Unlike the short-term fluctuations of the macroeconomic environment, infrastructure allows investors to focus on deep structural forces shaping economies over decades.
To further highlight the long-term perspective that infrastructure investment offers, look no further than the Massachusetts (MA) Bay Transportation Authority (MBTA) subway located in Boston, MA. Colloquially known simply as “the T,” this subway system was designed over 130 years ago. The foresight of those early planners continues to benefit commuters today despite the current system's strains due to underinvestment.1,2 This example underscores the enduring impact of infrastructure investments and the need for continuous funding to maintain and upgrade these critical assets.
This underinvestment [in infrastructure] is not unique to the US – it is a global issue.
The American Society of Civil Engineers (ASCE) has graded US infrastructure a C-minus, highlighting significant deficiencies across various sectors.3 Roads, for instance, received a D, while rail and ports fared slightly better with a B and B-, respectively.4,5,6 This underinvestment is not unique to the US – it is a global issue.
The G20 estimates a $15 trillion gap between current infrastructure spending and what is needed by 2040 to meet current and future demands.7 Bridging this gap requires increasing global infrastructure spending from 3% to 3.5% of GDP annually.
Emerging opportunities (and challenges)
We believe the infrastructure sector is ripe with opportunities, particularly in the context of recent economic shifts. The repricing of risk due to recent economic events – such as the pandemic and inflationary pressures – presents a unique opportunity for investors to lock in higher returns over the long term.
Infrastructure assets have proven resilient and have consistently performed even during economic downturns.
Infrastructure assets have proven resilient and have consistently performed even during economic downturns. The current environment, with normalized mid- to long-term interest rates, is particularly favorable for infrastructure investments. Investors are increasingly allocating funds to this asset class, recognizing its potential for stable, long-term returns.
The evolving nature of infrastructure investments
Traditional assets, such as roads, airports, and marine ports, remain essential, but new opportunities are emerging beyond concrete and steel in artificial intelligence (AI) and energy transition. AI, for instance, requires substantial energy infrastructure to support data centers and high-performance computing. The demand for energy to power these technologies is expected to grow significantly, presenting a lucrative investment opportunity.
Current themes and trends
Several key trends are shaping the infrastructure investment landscape. Digitalization, urbanization, and decarbonization are at the forefront of these trends.
Digitalization
The rise of AI and the increasing reliance on data centers are driving demand for robust energy infrastructure. Data centers currently consume about 3–4% of US energy, a figure expected to rise to 10–12% by the end of the decade.8 This surge in energy demand underscores the need for substantial investments in power generation and distribution infrastructure.
Urbanization
As populations continue to migrate to urban centers, the demand for infrastructure in these areas is growing. This includes transportation systems and essential services like schools, hospitals, and clean water facilities. The trend towards urbanization is particularly pronounced in emerging markets (EMs), where rapid population growth is driving the need for extensive infrastructure development.
Decarbonization
The transition to green energy is a critical component of future infrastructure investments. The Inflation Reduction Act has set the stage for significant investments in renewable energy despite potential policy changes under new administrations.9 Renewable energy sources, such as wind and solar, are becoming increasingly cost-competitive with traditional fossil fuels, making them a pivotal part of the energy mix.
The role of public-private partnerships
Public-private partnerships (PPPs) are essential for addressing the infrastructure investment gap. Governments alone cannot meet the enormous funding requirements, especially given the strain on public finances from recent economic crises. PPPs leverage private sector expertise and capital to deliver infrastructure projects efficiently.
The importance of government support
Countries like the US, with its state-by-state approach, and EMs like Mexico and Chile actively use PPPs to drive infrastructure development. These partnerships are crucial for projects ranging from managed lanes in Georgia to fiber networks in Spain.
Investment strategies and portfolio integration
Infrastructure investments offer several benefits, including inflation protection, high barriers to entry, and long-term, predictable returns. These characteristics make infrastructure valuable to investment portfolios, providing potential diversification and stability.
A diversified approach to infrastructure investing
Both private and listed infrastructure assets each offer unique advantages. Private infrastructure investments provide direct exposure to long-term projects with government backing, while listed infrastructure offers liquidity and the potential for attractive valuations.
Final thoughts
The infrastructure sector presents a compelling investment opportunity in 2025 and beyond. With the right strategies and partnerships, investors can capitalize on the vital role infrastructure plays in the economy, navigate emerging opportunities and challenges, and enhance their portfolios with long-term, stable returns. Finally, as the world continues to evolve, infrastructure will remain a cornerstone of economic growth and development, offering a resilient and rewarding investment avenue.
1 "Building a Better T 2022." Massachusetts Bay Transportation Authority, September 2022. https://www.mbta.com/projects/building-better-t-2022.
2 "MBTA Announces Ambitious Track Improvement Program to Eliminate All Speed Restrictions by End of 2024." Massachusetts Bay Transportation Authority, November 2023. https://www.mbta.com/news/2023-11-09/mbta-announces-ambitious-track-improvement-program-eliminate-all-speed-restrictions.
3 "Making the Grade: US Infrastructure Assessment." 2021 Report Card for America's Infrastructure. American Society of Civil Engineers, March 2021. https://infrastructurereportcard.org/.
4 "US Infrastructure Grade: Roads." 2021 Report Card for America's Infrastructure. American Society of Civil Engineers, March 2021. https://infrastructurereportcard.org/cat-item/roads-infrastructure/.
5 "US Infrastructure Grade: Rail." 2021 Report Card for America's Infrastructure. American Society of Civil Engineers, March 2021. https://infrastructurereportcard.org/cat-item/rail-infrastructure/.
6 "US Infrastructure Grade: Ports." 2021 Report Card for America's Infrastructure. American Society of Civil Engineers, March 2021. https://infrastructurereportcard.org/cat-item/ports-infrastructure/.
7 "Forecasting infrastructure investment needs and gaps." A G20 Initiative. Global Infrastructure Hub, Jun 2018. https://outlook.gihub.org/.
8 "The Impact of Data Centers on Energy Demand and Costs: What Lies Ahead?" Environment+Energy Leader, December 2024. https://www.environmentenergyleader.com/stories/the-impact-of-data-centers-on-energy-demand-and-costs-what-lies-ahead,58672.
9 The Inflation Reduction Act of 2022 is a United States federal law that aims to reduce the federal government budget deficit, lower prescription drug prices, and invest in domestic energy production while promoting clean energy.
Important information
Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.
Diversification does not ensure a profit or protect against a loss in a declining market.
Products investing in infrastructure are subject to the risk of concentrating investments in infrastructure-related companies, which makes them more susceptible to factors adversely affecting issuers within that industry than would a product investing in a more diversified portfolio of securities. These risks include high interest costs in connection with capital construction programs and the costs associated with environmental and other regulations.
Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.
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