According to the report, more than 80 per cent of business leaders from across the globe confirm they have changed their approach to the evaluation and assessment of infrastructure risk as a result of this changing landscape, yet one in six said they had made no changes.

Additionally, net-zero goals will have a significant impact on the sector, with more than eight in 10 respondents rating its impact as either high or very high, followed by advances in technology and climate change.

“The findings demonstrate a need for the industry to put a greater focus on more resilient infrastructure – assets that are flexible and robust enough for this changing landscape – to meet the needs of the future. The pressures on the sector mean that strategies which may have worked in the past cannot be relied upon to provide guidance for the future. Many of the norms that have previously informed long-term capital allocation will be significantly different in the years ahead,” the report stated. 

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“The assets that investors are used to financing today may not be appropriate in a world that will face powerful, complex issues such as how to respond to global warming, or how to harness and respond to the digital revolution.”

The report also showed that there has been – and will continue to be – a shift in the perceived risk attached to the infrastructure sector. Just under 80 per cent of respondents said that the pandemic had increased the risk to the sector to some degree, while nearly one in 12 felt that the risk had increased significantly. When taking the pandemic “out of the equation”, nearly 50 per cent of respondents felt the risk profile of the sector was increasing. Despite this, more than half of respondents felt the risk profile hadn’t changed, or had actually declined. 

Given this contrast, “there is clearly a danger that a significant number of industry participants have yet to come to terms with the forces driving change within the sector and the resultant changes in the sector’s dynamics,” according to Ashurst. 

In terms of the top challenges to the sector, the impact of the transition to net zero was majority rated as either high or very high, as was technology, followed by the impact of climate change. These results confirm that ESG issues are increasingly dominating infrastructure development, investment and financing decisions.

Mark Elsey, partner and global co-head of infrastructure at Ashurst, said that the report “highlights both the threats and the opportunities for the infrastructure market as it transitions to meet the challenges posed by the drive to net zero, new technology and other forces of change.”

“There is clearly a significant pressure on all market participants to shift their approach and put a greater focus on more resilient infrastructure – assets that are flexible and robust enough for this changing landscape and will meet the needs of not just today but the future,” he said. 

“As a key part of the required step change, governments and regulators will need to take increasingly joined up decisions if they are to create the right playing field for the sector to flourish. They will need to set innovative and flexible policy frameworks, decide which types of infrastructure are important for the future and what role they want the private sector to play. At the same time, it will be key to ensure that sufficiently stable regulatory and economic platforms are in place to let investment continue to flow to the sector.”

Moreover, the research revealed that delivering the more resilient infrastructure asset base required to succeed in a time of greater uncertainty will include a marked impact on the return demanded by investors for their capital, as reflected by more than one in six of respondents stating this new environment will significantly change the way they price risk. While this may put some investors off, others may welcome the uncertainties, particularly if they are able to understand, and see competitive advantages, and evaluate the risk of operating in a different world, according to the report. 

“Infrastructure has long been a haven for investors seeking a stable, sustainable return in a changeable world. However, new technology, the impact of climate change, and the other forces highlighted in this survey will challenge those assumptions as never before,” it stated. 

“Yet, as the survey shows, the appetite for the sector is likely to remain undiminished. With the right support, those who can come to understand the new market dynamic and the need for more resilient infrastructure will be best placed to navigate a world of increased risk – and greater opportunity.”

Lee McDonald, partner and global co-head of projects and real estate at Ashurst, said that the sector has “long been a haven for investors seeking a stable, sustainable return in a changeable world, and as our survey shows, the appetite for the sector is likely to remain undiminished.”

“Yet, the pressures on the sector mean that strategies which may have worked in the past cannot be relied upon to provide guidance for the future. With the right support, those who can come to understand the new market dynamic and the need for more resilient infrastructure will be best placed to navigate a world of increased risk – and greater opportunity,” she said.