Climate change is affecting the infrastructure sector.
And opportunities are opening up in the space, says Nick Langley, senior portfolio manager and investment director at RARE Infrastructure in Sydney. He manages the Renaissance Global Infrastructure Fund.
For instance, slumping rainfall levels impact water industries, he says. Rainfall is declining in the southeast region of the U.K., for example, which is where the majority of the population resides (including London). Rainfall has been increasing in its rural, northwest region instead.
Since water companies are regulated by strong geographic boundaries, says Langley, U.K. officials are now looking to relax the rules.
That way, instead of the Thames Water Company in London having to build a desalination plant to make sea water drinkable—an expensive undertaking—several water companies could build a pipeline to the northwest to redistribute their excess water.
Such projects will help “drive the continued development of infrastructure across both developed and emerging nations,” he says.
He adds that “governments are the ones…making policies,” and they’ll always take a conservative stance. They’ll “start planning now for the infrastructure…their economies [will] need over the next 10 or 20 years.”
So, “whether individual investors are climate change skeptics or not, [they need to know] infrastructure [will be] built and returns will be provided” as climate shifts occur. “There’s an option to invest in these projects and receive good returns over…longer periods of time.”
Langley says infrastructure will be refurbished and improved across the globe, so investors can take advantage. His team is “concerned investors have too much exposure to their domestic markets, and that leads to a lack of diversification in portfolios.”
Instead, “Infrastructure is a relatively safe way to get exposure to global markets and equities.”