We outlined in some of our earlier articles how infrastructure is currently funded. To recap, this is normally done, if through the private sector, via strategic investor/operators together with large institutional investors, whether they are infrastructure funds, with institutions as limited partners “LPs” or pension funds and other institutions making direct investments into single assets.
Critically, each infrastructure asset is likely to come with significant capital cost, requiring a large cheque for the investor and a willingness to hold the asset with limited or no liquidity for several years or more.
Up to now there hasn’t been an alternative to the institutional market in terms of funding large infrastructure projects.
This has led to numerous constraints, including:
- The fund market for unlisted infrastructure being geared towards institutional LPs, who are required to make significant commitments in terms of quantum of capital and time to funds in order to participate.
- The financial benefit coming from infrastructure assets being distributed across this institutional investor base, limiting the amount of benefit ultimately shared with LPs and individual smaller investors who currently cannot directly access this attractive asset class.
- A bottle neck restricting access to large institutions, contributing to significant infrastructure spending gaps (in the US$ trillions) globally.
The global infrastructure spending shortfall referenced above is only forecast to worsen over the next 20 years. This shortfall is significant and widespread, and isn’t confined to a particular subsector of infrastructure or region:
Now, imagine if we could transform this funding model, realigning high quality and much needed infrastructure with the largest pool of capital available. Rather than looking to institutions, with little in the way of incentive other than economic return and performance fees, we could put the funding decision in the hands of the general population — the ultimate investor. At Allinfra, we believe that widening the pool of investors who are able to participate directly in asset investment will lead to more well-rounded choices as to which assets get funded, and will lead to a significant and positive change to our global infrastructure base over time, and hence to our planet, specifically:
Allowing other indirect and/or non-economic factors to come into the decision making process relating to asset investment — for example:
- Perhaps you’re an investor who lives in a community with inadequate transport. The investment in new or upgraded transport infrastructure in that community not only delivers economic returns to you the investor, but may also improve quality of life, adjacent real estate value, employment and so forth.
- Maybe you’re an individual with a specific focus on improving the availability of clean drinking water in a particular country. The investment in water infrastructure in this particular country not only delivers an economic return but also achieves your desired social and environmental goals.
So, while there may be a wide range of assets that could be promoted and that meet return hurdles of institutional or individual investors alike, individuals who are not limited to the constraints of an institution could choose to back assets that deliver other tangible and intangible benefits.
Accelerating the funding of infrastructure that is aligned with the ultimate investor’s broader perspectives and objectives — such points of view being clearly expressed in what is/is not funded. Allinfra’s near term focus is on sustainable clean energy, environmental and carbon-reducing infrastructure, and hence Allinfra aligns well with investors who wish to promote infrastructure that contributes to a cleaner and sustainable future.
Allinfra’s vision is to put the power of investment choice back into the hands of the ultimate investor. We believe this will help to disrupt the current funding model in infrastructure, facilitating greater spending on infrastructure needed by specific communities, reducing the cost of that infrastructure through the removal of friction costs and intermediaries and help to drive towards a cleaner planet.
To learn more about Allinfra, check out our new film here, detailing why we created Allinfra in the first place.