The case for global infrastructure

Core infrastructure, a defensive asset class, provides basic services that are essential for communities to function and for economies to prosper and grow.

The combination of infrastructure’s defensive characteristics, the need for infrastructure investment globally, and the diverse nature of assets within the infrastructure universe means that infrastructure as an asset class will be an attractive investment opportunity for decades to come.

Global listed infrastructure has unique investment characteristics, such as monopolistic market positions, lower volatility of earnings underpinned by contracts or regulation, higher yields than the broader equity market, and inflation hedges within the business. These characteristics work together to provide long-term resilient and visible cash flow for investors.

With governments unable to wholly fund the ongoing and growing demand for infrastructure projects, they are increasingly turning to the private sector. Therefore, there’s a significant opportunity for private investors to tap into this growth story.

As the need for infrastructure investment continues to increase, the reasons for its global demand remain clear.

Emerging economies are expected to grow rapidly over the next 30 years, changing the world economic order that has been in place for much of the post-World War II era.

The emerging middle class is driving the in-country domestic demand story, as well as the global need for infrastructure.

Rapidly growing economies need infrastructure investment to both facilitate and sustain growth. Equally, these assets perform at their best in expanding economies, where robust domestic demand growth drives patronage growth.

Population growth and globalisation have also raised a number of environmental and climatic challenges which underpin the need for even more spend on infrastructure to ensure the sustainability of the planet.

While infrastructure, on the face of it, could be considered part of the problem – its build out has certainly contributed to these challenges over the past century – we believe it is now a core part of the climate solution. Although the speed of ultimate decarbonisation remains unclear, there appears to be a real opportunity for multi-decade investment in infrastructure as every country moves towards a cleaner environment – there is no chance of the globe reaching net zero without significant investment in infrastructure, both transport and energy.