Pension funds, insurance companies and other big institutional investors could help shrink the mammoth $500-billion-a-year worldwide infrastructure financing gap by 2030 if they follow through on meeting their own investment-mix goals, Standard & Poor’s Ratings Service says in a new report.
In its report, released on Jan. 16, S&P estimates institutional investors could contribute as much as $200 billion a year for infrastructure between now and 2030—or a total of $3.2 trillion during that span. (S&P and ENR are units of McGraw Hill Financial.)
Drawing on data from the Organization for Economic Cooperation and Development and New York City-based research firm Preqin, S&P says institutional investors are aiming to allot 3% to 8% of their assets under management to the infrastructure sector.
Those percentages are “a significant increase from what we’ve traditionally seen,” S&P notes.
The study also says total global infrastructure needs are estimated at $57 trillion through 2030, citing a McKinsey & Co. report.
Geoffrey Yarema, a partner with Nossaman, a Los Angeles-based law firm, said in emailed comments: “There is no shortage of debt and equity providers willing to invest in infrastructure projects. The S&P report makes that clear.”
Yarema, who specializes in infrastructure development and finance, adds, “The real challenge is that investors aren’t giving their money away.”
He says, "Projects they invest in must offer the means to repay that investment with a return. That requires the project to create a new revenue stream itself and/or the public sponsor to leverage its existing resources through availability payments.”
Public agencies make availability payments, over a period of years, to private concessionaires for, for example, designing, building, maintaining a toll or non-toll highway.
Projected world population growth, particularly in developing countries, will require more infrastructure in areas such as energy, water, transportation, telecommunications, schools and hospitals, S&P says.