Q&A: Jon Phillips, Chief Executive of GIIA, outlines the priorities, challenges, and opportunities facing infrastructure investors
The Global Infrastructure Investor Association (GIIA) is the membership body for the world's leading investors in infrastructure, with a membership of almost 100 investors and advisers in the infrastructure sector across 70 countries, representing USD1.6 trillion in assets under management. We recently spoke with the GIIA’s new CEO, Jon Phillips, who shares his priorities, his thoughts on opportunities and challenges facing the infrastructure sector, and how the GIIA is responding.
Q: You were appointed GIIA’s CEO earlier this year. Can you tell us about your priorities?
Jon: GIIA was founded seven years ago by senior figures in the sector, in recognition that a relatively young asset class needed a mechanism to convene and project a collective voice when engaging with governments and other stakeholders. Since then, we have grown to represent a sizeable proportion of the market, with the majority of the larger funds playing a leading role in our development. We have been keen to ensure wide representation among our members in terms of investor type, scale of assets under management (AUM), and geographical outlook. One of our priorities is to continue incremental growth in membership across all fronts.
In our early years, we focussed primarily on the UK, Brussels, and Washington DC, which account for the majority of member AUM. Although these remain our priority, we are gradually extending our reach into other markets such as Australia and Canada. From our London headquarters, we can develop a valuable dialogue with representatives from these and, increasingly, other markets in South America and Asia Pacific.
Infrastructure investment often sits at the intersection of public policy and private sector delivery so it has always had a strong political component to its landscape. With elections in the UK, US, and EU in 2024, it’s a time of both greater political uncertainty and policy formation. We are engaging directly with decisionmakers and advisers, to ensure policies are in place that enable our members to continue investing through a challenging period. Whether it’s making the UK a more attractive destination for private capital through better regulatory frameworks, influencing US states to embrace public private partnerships (PPPs) to help close funding gaps, or highlighting to the EU aspects of its Foreign Subsidies Regulation which could stifle legitimate investment, our focus is always on targeted, evidence-based interventions which can deliver real change.
Q: You’re focused on influencing governments to work with funds to develop policy frameworks that attract and drive infrastructure investment. What are some things you would like to see governments doing in the immediate term, and over the medium- and long-term?
Jon: Estimates of the yearly investment in infrastructure needed to deliver net zero and long-term resilience to climate change run into the trillions. Given how stretched public balance sheets are, by far the best route to closing the funding gap between what citizens want and countries can afford is through effective partnerships with the private sector.
In the immediate term, we need greater engagement between policymakers, regulators, and investors to identify how together we can future-proof our energy, utility, digital, and transport networks. Over the longer-term, politicians must recognise that investors work to timeframes which far exceed regular political cycles. They should strive to reach cross-party consensus around the need for policy certainty, fair regulatory frameworks, and ambitious investment incentives that bridge across elections and create the long-term policy stability to attract investors.
Q: One of the most urgent priorities faced by the infrastructure sector is the need for more investment to enable the net zero transition. What are the biggest opportunities and challenges for investors? And are you seeing any regional differences in those opportunities and challenges?
Jon: Investors have long recognised the opportunity to deliver reliable returns for pension savers through net zero assets. Interim capital raising among infrastructure funds hit USD46 billion in the second quarter of 2023. Huge swathes of that funding are earmarked for green investment, with the record for the largest renewables fund ever raised expected to be broken in the coming months.
Although decent returns are well-established in renewable energy, governments need to provide greater certainty to investors in emerging net zero sectors like carbon capture, hydrogen production, and electric vehicle charging. The US has broken the mould when it comes to crowding in green investment, with USD369 billion worth of incentives and tax credits contained within the Inflation Reduction Act. However, the impact of those subsidies has disproportionately been in established solar and onshore wind sectors.
Another priority is helping policymakers and regulators recognise how rising inflation and debt costs are impacting delivery. The guaranteed strike price for renewable power generation that was set for the last auction round in the UK was so low that no new offshore wind capacity was secured, despite it historically being a strong sector for the country.
Q: Emerging markets and developing economies (EMDEs) also need much more investment in sustainable, resilient, and inclusive infrastructure. What solutions or reforms would you like to see fast-tracked to unlock this investment?
Jon: Long-term political stability and certainty of fair returns are fundamental drivers of infrastructure investment. The more EMDEs can offer these – along with constructive models for partnership between public and private capital – the more investment can be unlocked. As ever, dialogue between investors and policymakers is key, and also between policymakers and global organisations like the International Finance Corporation which focuses on catalytic investment.
Q: You recently launched GIIA’s latest Public Attitudes Tracker with Ipsos, surveying 22,000 citizens around the globe about their views on infrastructure priorities. What are the notable headlines and themes this year?
Jon: Our latest tracker examines public attitudes in more than 30 countries, including nearly all G20 member countries. It shows that, globally, consumers want faster and more efficient investment in infrastructure, but don’t necessarily see public spending as the right conduit for investment. In most cases they don’t feel their country is doing enough to drive infrastructure improvements or ensure climate resilience. They also believe the cost of investment should be spread fairly across generations. When we speak to regulators, we always stress that an excessive focus on keeping consumer bills low today will store up even greater costs for tomorrow.
Q: GIIA is a strong advocate for partnership and collaboration between the public and private sectors. What are some successes you have seen where public-private collaboration has addressed complex or pressing problems?
Jon: In a major study we conducted with our member DLA Piper, we found PPPs are more likely to deliver on time and on budget compared to projects funded solely by the public sector. We looked at several countries including Australia, Canada, and the UK, which are well-established markets for private capital. Private finance and the expertise and efficiency that come with it have brought forward a wide range of highway, rail, and social projects in Australia and Canada, while the regulated asset base model has financed the massive Thames Tideway Tunnel under London.
Contrastingly, in the US, every state has its own procurement laws and processes, making it harder for investors. The Infrastructure Investment & Jobs Act and Inflation Reduction Act are providing huge incentive packages, but many individual states still need their politicians to lead a cultural change from long-standing dependency on funding through municipal debt. I’m hoping the US is on the cusp of grasping the opportunities of PPPs.