Infrastructure – Closing the Gap: Transport, Energy and Water
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Infrastructure – Closing the Gap: Transport, Energy and Water

Infrastructure generates interesting investment opportunities. There are many ways to gain exposure to infrastructure investments.

Infrastructure expenditures typically lead to job creation and they are a strong economic multiplier, resulting in productivity gains. Interest rates in many parts of the world are very low creating an ideal environment to fund infrastructure projects.

Let us look at the potential for various types of infrastructure spending, in particular transport, water and energy infrastructure.

Opportunities in infrastructure assets

Opportunities in infrastructure assets

Bubble size represents aggregate spending over the next decade

Source: McKinsey Global Institute analysis, Credit Suisse

Transport Infrastructure Down the Road

Most infrastructure programs list transport infrastructure as their priority. While developed markets focus on road repair, emerging economies are expanding their road, rail, port and airport infrastructure. Germany's Federal Ministry of Transport and Digital Infrastructure has adopted a plan to spend 290 billion euros on the construction and modernization of roads, bridges, railways and waterways by 2030. Asian countries are ramping up investments as well. China, for instance, plans to build 30,000 kilometers of roads over the next five years.

Such infrastructure programs will require large amounts of building materials, industrial equipment for construction and engineering services. Therefore the companies from those areas are likely to benefit.

Water and Energy Infrastructure

The energy sector has undergone a major transformation in recent years due to new regulations and increased focus on clean energy. According to Bloomberg New Energy Finance, globally nearly 4.4 trillion dollars (half of which in Asia) will be invested in new power generating capacity over the next ten years. The increased use of renewable energy should drive spending on improving electricity grid infrastructure and interconnection and provide opportunities for battery storage. The European Commission, for example, has allocated 5.4 billion euros to the Trans-European energy infrastructure project through 2020.

Water is a further critical infrastructure resource. Industry, especially agriculture, consumes huge amounts of it. Though with the growing global population water supply poses a serious challenge globally, it can also be seen as a great investment opportunity. Utility companies, along with government organizations, will increasingly be called in to build sustainable water infrastructure.

The need for infrastructure spending is clear, as is the political will to invest in infrastructure projects.