Around the world, governments face an acute need for new or modernized infrastructure. The estimated shortfall in global infrastructure debt and equity investment is at least US$ 1 trillion per year. Many investors, particularly long-term ones such as pension funds, insurance companies and sovereign wealth funds, want to allocate more capital in infrastructure but struggle to find bankable projects. In short, a significant mismatch exists between the need for infrastructure projects and capital made available by investors. While both investors and political leaders can take steps to address this disconnect, the Blueprint focuses on how governments can enhance the viability of infrastructure projects and attract private capital for the public good.
Inherent to this task is a need to understand the perspective of investors, who assess infrastructure projects against a multitude of options in other asset classes and countries. In this context, countries with more effective regulatory environments and credible project pipelines will attract more investment at a lower cost. Fortunately, the most critical policies to interest private finance also tend to benefit society. This underscores a key point: governments can seek private investment while focusing on the ultimate goal of creating broader economic value and social benefits.
Based on interviews with prominent global infrastructure investors, specific actions for governments are recommended that fall into three categories:
- Infrastructure strategic vision, which includes a project pipeline, a viable role for investors and communication strategy
- Policy and regulatory enablers, which mitigate renegotiation risk and increase the efficiency of key processes
- Investor value proposition at the individual project level, which focuses on maximizing value for governments and ensuring a competitive risk-adjusted return for investors