The push for sustainable infrastructure grows

From

Nick Langley

The COVID-19 pandemic has meaningfully hit most countries, bringing with it a toll on human lives and livelihoods. As governments move to mitigate the public health crisis and support economies through monetary and fiscal policy, many are asking if governments will stimulate their economies with investments in infrastructure.

Nick Langley, Portfolio Manager, RARE Infrastructure, a leading listed infrastructure manager, says: “While we expect some infrastructure investment as a means of stimulus, we expect it to focus on smaller projects aimed at increasing the money supply and getting money into various smaller communities and regional centers.

“Yet, longer term, there are several positive drivers for infrastructure as an asset class. The need to lower carbon emissions is not going away; nor is the importance of upgrading and building new infrastructure to achieve lower emissions targets.

“And part of the world’s response to the pandemic, increasing the urgency of balancing stakeholders in business operations, also looks to be a positive for infrastructure’s outlook. Partly, this is because infrastructure companies are well-positioned to manage a balance of stakeholder and shareholder interests that is a key tenet of the corporate response to the pandemic.

“The tilt toward managing stakeholder interests has been accentuated by the crisis, as companies have found themselves needing to help employees, customers and the general public during difficult times.

“A specialised knowledge of the infrastructure sector, with a rigorous approach to ESG analysis, will be necessary to manage risks and capitalise on opportunities as green infrastructure grows. The sector has very attractive tailwinds and attributes, but there are several risks that investors need to be mindful of,” notes Langley.

In a recent white paper, Langley highlights:

  • Infrastructure will require substantial investments for the world to advance on lower carbon emissions targets and is well-positioned for the growing interest in stakeholder capitalism.
  • While public policy will play a significant role in funding lower emission infrastructure, we expect the world will rely on the private sector to fund many initiatives, likely with user-pays and regulated infrastructure.
  • We believe it will be advantageous to be in the listed infrastructure space where capital can be allocated nimbly as public policy develops, affecting infrastructure valuations.

Read the white paper.

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