Rahul Bhushan, Managing Director of ARK Invest Europe, shares insight into why sustainable infrastructure might be a megatrend you can’t afford to ignore due to its indispensable nature
Prioritising investment in sustainable infrastructure is critical for fostering economic resilience and tackling climate and environmental challenges. Global investment in renewables reached a record $1.8 trillion in 2023, demonstrating a robust commitment from both government policies and private sector initiatives.[1]
There are four critical sub-sectors driving the growth and development of sustainable infrastructure, and some highlight key companies making significant strides in these areas.
Environmental Infrastructure
The energy transition is now seeing significant investment not only in renewable energy generation but also in energy storage and grid modernization.
According to projections, global investment in grid infrastructure is set to reach $400 billion in 2024, driven by strategic policies and funding initiatives in Europe, the US, China and parts of Latin America.[2]
There are several public companies contributing to the environmental infrastructure cause:
- Acciona SA, a Spanish company, is making significant investments in grid infrastructure. Acciona is involved in developing one of Australia’s largest green power grids, a project valued at AU$10 billion (€6.2 billion). It has extensive experience in designing, financing, and constructing transmission networks and electrical substations globally, including in Spain, Kenya, Mexico and Peru.[3]
- Terna Energy SA, a Greek company, is making substantial investments in Italy’s grid infrastructure. Terna’s 2023 Development Plan includes a €21 billion investment over the next decade, aiming to double the power exchange capacity across Italy.
Data and Telecom Infrastructure
AI is rapidly revolutionising data centres. Hyperscale data centres are expected to triple in capacity over the next six years. Companies like Amazon Web Services are investing $10 billion in new centres in Mississippi, while also committing to renewable energy sources to power these facilities. Amazon has announced over 500 renewable energy projects globally, aiming to power 100% of its activities with renewable energy by 2025, five years ahead of its original target.
However, Big Tech companies are also investing heavily in clean power. Amazon’s investment in nuclear energy, exemplified by the purchase of a nuclear-powered data centre from Talen Energy, and Microsoft’s development of green hydrogen technology for backup power, highlight Big Tech’s dual focus on growth and sustainability.[4]
Vodafone, too, has been actively upgrading its network infrastructure with energy-efficient technologies, while BT Group aims to power its operations with 100% renewable electricity by 2026.[5]
Transportation Infrastructure
Despite an overall decline in emissions, transportation emissions in Europe have increased by 29% since the 1990s, and they are projected to constitute nearly half of Europe’s greenhouse gas emissions by 2030.[6]
Companies like Ferrovial SE are leading the way in developing sustainable solutions by. investing heavily in EV charging infrastructure and smart traffic management systems, to optimise traffic flows and reduce congestion and emissions.[7]
ComfortDelGro Corporation, a Singapore-based transportation company, is making significant strides, recently securing a S$100 million green loan from DBS to decarbonize its UK bus fleet. The funds were used to purchase 135 electric buses, comprising 77 double-deck and 58 single-deck buses, for its wholly-owned subsidiary, Metroline.
Social Infrastructure
Sustainable infrastructure is not solely about environmental benefits; there’s also a a strong social component.
Ageing demographics across the globe represent one of the most significant global megatrends. By 2040, 28% of China’s population is expected to be over 60 years old, posing significant challenges and opportunities for public health and socioeconomic development.[8]
Companies like Welltower are at the forefront of developing senior living facilities and healthcare properties designed to be energy-efficient and environmentally friendly. In 2023, Welltower certified 135 properties as ENERGY STAR, completed energy efficiency upgrades across 20 properties, and increased the number of properties powered with on-site solar energy to 25.[9]
HCA Healthcare is expanding its services to meet the growing demand for healthcare in aging populations. In 2024 alone, HCA is investing more than $5 billion in capital improvements, which includes constructing new facilities equipped with the latest sustainable technologies and expanding its existing operations to enhance service delivery to ageing populations.[10]
Conclusion
Investing in sustainable infrastructure not only meets current demands but also prepares economies for future challenges like climate change, demographic shifts, and technological advancements.
The growth in AI and renewable energy is driving significant expansion in data, telecom, and environmental infrastructure. At the same time, transportation and social infrastructure investments are ensuring sustainable and equitable growth.
While infrastructure might not be the most exciting topic, it stands as a stable and essential megatrend, offering calm and steady growth, well-buffered against downturns due to its indispensable nature.
[1] Bloomberg New Energy Finance, “Global Clean Energy Investment Jumps 17%, Hits $1.8 Trillion in 2023, According to BloombergNEF Report”, 30 January 2024. Available at: https://about.bnef.com/blog/global-clean-energy-investment-jumps-17-hits-1-8-trillion-in-2023-according-to-bloombergnef-report/
[2] IEA, “Overview and key findings”, 2023. Available at: https://www.iea.org/reports/world-energy-investment-2024/overview-and-key-findings
[3] Acciona, “ACCIONA posts €541 million net profit (+22.6%), invests €3.32 billion (+66%)”, February 2024. Available at: https://www.acciona.com/updates/news/acciona-posts-541-million-net-profit-invests-3-32-billion/?_adin=132415900
[4] Amazon, “Amazon is the world’s largest corporate purchaser of renewable energy for the fourth year in a row”, January 2024. Available at: https://www.aboutamazon.com/news/sustainability/amazon-renewable-energy-portfolio-january-2024-update
[5] Vodafone, 2024. Available at: https://www.vodafone.com/about-vodafone/how-we-operate/cost-of-living/improving-energy-efficiency
[6] European Environment Agency, “Greenhouse gas emissions from transport in Europe”, October 2023. Available at: https://www.eea.europa.eu/en/analysis/indicators/greenhouse-gas-emissions-from-transport
[7] Ferrovial, “Ferrovial, one of the most sustainable companies in the world according to the Dow Jones Sustainability Index”, December 2023. Available at: https://newsroom.ferrovial.com/en/press_releases/ferrovial-one-of-the-most-sustainable-companies-in-the-world-according-to-the-dow-jones-sustainability-index/
[8] China Briefing, “Understanding China’s Rapidly Growing Healthcare Market”, June 2023. Available at: https://www.china-briefing.com/news/understanding-chinas-rapidly-growing-healthcare-market/
[9] Energy Star, “Welltower Inc”, 2024. Available at: https://www.energystar.gov/about/welltower-inc-0
[10] HCA Healthcare Magazine, “Capital Investments Are People Investments at HCA Healthcare”, May 2024. Available at: https://magazine.hcahealthcare.com/care/in-our-hospitals/capital-investments-are-people-investments-at-hca-healthcare/
