Little could we have known that, as the beginning of 2024 nears, we would find ourselves in the throes of a new period of disruption and uncertainty, one marked by rising geopolitical tensions, persistently high inflation and surging debt costs. In the meantime, the need to deliver the trillions of dollars’ worth of investment required to address the net zero, digitalisation and critical infrastructure challenges discussed in this year’s expert report has grown even more urgent. Despite the myriad challenges faced, global infrastructure investors continue to deliver: providing improvements to utility, transport, broadband and energy networks around the world, as well as robust returns topension savers.
As an asset class, private infrastructure remains buoyant – interim fundraising hit a new high of USD 45 billion in the second quarter of this year, with fresh records set to be achieved for the largest funds dedicated to renewable energy and digital investment.
In terms of where investors are choosing to allocate the capital they are raising, this new set of country rankings is testament to the power of policy certainty, economic stability and willingness to work with funds at the highest levels of government in order to drive inward investment. Notable among this year’s risers is the US, where the Biden administration’s Infrastructure Investment and Jobs Act and Inflation Reduction Act have shifted the global dial when it comes to net zero policymaking.
The USD 369 billion worth of green incentives and tax breaks contained in the latter have proved particularly effective at crowding in private investment, while funding from the former is rightly designed to help promote collaboration between states and investors at the local level.
Which is not to say that the nation has ticked every box when it comes to facilitating private investment: public-private partnership legislation remains underdeveloped at the state level, permitting processes remain too cumbersome and whilst incentives have spurred a boom in solar capacity across the nation, that success has not been replicated across other renewables.
For policymakers within countries further down this year’s list, especially those in nations with strained balance sheets, it should be remembered that non-fiscal measures – especially developing the right regulatory frameworks – can be equally effective at raising investor appeal. Whether through incentives or regulatory reforms, one thing is for certain: governments will only meet their net zero and infrastructure targets through working closely with private investors. With public finances stretched around the world following the pandemic, the need to do so is especially pressing.
As such, this latest Index also rightly highlights how a rising tide of new requirements linked to scrutiny of international investment is impacting funds. Whether it be measures linked to the Foreign Subsidies Regulation in the EU, National Security and Investments Act in the UK, or measures imposed by the Committee on Foreign Investment in the US, it is vital that well- intentioned initiatives designed to deter malicious actors do not inadvertently deter the legitimate inward investment which is so urgently needed.
Removing the unnecessary regulatory barriers which deter investment globally is a must. So too is greater dialogue between governments and investors, but also between governments themselves. The more we can avoid a wildly varying global patchwork of regulations and requirements around infrastructure investment, the more we can accelerate change.
The challenge of addressing the world’s infrastructure investment gap is one shared by policymakers, regulators and investors. It is only through long-term partnerships that we can hope to close it.
"The more we can avoid a wildly varying global patchwork of regulations and requirements around infrastructure investment, the more we can accelerate change."
