The Global Infrastructure Investor Association (GIIA), which represents many of the world’s leading institutional investors in infrastructure, announced in early June the appointment of Jon Phillips as Chief Executive Officer (CEO). Infrastructure Magazine sat down with the new CEO to discuss GIIA’s role in the sector, the upcoming challenges and how it is imperative that the industry reduces its emissions globally.
As the membership body for some of the largest infrastructure investors and advisors in the world, GIIA collectively represents US $1.6 trillion in infrastructure assets. Now at the helm of this global powerhouse, Mr Phillips – who joined the organisation in 2016 and served as acting CEO from December 2022 – explains the biggest trends, and issues, in the sector presently and in the future.
How does the GIIA help members navigate the infrastructure investment environment and what led you to taking the helm of the association?
We were founded in 2016 out of recognition by some of the major players in the sector that it was time the asset class had a more coordinated voice and improved dialogue with policy makers, politicians and regulators.
Infrastructure usually sits at the interface of public sector policy and private sector delivery, so advocacy remains at the heart of what we do, but we also have a role to convene our members, share market insights and help build professional networks. We have an international programme of events and thought leadership designed to help members navigate the market.
Our aim is to play an important role in ensuring policy makers and regulators understand and take account of the implications of their plans when it comes to impacting investor confidence and investment opportunity. Working in a complementary way to sector-specific trade bodies, we can bring the views of global investors that are sometimes overlooked, as we did with the Australian Energy Regulator (AER) in autumn 2022 in its consultation on rates of return.
Prior to joining GIIA in 2016, I led communications and stakeholder relations at the UK’s Nuclear Decommissioning Authority and before that at Heathrow Airport. Between the three roles, I’ve worked in infrastructure from an asset company, public sector and investor perspective, so I am delighted to bring that 360-degree understanding to the position of GIIA chief executive.
In your view, what are the biggest trends in the infrastructure sector in Australia and across the globe?
The energy transition and net-zero investment opportunities, increased connectivity and long-term resilience are key focus areas for investment funds everywhere. The challenge is delivering on priorities against a backdrop of rising costs, high borrowing rates, supply chain pressures and skills shortages.
In addition, with geopolitical uncertainty weighing on the minds of policymakers, we’re seeing increased scrutiny of inward investment.
There’s a balance to be struck here between deterring malicious actors and securing the legitimate investment needed to make net-zero a reality. Governments need to balance their legitimate concerns in this area with the need to remain attractive in the competition for international capital.
The new Register of Foreign Ownership of Australian Assets introduced by federal authorities in July will, for example, increase the time and money that funds must spend on admin when they wish to bring new investment to the country. If requirements are too burdensome, they will likely seek opportunities elsewhere.
Where are the biggest challenges and opportunities for the sector?
The biggest challenge of our age – bringing harmful emissions to a balance of net zero – also marks the biggest economic opportunity.
This is no more evident than in a country like Australia, where growth has historically been spurred by fossil fuels, but where great strides are now being made in upping renewable energy capacity. The strides can’t come soon enough, with the Australian Energy Market Operator (AEMO) forecasting that two-thirds of coal power generation will be removed from energy markets by 2030, meaning a huge amount of renewable capacity needs to be delivered in just seven years.
Over the past 12 months, $5 billion worth of private investment in greenfield – that is, new renewable energy projects – have been signed off across Australia. That’s more than other major economies like Japan and Saudi Arabia, but represents only a fifth of that secured in the US. More will be needed, and at a much faster rate, to make net-zero possible. Private capital will need to play a major role if Australia is to meet its ambitions, and that will require policies designed to attract private investors.
Promisingly, If you look at a subsector like offshore wind, progress is poised to accelerate. The Federal Government established an important National Regulatory Framework for offshore wind last year, designating six offshore wind zones. At the state level, Victoria is now targeting 2GW of offshore power generation capacity by 2032.
Australia secured £13 billion in total private investment in greenfield infrastructure projects over the past year, putting it behind the likes of India and Brazil. As such, there’s a big opportunity for governments at all levels to increasingly harness the benefits of private investment to improve delivery and take pressure off public balance sheets.
Australia already has the experience to make this possible. Its asset recycling model – whereby governments sell or lease infrastructure assets to investors and use the proceeds to reinvest into new projects – is one we point to in other markets as an example of good practice.
Equally, public private partnerships (PPPs) have been utilised in the past across the nation, but not to the extent of other developed economies with strong infrastructure networks, such as Norway. Historically, cost overruns and time delays stand at 18 per cent and 26 per cent respectively for traditionally procured projects across Australia. For PPPs, the same figures stand at four per cent and one per cent.
Is there anything Australia can learn from other countries in its approach to the industry?
The global race to attract sustainable inward investment is ramping up. In the US, that’s taken the form of close to USD $1 trillion in new infrastructure spending and investment incentives. The EU has responded with its Green Deal Industrial Plan, targeting permitting reforms, greater government access to funding for infrastructure projects and skill development.
There is a lot to learn from developments like these where attracting investment is concerned. The US’ efforts are proving especially effective. The Federal Government has dedicated a welcome $4 billion to supporting renewable capacity, including AUD $2 billion for its Hydrogen Headstart programme, as part of its Budget for 2023. What is not yet clear is how it intends to maximise investment by leveraging the private sector as it has previously done so well.
Australia has lessons to teach when it comes to infrastructure investment too. If you look at what’s happening in the UK currently, the UK Treasury is introducing measures aimed at increasing the kind of pension fund consolidation that has already been achieved across Australia. That consolidation increases the capacity and efficiency of funds, making them more able to invest in the infrastructure networks we all rely on every day, while improving returns for the savers they represent.
