Such consequences will last for several years. As a result, we’ve established three trends that will drive the infrastructure sector in 2021, even as the global economy struggles to grapple with the pandemic.
Return to a more normal state.
The pandemic’s immense influence on humanity has paved the way for a potential economy that is lower in emissions. If the UK government and society’s interest on climate change grows, spending in renewables and infrastructure is expected to accelerate in 2021. Investment in infrastructure boosts economic growth, particularly after a time of extreme interruption like the one we’ve had in the last year.
As years of underinvestment in many developing economies, such as the United States, are paired with an increasing emphasis on decarbonisation, the global trend of building back greener is likely to intensify infrastructure spending.
Governments are pledging to reduce greenhouse emissions, with a growing focus on green energies. To meet these goals, significant investments in renewable energy would be required. Investment by manufacturers and favorable government policies, for example, would stimulate development in the global electric car industry at a more granular level.
Regulatory prohibitions, incentives, loans, tax rebates, and other non-financial rewards from different governments are all directed at ending the manufacture of internal combustion engines.
This would promote the significant investment in EV charging, relevant grid infrastructure, and high energy production that is needed, as well as provide a major investment potential.
The significance of private capital
Private capital has proven to be an increasingly important role in infrastructure and renewables investment in past years, owing to the potential for predictable returns, and we expect this pattern to continue in 2021, due to number of factors.
Investors in the United Kingdom applauded Chancellor Rishi Sunak’s National Infrastructure Strategy, which required the establishment of a new national infrastructure bank to co-invest with private sector investors to help post-pandemic revival. The government’s appreciation of the critical position played by private capital would boost the infrastructure and renewables sectors, resulting in higher private spending.
If the post-Covid recovery progresses, the government will be concerned about the state of the national finances, so putting private money into projects whenever possible will offer a much-needed financing option.
Infrastructure is becoming more appealing to private investors as the ‘lower-for-longer’ interest rate climate persists and wider financial markets get more expensive. Because of the uncorrelated, resilient returns it provides and its capacity to survive economic downturns, allocations to the sector are expected to rise.
Retail investors’ access to infrastructure assets by public markets is increasingly widening, eventually accelerating the delivery of emerging ventures and technology innovations such as hydrogen and carbon capture.