2021 outlook bright for investing in infrastructure

From

Nick Langley

Despite the calamitous global pandemic situation the outlook for investing in one significant sector, namely infrastructure, is bright, according to Nick Langley, Founder and Senior Portfolio Manager at RARE Infrastructure.

“There is a confluence of issues, events and realities that cause us to be extremely positive about the potential returns on offer from listed infrastructure investments globally as the world grapples with the pandemic and gets ready for the Biden administration in the U.S,” said Mr Langley.

Four positive themes that make investing in infrastructure attractive in 2021 are: acceleration in infrastructure projects globally, Joe Biden’s stance on green energy,  growth in utilities sector and focus on lower emissions target and transport infrastructure,  Langley  noted.

“Across the developed world Infrastructure projects are being accelerated as governments look for opportunities to support local economies, stimulate job markets and support small and medium-sized enterprises. These projects tend to be accretive to value and are often missed by the market.

“We expect to see a further focus on infrastructure spending due to the U.S. presidential election outcome and the probability that Democrats will control the agenda in both houses of Congress (House and Senate). Projects related to renewable power generation and electric vehicles in the utilities sector are expected to benefit, and a larger stimulus bill is now also likely.

“Initiatives to expand broadband to rural areas will likely benefit the wireless-tower sub-sector as will the 5G rollout globally, while ‘midstream’ or traditional energy could face headwinds due to a faster transition toward renewables.

“The utilities sector in the U.S., Europe and Asia were hardly impacted by the pandemic due to their essential service nature, supportive regulation, environmental importance in leading the decarbonisation of economies and  social importance as major employers.

“A variety of trends will likely accelerate asset growth and subsequent earnings, cash flow and dividend growth in the medium and longer-term. These include higher renewable energy targets, gas to electricity switching – in residential as well as commercial, the build-out of electric vehicle charging infrastructure and the need to build grid resilience against increasingly destructive weather events related to climate change.

“We also see opportunities to invest in transport infrastructure, particularly in long-dated monopoly assets like the Eurotunnel and North American Rail, which are expected to benefit from policies to lower emissions and the post-COVID-19 recalibration of supply chains,” Mr Langley said.

“It is indeed remarkable that with so many issues facing governments and institutions, particularly the pandemic-induced health and economic crises, that one sector offers so much potential for investors. We believe we have good cause to be very optimistic about the likely returns from global listed infrastructure in 2021,” he said.

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