Asia’s expanding middle class, and consequently its increasing use of technology and greater push for a greener future, have emerged as key opportunities for the infrastructure sector, according to Sarah Shaw, chief executive and chief investment officer at 4D Infrastructure.
“Rapid population growth and the expanding middle class in Asia is driving the need for infrastructure. As personal incomes rise, so does the expected standard of living, triggering a demand for essential utilities – such as clean water, waste services and power – and progressing to services that support efficiency and a better quality of life, such as roads, airports and communication,” Shaw said.
“From an investment perspective, infrastructure investors can capitalise across the entire value chain.”
A growing middle class and an improving economic outlook is also driving momentum in the toll road sector for both passenger and heavy vehicles. Additionally, Shaw explained, these factors are mutually reinforcing as roads are considered “core” to Asia’s economic development.
“We favour Indonesian toll road operator Jasa Marga and the Chinese operators exposed to the relatively resilient Tier 1 cities such as Shenzhen International,” she added.
Looking at the global opportunity set for a greener future, Shaw highlighted that the 2050 net zero target is “impossible” without the emerging world, particularly Asia’s commitment to the goal.
Expounding on this, she said that within the region, 4D Infrastructure is capitalising on this through investments in grids as well as the water sector, both of which require growing levels of funds.
Earlier this year, Shaw similarly opined that there remains a “multi-decade” investment opportunity for infrastructure despite a seemingly unclear path towards decarbonisation among various countries.
Moreover, she added that the rise of technology provides another tailwind for increased focus on infrastructure.
“The explosive growth in data consumption is fuelling significant investment opportunities for infrastructure owners globally. Artificial intelligence and cloud computing, for example, demand huge infrastructure investment to support their growth.”
Clarifying what this means for investors, Shaw said that dipping into Asia’s infrastructure landscape provides access to defensive and resilient earnings, but with significant potential for growth.
“This is due to a chronic underspend on infrastructure globally over the past 30 years as well as the changing dynamics of the global population.
“Like most investors, of key importance to our investment decision is fundamental value, total return and quality. As always, we maintain a diversified portfolio of high-quality infrastructure names globally, and at the moment, believe parts of Asia are offering an attractive mix of quality and value,” she concluded.
