Infrastructure assets poised to head off tailwinds: CBRE IM

The infrastructure asset class is better positioned than other asset classes to withstand current macroeconomic challenges such as rising interest rates high inflation and supply chain disruptions according to CBRE Investment Management senior director global infrastructure research Tania Tsoneva.

Talking to Real Asset Media’s Richard Betts, Tsoneva said there are three basic reasons for its strength.

First, it is resilient being defensive and is a diverse asset class that provides essential services. During this period of high commodity prices and unprecedented power prices in Europe, new sectors like digital and renewables limit the exposure to such variables, she added.

Secondly, there is structural growth so, regardless of the macro environment, the journey towards net zero continues and provides strong tailwinds for infrastructure investing.

Thirdly, investors’ confidence in the asset class continues –more than $150 billion was raised for infrastructure investment in 2022, in part, because it ticks a lot of ESG boxes.

“With the war in Ukraine there’s increased focus on energy security and increased focus on affordability, so governments are targeting a diverse energy mix, especially in Europe,” Tsoneva said.  “While the focus is on energy security, I don’t think that energy transition has been sidetracked.”

“Renewables are becoming ever more cost competitive – the gap between renewables and fossil fuel generation widened in 2022 and the economics are stronger now,” she said.

Tsoneva is optimistic for 2023, but with caveats.

“I think it will take time for infrastructure investors to adjust to the new economic realities, to start reflecting the higher funding costs, the higher cost of capital in their investment decisions

“But I also think that now supply chain is issues have started to ease we will see a lot more investment opportunities and a lot of them are going to be in the green sectors.”

While there is considerable interest in areas such as EV chargers and electrification of transport Tsoneva stated that one of the things that should also excite infrastructure investors more is the role of legacy infrastructure such as the power grid, which needs to be more resilient and accommodating for renewable power.

Please click on the video above to watch the full interview or listen to the podcast below.