Infrastructure funding in the age of big data

When it comes to the management of infrastructure assets, sensor technology can drive manifold efficiency and workflow improvements. The sensors themselves may come at a cost, but the value of the data they gather will be of much greater value in the longer-run. Technology costs are always coming down, even while the technology itself becomes increasingly sophisticated; any necessary upfront investment will more than repay itself. Sensors that allow for predictive maintenance, for instance, are hugely advantageous when negotiating insurance premiums – an often-overlooked element of the whole-life infrastructure cost base. Now though, a new idea is gaining traction. Infrastructure data, it says, should not only be used to lower operational and maintenance costs, but could also be leveraged to raise project capital to fund infrastructure development pipelines.

The idea of selling data, even if anonymised, will always be contentious; the practice is more accepted in some markets than others. It is true, of course, that most people these days carry smart phones which constantly monitor the patterns of their life and day-to-day activity. Nonetheless, the gathering and packaging of data for commercial purposes will naturally inspire some resistance. The involvement of governments in the process will complicate things further – particularly among those already suspicious of the supposedly Orwellian character of the fourth industrial revolution. Such concerns will require legislators to introduce robust regulatory safeguards if they want to win public confidence. If they are successful in ensuring all personal data is used ethically, and if the narrative messaging focuses on the benefits to the taxpayer, it might hold up. We’re all familiar with the formulation that says data is the new oil; it has become something of a cliché – and not without good reason. Data is a highly valuable commodity, traded for huge sums on the derivatives market. Governments that are awake to the potential, could unlock significant new revenue streams and, in turn, address burgeoning infrastructure investment need.

It is important when discussing solutions to be clear about the problem you’re seeking to solve. In this case, I feel that the sale of asset-use data has been proposed as a remedy to an issue that does not quite stack up. Much is made of the infrastructure funding gap, but there is no shortage of capital within the private sector. It is commonly believed that public and private finance does not exist at sufficient scale to deliver global infrastructure needs. This is not the case: in fact, there is an abundance of private capital holders seeking infrastructure opportunities. The problem usually relates to how deals are packaged, unrealistic return expectations or poorly designed risk mitigation profiles. The infrastructure investment need does not centre on a lack of money per se, but rather on concerns around viability and alignment of project-investor expectations. The under-development of viable project pipelines, and misaligned risk and responsibility share agreements remain the principal stumbling blocks.

There are numerous vehicles and funding models out there, meaning infrastructure should – and does – appeal to investors from across the spectrum. The bond market remains attractive for those wanting to avoid direct entry into the space. And, given the continued strong performance of ESG stocks, the green bond market is very attractive – and includes plentiful green and blue infrastructure options. 

In almost every country in the world, the public purse has been severely adversely impacted by the COVID-19 pandemic. I have long argued that municipalities need to get creative with how they generate revenue from their infrastructure asset portfolio. There are plenty of options here which do not involve selling what might be seen as personal and sensitive data. 

We are witnessing greater private equity entry into the infrastructure space, with unitisation an ever-growing concern. Nonetheless, many of the big pension funds adopt a long-term purchase-and-hold strategy when it comes to infrastructure, aligning the asset lifecycle with their dividend obligations. Rarely, if ever do they chase liquidity; there remains a clear distinction between who develops the assets and who ultimately comes to own them. With this in mind, it becomes harder to see from exactly where the appetite for packaging and selling user data might spring.

But whether or not data is the key that can unlock infrastructure project funding, there is a larger point at play here. The sector, and the wider construction industry in which it sits, needs to make much more effective use of technology. Across the planning, design, construction and operational phases, we must be adopters and pathfinders, rather than sceptics. With better forecasting and futureproofing protocols, we can save enormous amounts of money. In doing so, we will make the sector more attractive to investors. They have ample capital ready for deployment, it is incumbent on us to grab their attention.

• Martin Haran is the lead author of the WBEF special report Bridging the gap: Private investment in future infrastructure provision. Download the full piece here.