Publications

- April 1, 2017: Vol. 10, Number 4

Research review: A guide to recent infrastructure research reports and papers

by Drew Campbell

The future of funds: exploring the architecture of multilateral climate finance

By World Resource Institute

The complete report, which was published in March 2017, is available at http://www.wri.org/

Synopsis: According to the report, policymakers are searching for ways to make the architecture of investment funds more effective and coherent. The future of funds report reviews seven important multilateral climate funds and makes operational and architectural reform recommendations aimed at improving their performance in delivering low-emissions and climate-resilient development. “Five [of the funds] are explicitly part of the institutional framework of the UN Framework Convention on Climate Change: the Green Climate Fund, the Global Environment Facility, the Least Developed Countries Fund, the Special Climate Change Fund and the Adaptation Fund,” the authors note. “The two Climate Investment Funds — the Clean Technology Fund and the Strategic Climate Fund — lie outside this UNFCCC framework.”

The report outlines five strategies that these funds should use in order to support the goal of transformative change: Achieve impact at scale; promote country ownership; improve efficiency; support equitable allocation; and increase accountability.

Industry top trends 2017 — utilities

By Standard & Poor’s Global Ratings

The complete paper, which was published in February 2017, is available at https://www.spratings.com

Synopsis: Standard & Poor’s reviews trends across the regulated utilities universe and finds the market is mostly stable with stable regulatory oversight and slow but steady demand for power and water; however, aggressive capital expenditures will keep credit ratings from improving. “Emerging new political trends in historically stable regions like Europe and the U.S. may have far-reaching effect on utilities over time, but S&P Global Ratings sees little immediate influence from those factors in 2017,” the report notes.

Corporate mergers and acquisitions and power generation transformation — moving from carbon-based sources to clean sources — remain the sector’s greatest risks, and “grid transformation is becoming more prominent as utilities react to technological advances and the need for greater attention to cyber security,” S&P notes. The report also provides a forecast with assumptions and a look at industry trends.

If you build it: a guide to the economics of infrastructure investment

By The Hamilton Project

The complete report, which was published in February 2017, is available at http://www.hamiltonproject.org/

Synopsis: The Hamilton Project examines the state of U.S. infrastructure, makes the case for why investment in infrastructure is needed and lays out how this can be accomplished. It is well known that investment in American infrastructure has lagged required maintenance and expansion needs — 1.5 percent of GDP in 1980 and only 0.6 percent in 2015. A key distinction for the public and private sectors is determining which projects are best for government and which are best for private investment. “Because much of the nation’s infrastructure generates broadly shared benefits that are not limited to those who can pay, decisions about this infrastructure are an important public policy concern and not just a matter for private firms and investors,” note the authors. “Of course, deciding precisely which infrastructure investments should be undertaken by the public sector is an important policy question that can be informed by careful analysis.”

The report goes on to review the various public and private methods of financing infrastructure projects, including strategies such as repatriation of offshore capital, public private partnerships and more.

H1 2017 private markets navigator

By Partners Group

The complete report, which was published in February 2017, is available at https://www.partnersgroup.com

Synopsis: Partners Group shares the firm’s outlook for all private markets asset classes, including infrastructure, during the next six months. A key takeaway is that the market for private infrastructure investments — and in particular, operating assets — continues to experience strong competition and rising prices for mature, established assets. Investors can find values in parts of the market that are less sought by the mainstream. “We maintain our belief that the most attractive investment opportunities are found … in sectors undergoing transformative shifts in infrastructure use or demand,” the authors note. “Inflated by unconventional monetary policy and strong investor appetite, asset prices for established infrastructure have risen above pre-crisis levels and are set to remain elevated during H1 2017.”

Partners Group suggests investors focus on renewable energy, communications, and power and energy infrastructure sectors globally. The firm also is seeing more secondary sales from mature funds seeking portfolio liquidity solutions, “and we see this as an opportunity to selectively acquire assets in the core infrastructure segment if risk/return parameters for these appear sufficiently favorable.”

Glossary, videos, podcasts, research in the Resource Center

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