David Young

alone don’t have the capital available to fund the infrastructure that will be required, writes David Young

More than 4,000 institutional investors, industrials, asset managers, government representatives, advisors and commentators attended the Global Infrastructure Investment Summit in Berlin to discuss trends and drivers that will shape the investment landscape.

While predicting the future may be a fool’s errand, it seemed there were key themes emerging which will be hugely relevant to the development of infrastructure investment globally – best summarised as the three “D’s”.

Decarbonisation and the drive to hit net zero means large scale infrastructure investment is required, not only in terms of how we generate power but in the global transition towards sustainability.

Deglobalisation and the impacts it is having on investment focus means some of the world’s biggest funds are now looking at much bigger allocations needed to reconfigure energy supply, storage and delivery infrastructure, to ensure more local energy security in the UK and EU.

Digitisation and the impact of artificial intelligence is profound and AI will transform economies and lives, creating huge demands on infrastructure and energy which require geopolitical-level consideration.

There is unquestionably a huge need for capital to fund the infrastructure needed to implement the three “D’s” but who will provide it? Look at the balance sheets of the UK and EU nations and it becomes apparent that there is simply not the capital available for governments to do this themselves.

New ways of collaborating between the public sector, industrials and private capital must be a big part of the answer as over 90% of the finance required to finance the three D’s will come from the private sector - but only with suitable government policy and intervention.

We have to recognise that this private capital is global and we need to compete effectively - making UK projects as investable as possible. The likes of UK Infrastructure Bank and Scottish National Investment Bank, alongside international development finance institutions, are playing an increasingly important role in filling gaps in capital structures, providing blended finance and enabling lower price debt finance to catalyse private capital.

New collaborations between asset managers, private pension schemes, industrials and other capital finance providers is needed to make this happen. It will be interesting to see how the plans of the various political parties, such as Labour’s proposed Great British Energy, move the dial on this.

Global professional firms like Pinsent Masons have a real role to play in this, helping to ensure that consistent solutions can be rolled out internationally that attract global capital and investment, and that advanced delivery and technology are utilised to make contracting quicker, more efficient and consistent.

As a firm, we have advised on innovative funding deals including Centrica and UK Infrastructure Bank making substantial commitments to support Gresham House’s Secure Income Renewable Energy & Storage Fund, which facilitates investment in renewable power generation and short-duration battery energy storage facilities to help maximise grid connections.

There has long been talk of legaltech revolutionising how we all work, but there is a real belief that we are at a tipping point where advanced “Delivery” is the “D” that helps facilitate the collaboration structures needed for decarbonisation, deglobalisation, and digitisation megatrends.

David Young is partner and head of international funds & asset management at Pinsent Masons