Source: Global Infrastructure Hub based on IJ Global data
While private investment in infrastructure over the past decade has been dominated by the energy and transport sectors, it remains very low outside of these sectors. The social sector (such as schools or hospitals) accounted for only 6% of total private investment in infrastructure projects between 2010 to 2020 and has been on a downward trend (despite modest growth in 2020 due to pandemic control activities).
This gradual decline is one of the most salient trends over the past decade, falling from 11% in 2010 to just 3% in 2020. This decrease is being driven by high-income countries, while investment in middle-and low-income countries have remained small throughout the decade.
This trend of underinvestment in social infrastructure is alarming and has persisted despite evidence showing that, for high-income countries, social infrastructure debt is less risky and performs better relative to other infrastructure subsectors.
Encouragingly, there is some evidence that investor appetite for social infrastructure is growing. This can be attributed to the accelerated demand for social infrastructure assets during the pandemic, the assets being largely shielded from the negative effects of COVID-19, and the fact that social infrastructure can meet environmental, social and governance objectives for investors.
Water and waste sector investments are mostly dominated by the public sector, they typically attract the lowest levels of private investment, together accounting for 4% of total private investment in infrastructure from 2010 to 2020. This is worrying when universal access to water, sewerage treatment and waste remains a serious challenge in a number of developing economies.
Another sector which maintains low levels of private investment, despite being mostly private, is telecommunications, which, when compared to other subsectors, accounts for only 4% of private investment from 2010 to 2020. This is despite an increase in 2020 and growing investor appetite amidst global momentum towards digital connectivity during the pandemic. However, this recent momentum is heavily concentrated in high-income countries particularly in fibre-optic network projects across western Europe. The gap and space for investment in middle-and low-income countries still remains significant.
There is ample scope to ramp up private investment in social, telecommunications, and water and waste infrastructure - all of which are critical to meeting urgent global infrastructure needs.