Infrastructure investing. It matters.

A joint publication by Swiss Re and the IIF highlights the importance of infrastructure growth and partnerships to fund its investment.

The need for infrastructure over the next several decades is enormous. The global annual infrastructure spending requirements are estimated to increase to around USD 4 trillion by 2030 from USD 2.6 trillion today.

Securing funding for this type of investment is crucial for growth. Consequently, long-term investing - a topic close to Swiss Re Asset Management - ranks again high on the G20 agenda this year. These activities build on a number of public consultations with international organisations and regulators.

There is now a tremendous window of opportunity to realize many of these initiatives.

From words to action

Long-term investors contribute greatly to economic growth by providing risk capital and having a stabilizing effect on financial markets. Infrastructure investing. It matters explains the importance of long-term investment and offers real-life proposals. The report, written by Swiss Re and the Institute of International Finance's (IIF) Council for Asset and Investment Management (CAIM) also provides a wish list for market and public policy changes. More generally, the report puts the spotlight on lingering impediments to this important source of funding growth and shows how they could be removed.

Against the backdrop of highly indebted mature-market governments and ongoing bank deleveraging in Europe, more diversity in funding sources for the real economy is essential. In Europe and High Growth Markets governments and private entrepreneurs seeking to finance infrastructure projects are still making insufficient use of private capital markets. Infrastructure investing. It matters highlights the need for public policy action for infrastructure investment to become an asset class.

Finding a solution together

A number of international organisations and multilateral development banks have expertise in project finance. Building on their knowledge and credibility, Swiss Re proposes a public-private partnership project bond initiative. The proposal builds on the expertise and credibility of public institutions in project finance. In turn, this would help creating the much-needed standardisation in infrastructure investments to become a more widely used and recognised asset class. Institutional investors would benefit from a larger pool of investable and attractive longer-term assets.

Long-term investors’ role in supporting global growth should be strengthened and more private capital market solutions provided. That said, prudent investment principles demand that long-term investors shouldn't simply buy assets and hold them to maturity. Retail and institutional investors need the ability to make adjustments to their portfolios as needed – including to their longer-term investments.

This report is meant to encourage discussion and, ultimately, action.

Published 25 February 2014

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