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

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."

View full image: View full image: Please state to what extent you agree or disagree with the following statement: COVID-19 negatively impacted our investment levels (PDF)

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.

View full image: Has COVID-19 resulted in any of the following changes in your organization’s operations or investment strategy for the long-term? (PDF)

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