A highway near sea

The New Infrastructure Blueprint

Societies everywhere are grappling with major, overlapping challenges: Energy security pressures, the transition to a low-carbon economy, changing demographics and urbanization, and realigning supply chains. On the horizon is a digital revolution led by artificial intelligence.

A global opportunity

Taken together, these forces require an enormous amount of new infrastructure, from super batteries and hyperscale data centers to modern logistics hubs and upgraded airports.

We explore the major structural forces driving what’s poised to be a transformational moment in infrastructure investing. And we dive into the various ways capital can invest in the opportunities that we’re seeing today as well as the ones we’re expecting, and how investors can incorporate the asset class into their portfolios.

 

A changing world

Infrastructure sits at the intersection of the trends transforming the world we live in. It’s the cell towers and fiber internet that power the digitization of business and everyday life. It’s the new land, air and sea transportation facilities that support global supply chains as they reconfigure.

More broadly, it’s the new and upgraded infrastructure across transportation, energy, communication and other services required by a growing and urbanizing world population.

Increase41%
in foreign direct spending that Mexico saw in the first half of 2023

Many companies are seeking to reduce their dependencies on distant producers, shortening supply chains to bring them closer to their end consumers. Mexico is one of the nations that has benefited from this nearshoring trend.

Increase53%
in spending on data center construction is projected from 2022 to 2030

Rapidly advancing technology will require more infrastructure, including new sources of energy.

Increase70%
the percentage of the population is expected to live in urban areas by 2050 vs. just over half today

Urban expansion means enhanced infrastructure across multiple sectors. Among other things, cities require more electricity, expanded telecommunications networks and essential water and sanitation systems.

Source: Ministry of Economy, Mexico, August 9, 2023.

Source: McKinsey analysis, January 2023, citing Synergy Research Group.

Source: World Bank, “Urban Development Overview,” April 3, 2023.

Windmills in a green landscape

A new era for energy

An increasingly digital and urban population requires more electricity, while nations work to lower carbon emissions and strengthen their energy security.

Rising demand

The BlackRock Investment Institute Transition Scenario projects that global power demand will grow two-and-a-half-fold by 2050.

The transition to a low-carbon economy

Shifting business practices and changing consumer and investor preferences are contributing to new energy investments.

A focus on energy security

Heightened global tensions have brought energy security to the forefront of many governments’ policy agendas.

Upgrades and upkeep are constant

Planned retirements of existing power plants are another driver of investment as they are replaced by new, often low-carbon, sources of energy.

 

Rising demand

The BlackRock Investment Institute Transition Scenario projects that global power demand will grow two-and-a-half-fold by 2050.

The transition to a low-carbon economy

Shifting business practices and changing consumer and investor preferences are contributing to new energy investments.

A focus on energy security

Heightened global tensions have brought energy security to the forefront of many governments’ policy agendas.

Upgrades and upkeep are constant

Planned retirements of existing power plants are another driver of investment as they are replaced by new, often low-carbon, sources of energy.

 

The financing gap

Chart showing US government spending on infrastructure has fallen relative to GDP

Governments have traditionally built and maintained infrastructure, but with national debt tripling since the 1970s, it’s unlikely they can fund it alone. The situation requires a strategic pivot. And private investors are meeting this need, led by large pensions and sovereign wealth funds who are attracted by the stability, long duration and inflation-protected potential returns of infrastructure assets.

At the same time, for companies around the world infrastructure is just one of many demands on their resources – and is often not their core business consideration. A private investor can work with corporates, allowing firms to focus on their strategic priorities.

What it means for investors

The infrastructure moment is a growing opportunity for investors. It encompasses a wide range of investment options and sectors, and it can play a variety of roles within a portfolio.

A top view of airport
Opportunities

A wide array of opportunities

Private investors have the chance to be at the center of a transformative period for essential infrastructure. The opportunities range from partnering with governments to build physical assets to joint ventures with infrastructure operators, as well as bespoke debt structures.

Industrial giant pipe
Diversification

Diversification in a portfolio

Infrastructure has historically had a relatively low correlation to traditional asset classes due to its idiosyncratic characteristics – it typically doesn’t move in step with economic cycles and its service contracts are often inflation-linked.

Man cleaning machinery part
Stability

Stable investment

As an asset class, infrastructure has traditionally been known for its stability. Many projects involve essential services that remain in demand regardless of economic conditions, and which generate steady, regular and predictable cash flows.

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Authors

Jeetu Balchandani
Global Head of Infrastructure Debt
David Giordano
Global Head of Climate Infrastructure
Mark Florian
Global Head of Diversified Infrastructure
Mark Wiedman
Head of Global Client Business