Emerging Infrastructure Trends for 2021
In 2020, even best laid plans were hijacked by COVID-19. And the uncertainty of the pandemic still hangs all around us. But the world is already moving forward. KPMG recently launched a report detailing 10 Emerging Global Infrastructure Trends for 2021.
“In 2021, the infrastructure sector globally is expected to adjust itself to cope with the changes from disruptions and from the COVID-19 pandemic. The infrastructure project should be resilient and focus on environmental, social and governance (ESG) to emerge from the crisis with renewed vigor, fulfilling a key role as a catalyst to sustainable economic recovery,” says Tanate Kasemsarn, COO and Head of Infrastructure and Government, KPMG in Thailand. “The year ahead will likely be characterized by growth, sustainability and resilience. These are the 10 trends we expect to see in 2021.”
Trend 1: Uncertainty creates planning complexity
With the current uncertain situation, how do infrastructure planners differentiate between the impact that are permanent and those that are temporary, especially with building assets with lifecycles that span decades? In the absence of clarity, infrastructure owners and planners are now trying to identify investments that align to their existing long-term plans but allow for increased flexibility and agility. Over the coming year, we expect to see a much more nimble and flexible approach to infrastructure planning as well as much more focus on leveraging technology, data and analytics and other decision-making tools.
Trend 2: Cities rethink their value proposition
Over the coming year, expect urban planners and city infrastructure leaders to begin reassessing the infrastructure needs of their cities to understand not only how they deliver value to citizens today, but what citizens will consider value-adding in the future. Smart, digitally enabled cities will undoubtedly play a role, helping government evolve the urban environment in order to deliver a better, cleaner and more efficient quality of life for its citizens.
Trend 3: Borders become real again
With borders closed, nationalistic policies and trade wars, flows of goods between borders were greatly impacted. As a result, airport and port operators have recognized the need for technology and automation as a way to create greater resilience and stronger response mechanisms. Over the coming year, expect to see greater investment into digital and smart ports, airport automation and the development of institutional mechanisms for improving collaboration between supply chain actors.
Trend 4: Infrastructure supply networks evolve
The pace of change in infrastructure and construction supply chains will pick up as organizations invest in resiliency. We expect to see developers start to think more broadly about the factors that influence their supply strategies. In some cases, this will likely mean a strong shift towards re-shoring and near-shoring. And it will almost certainly mean that inventory levels will rise considerably, offering opportunities for new suppliers and smaller suppliers to grow
Trend 5: New finance floods the market.
2021 should see a flood of new capital flow in from pension funds and insurance companies who, now that the risks are better understood, are looking aggressively at brownfield assets and greenfield projects for increased returns.However, the flip side of the coin is that lower interest rates and increased funding options also means that well-structured projects in emerging markets are attracting investors with much lower return expectations. Expect to see new investors gravitate towards infrastructure vehicles that provide sustainable inflation-protected long-term annuity returns, particularly as treasury rates remain low.
Trend 6: Toward a greener, fairer rebuild
Expect to see the infrastructure agenda be powerfully influenced by a focus on environmental, social and governance (ESG) outcomes aimed at ensuring actions are contributing to a fairer, more inclusive and more equitable world. On the environmental side of the ESG equation, at least, governments clearly agree, and many have been making significant policy announcements to support that agenda.
Trend 7: Resilience jumps up the agenda
While the pandemic may have taken the spotlight in recent months, governments and asset owners have increasingly focused on the resilience of their infrastructure to climate and weather-related risks. Apart from climate and weather-related risks, the definition of resilience has also broadened. Many infrastructure players have started to ask whether their assets could react quickly to unexpected demand fluctuations. Over the coming year, expect infrastructure owners, planners and regulators to start asking difficult questions about the resilience of their assets in the broadest sense.
Trend 8: Delivering securely in a digital world
Today is an era of hyperconnectivity. Connectivity technologies like 5G and cloud will also be central to driving innovation and value in infrastructure. Governments will start to recognize that they must address the growing deficits in their digital infrastructure to drive growth in both their economies and balance their sheets.
Trend 9: Government gets permission to transform
This year, we expect to see government officials and infrastructure leaders assess the extent to which they can make some of the pandemic-driven changes, such as online learning and distance healthcare delivery, more permanent.Data will be critical to imagining and implementing radical change.However, one clear challenge will be around privacy as seen by mixed reception of apps such as COVID-19 track and trace. Expect privacy considerations to play a much greater role in infrastructure decision-making going forward.
Trend 10: Governments look for partners
Governments increasingly see that the private sector can be a trusted delivery partner. And, as a result, a range of new opportunities for private sector participation are emerging. Beyond traditional financing partnerships, many governments are now striving to create partnerships that give them access to enhanced expertise and capabilities, as seen in the COVID-19 vaccine development and delivery. These new partnerships will be driven by innovation and the desire to deliver more to stakeholders.