Feature
INFRASTRUCTURE: HOW TO BUILD BACK BETTER
Everyone loves infrastructure, especially the government. Indeed, back in 2020, when Rishi Sunak was the chancellor, he set out the UK’s first infrastructure strategy. This was fol- lowed almost two years later with the Levelling Up whitepaper, which has infrastructure scribbled all over it, like a lovelorn teenager. Institutional investors, particularly pension funds, also love the asset class for a host of reasons. But for all this love, the biggest challenge with infrastructure is the lack of appropriate projects to invest in. How can some- thing so loved be so elusive? There is, it seems, a need for the government to create a form of dating agency that matches investors with their ideal projects. “Government intervention is the most likely and most signifi- cant catalyst to increase the number of investable greenfield projects,” says Paddy Dowdall, assistant executive director of the Greater Manchester Pension Fund, citing one area that is no doubt the future of infrastructure. “This could be in the form of direct procurement of social infrastructure, renewable energy subsidies, grants for brownfield re-development or co- investment on a subordinated basis,” he adds. But Sarah Gordon, chief executive of the Impact Investing Institute, believes that the government has encouraged institu- tional investment in this area, but she wants it to focus on under-served regions of the UK. “Alongside helping to crowd
30 December – January 2023 portfolio institutional roundtable: Infrastructure
in investment, government can also empower people and com- munities in these places to engage with private capital,” she adds. Michele Armanini, greenfield managing director of Infracapi- tal, M&G’s unlisted infrastructure equity business, highlights several areas where the government could make projects viable for institutional investors.
“When it comes to encouraging institutional investment into sustainable infrastructure projects, the government and regu- lators must embrace new technologies in a way that enables them to scale quickly and share risk fairly across the public and private sectors,” he says.
Armanini has already seen examples of this, with the UK gov- ernment’s development of models, such as Contracts for Dif- ference, to support and incentivise investment in sectors like offshore wind. “This level of support and targeted intervention has dropped off substantially, and private investors can now invest in this sector with confidence, knowing they can make an economic return and will not be left with stranded assets,” he adds. George Graham, director of South Yorkshire Pensions Author- ity, argues that there are other ways of shifting the infrastruc- ture needle. “The key change that would improve matters here is to find more ways to bring the skills and expertise of fund
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