The key thematics to drive continued growth in infrastructure in 2024

Sarah Shaw

Infrastructure as an asset class is well positioned for any recessionary pressures that could develop within in the next 6 – 12 months. Infrastructure has been, and continues to be, supported by five key and integrated growth thematics that are long term, significant and completely immune to short cyclicals.

Ageing infrastructure

Following decades of under-investment by developed countries in infrastructure, much of the existing infrastructure is old, inefficient and, in many cases, unsafe. For example, over 50 per cent of London water mains are over 100 years old. Even worse, a recent report suggested that one in five New Yorkers are drinking water from lead pipes. There is an increasing need for privately financed infrastructure to step in and help fill the void.

Global population trends

For some time now, there has been a clear trend of the West getting older but much of the East younger. Both dynamics require significant investment in infrastructure. For example, in emerging markets, a growing young population requires new, improved and expanded infrastructure development to support their evolution.

In the developed world, the growing aging population requires increased private sector investment in infrastructure as the demand on government budgets in terms of pensions healthcare and aged care services reduces allocations to infrastructure.

Emerging middle class

The emergence of the middle class in developing economies, offers huge opportunity for the sector. Infrastructure is both a driver and a first beneficiary of improved living standards which means clean water, indoor plumbing, gas for cooking and heating, and power. Over time the demands of this growing middle class progress to services such as transport and communication. This theme has been apparent for some years now and continues to dominate emerging market infrastructure investment opportunities.

Clean energy transition

Huge investment in clean energy infrastructure is required as economies move towards net-zero commitments. While the speed of decarbonisation remains unclear, there is a real opportunity for multi-decade investment in infrastructure as every country moves towards a cleaner environment.

Technology

We have seen the explosive growth in data consumption and more recently the Internet of Things, fuelling significant investment opportunities for digital infrastructure owners globally. For example, mobile connectivity has emerged as an essential service for daily life, and the huge global need for wireless data transmissions is creating a need for cellular towers.

By Sarah Shaw, global portfolio manager and CEO/CIO