Our thinking

US infrastructure 2021 – 22: The path to growth

What's inside

Our survey shows investment in infrastructure assets looks set to accelerate with an anticipated boost from the US infrastructure bill and a growing focus on sustainability and technology

Foreword

The US infrastructure market is at a critical juncture. President Biden's approximately US$1 trillion plan for investment in key infrastructure asset classes has attracted bipartisan support. That paves the way for large-scale spending across the country, with investment in transport, energy and power, water and digital connectivity at the center of proposals that offer the prospect of fundamental transformation.

President Biden's plans reflect a twin imperative: to renew and modernize US infrastructure, but also to provide further stimulus to the US economy as the recovery from the COVID-19 pandemic continues. The combined effect could be an unprecedented boost for the US infrastructure market.

Against this backdrop, White & Case, in association with Acuris Studios, surveyed key US infrastructure market participants—the public authorities commissioning new projects and the investors, financiers and developers who will fund, deliver and manage them. Our survey results reflect on current market sentiment, identify the opportunities that participants are prioritizing and pinpoint the challenges.

Boosted by substantial support from the Biden administration and rising demand for infrastructure investment both in the US and internationally, our research reveals that the mood is upbeat with four main findings:

1. Growth industry
Respondents see the US as a land of opportunity. Their intentions are to grow not only their investments in US infrastructure, but also the size of their teams.

2. The COVID-19 effect
While the majority state that the pandemic had a negative effect on levels of investment in US infrastructure, it also prompted respondents to consider new practices including investing in a more diverse set of assets and improving digital technology.

3. Sector watch
While transportation (in particular, roads, tunnels and bridges) is seen as the key investment sector in 2022, social infrastructure has rocketed up the agenda due to the pandemic and the growing influence of environmental, social and governance (ESG) issues.

4. A connected future
Sustainability and technology are the watchwords for respondents when it comes to futureproofing their infrastructure investments.

Methodology

In the third quarter of 2021, White & Case, in partnership with Acuris Studios, surveyed 85 senior-level investors that have, or plan to, develop/fund/invest in US infrastructure, and 15 public authorities that have awarded or plan to award a PDA, DBOM, DBFOM or lease for the development or replacement of US infrastructure. 

Investors surveyed included infrastructure funds, pension funds, sovereign wealth funds, sponsors, developers, institutional investors and commercial banks.
 

US infrastructure: Plans, progress and the path to growth

The global pandemic has not dampened enthusiasm for infrastructure investment in the US. Investors and developers are looking to increase their stakes in multiple sectors and states

Two bridges

The COVID-19 effect

While the effects of COVID-19 were unsurprisingly largely negative, the pandemic did prompt most respondents to weigh new opportunities and ways of working

Children going to the school

A changing world: Technology, ESG and climate change

The pandemic has irreversibly hastened existing trends in the world of infrastructure. Digitalization, ESG considerations and climate change are no longer side issues, they are fundamentals

Server room

Looking ahead: The future for US infrastructure

Respondents are broadly optimistic about the outlook for the US infrastructure sector, but there is no room for complacency. In this final chapter, we explore funding and future plans and reveal seven key factors for infrastructure success

Dish satellite
Children going to the school

The COVID-19 effect

While the effects of COVID-19 were unsurprisingly largely negative, the pandemic did prompt most respondents to weigh new opportunities and ways of working

Insight
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4 min read

The pandemic took a toll on all asset classes in the past two years, and infrastructure is no exception. According to the ASCE, airports (which lost an

64%

of respondents say the pandemic prompted them to improve their investment technology

estimated US$23.3 billion in revenue), roads (revenue from the federal Highway Trust dropped 49 percent in May 2021 compared with the same period in 2019) and wastewater (the pandemic caused a US$12.5 billion shortfall for utilities) are just a few of the sub-sectors hit hard by COVID-19.

Our survey bears this out. Almost two-thirds of respondents (61 percent) say the crisis negatively impacted their level of investment in US infrastructure—and that figure includes 34 percent who strongly agree with this view. Not only did the pandemic undermine confidence, but it made it much more difficult, in practical terms, to do deals, with travel restrictions, lockdown measures and new models of working presenting significant obstacles.

However, according to our respondents, the impacts of COVID-19 have not all been negative, prompting many to consider new opportunities and ways to work differently. For example, two-thirds of respondents (66 percent) say the pandemic prompted them to diversify into new infrastructure asset classes, while 64 percent have improved their investment technology.

The latter point may be one of the very few upsides of the pandemic. Digital connectivity is now often referred to as a utility, and companies and investors are beginning to realize this. However, digital infrastructure is not regulated as a utility and the developments in the infrastructure market are now outpacing the regulatory framework, with funding pouring into areas such as fiber to the home. The head of infrastructure investment for an institutional debt investor in the US says: "There will be increased focus on digital infrastructure development post-pandemic. Fiber line plans and tower developments are some of the investment opportunities that we would be interested in."

The impacts of COVID-19 have not all been negative, prompting many of our respondents to consider new opportunities and ways to work differently

56%

of respondents cited an increased focus on ESG issues as a key pandemic-related change

 

All eyes on ESG

While ESG was on investors' horizon pre-pandemic, COVID-19 pushed the needle into the red. Investors across all asset classes have become more engaged with ESG concerns since the onset of the crisis, reflecting growing awareness of the fragility and interconnectedness of the world in which we live. Data from Bloomberg Intelligence's ESG 2021 midyear outlook shows that ESG assets are on track to exceed US$50 trillion by 2025. And infrastructure is very much part of that mix—56 percent of respondents cited an increased focus on ESG issues as another key change related to the pandemic.

As well as adding to the imperative for climate solutions and the energy transition, the pandemic is likely to make investors more determined to address inequality—with more attention on how to support investment in underserved communities. In a climate context, for example, this may lead to increased investment in flood protection or water management. The director of strategy at a US-based developer makes the point quite bluntly: "Clean water and clean air projects need to receive more funding in the coming years."

These changes will likely be enduring. As the global economy recovers from the pandemic, confidence can be restored. And infrastructure investors will be in an ideal position to capitalize on some of the changes made through necessity. For more on ESG and climate change, see A changing world.

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2021 White & Case LLP

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