Infrastructure is entering a new era that requires a radical shift in capital mobilisation between public and private players to build systems that will sustain society for decades to come, writes Luba Nikulina
Global infrastructure investment needs are expected to top $100trn (€85trn) by 2040, representing one of the largest capital deployment opportunities ever witnessed, with part of this requirement representing ‘next generation’ infrastructure.
Today, we would only classify around 20% of infrastructure opportunities as ‘next generation,’ encompassing areas such as digital networks, data centres and energy transition assets, through to emerging areas such as AI-driven systems and space infrastructure. This is set to increase materially over the coming decades, as capital shifts toward assets that are more aligned with digitisation, decarbonisation and evolving societal needs.
While next generation infrastructure represents a minority of infrastructure opportunities today, it is likely to become one of the dominant components of the asset class within the next 15 years. This profound shift is forcing a rethink of infrastructure’s role, from what was a defensive, income-oriented allocation, towards an asset class that is increasingly a source of growth and innovation.
In our view, there are five tailwinds underpinning this trend, which mean the evolution of infrastructure is increasingly able to both anchor and innovate portfolios.
Digitisation and decarbonisation sit at the forefront. First, the rapid growth of data, connectivity, automation and artificial intelligence is driving sustained demand for digital infrastructure, from fibre networks and data centres to the power systems that support them.
As AI models become more computationally intensive, the physical layer of the internet requires a massive expansion in high-density cooling and hyper-scale storage, turning what was once a niche sub-sector into a core pillar of modern industrial capacity.
Secondly, the global shift toward lower-carbon energy systems is accelerating investment in renewables, storage, grid upgrades and electrification. These trends are providing long-term demand tailwinds and shifting infrastructure towards higher-growth assets.
At the same time, deglobalisation adds further momentum. Heightened geopolitical risk and a renewed focus on national resilience are increasing the demand for domestic infrastructure, energy security and logistics capacity. This shift toward “friend-shoring” and local supply chain robustness necessitates a re-tooling of port facilities, rail corridors, and domestic manufacturing hubs that had previously been sidelined in an era of hyper-globalisation.
Meanwhile, ageing populations and demographic change, urbanisation and changing patterns of consumption are reshaping demand for healthcare, social infrastructure, housing and transport. These shifts create a long-term divergence in how essential assets are utilized, requiring infrastructure that is increasingly flexible and data-responsive. To maintain value, the next generation of investment must anticipate these evolving usage patterns, ensuring that critical systems remain aligned with the shifting priorities and physical locations of the global population
Overlaying all of this is the need for public debt deleveraging: fiscal constraints that limit public spending in the developed world and create a larger role for private capital in building and maintaining essential assets.
Despite the potential involved, global capital needs to mobilise in unprecedented ways. Currently pension funds are the biggest source with approximately $60trn in assets, followed by around $40trn in insurance companies. This is one of the reasons why pension capital plays a crucial part of this landmark and once-in-a-generation shift in infrastructure.
For the US in particular, the need to unlock pension capital comes at a critical moment as the American Society of Civil Engineers estimates the country faces a $3.7trn infrastructure funding gap through 2033, underscoring the importance of enabling new funding models to ensure the resilience and productivity of essential infrastructure.
Infrastructure strives to align financial objectives with societal needs. Almost uniquely, the asset class is able to bridge private market ambitions with public benefit, demonstrating that generating profit and creating lasting societal value can go hand in hand.
Looking ahead, infrastructure is entering a new era that will help to shape the economies and communities of tomorrow. For this to be realised, there needs to be a radical and collective shift in the way we mobilise capital between public and private players to ensure we are able to build the systems that will sustain society for decades to come.
As the world grapples with how best to fund, future-proof, and socialise the benefits of such vast capital deployment, infrastructure stands out as a sector capable of delivering both economic returns and essential societal outcomes. This dual role demands not just capital but creativity and collaboration between governments, investors, communities and technology providers, to build the systems that will sustain society for generations.
The challenge, and opportunity, for the next generation of infrastructure investment will be not only to deliver reliable returns but to underpin the quality of life, connectivity and sustainability on which future prosperity depends.
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