pushing hard for reform.