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The G20 Roadmap to Infrastructure as an Asset Class

The G20 Roadmap to Infrastructure as an Asset Class - RealtyMyths

Infrastructure is the backbones of a country’s economy – growth of both – physical and digital infrastructure is needed for achieving sustainable development. Larger infrastructure investments by the government are considered positive in generating higher economic output by creating demand, and in the long term by amplifying the overall productivity.

According to the Global Infrastructure Hub,

“The Group of Twenty (G20) was established in 1999 as a forum for governments and central banks from the 19 largest national economies and the European Union to discuss policy relating to the promotion of international financial stability and coordination of economic policy.”

The G20 clearly understands the critical role of infrastructure in the progress of a country and the need to manage investments in a way that doesn’t hinder the momentum of growth; as infrastructure development is directly proportional to the number of jobs and therefore, in the growth of the economy. G20 emphasizes on the policies and its execution to ensure smooth investments. These policies include investment strategies, incentives for investing in infrastructure by institutions, and the mechanism of corporate governance.

Despite these efforts, the pattern of investments in developed and developing countries shows various ups and downs. Private capital investment has declined due to various reasons and the need is to explore new avenues to lure private institutions in the big market. Global investors are looking for steady opportunities where they don’t have to face high-risk factors due to market fluctuations. The infrastructure assets can attract attention if they hold high yielding values and probability of unexpected returns, or due to their short life-cycle, hence, looking promising enough for the investors to consider portfolio diversification.

An asset class is a grouping of investments with similar characters and fall under the same rules and laws. The G20 roadmap to infrastructure to transform it into a tradable asset class would mean smooth investments in the infrastructure projects that keep the money floating in the market via frequent transactions (easy to buy and sell), and which generate a revenue pool for institutional investors with various kinds of funding schemes. The road map clearly visualizes the need for tapping the private investment, which right now is stuck in the forms of bonds, equities, and hedge funds. It also requires some homework to market infrastructure development as a long-term vision that is profitable and not risky, thereby, holding eyeballs of the private investors for seeking opportunities into building schools, roads, hospitals, and other such services.

The main issue in achieving such a credible growth is the risk involved in the projects. The G20 can’t take responsibility if the project is obstructed due to an unforeseen situation and when the risk is transferred on the citizens, then they lose trust. It also disregards the sore fact that they are physical buildings, roads, or pipelines which millions of individuals rely on as they look forward to a brighter future.

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