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Investing in Infrastructure: Insights from the Manager of a $40 Billion Firm Meeting Urgent Demand

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The Growing Demand for Infrastructure: Opportunities for Investors

Infrastructure Improvements and Climate Change Efforts

The demand for infrastructure improvements is set to increase as more people move to cities in the coming decades. In addition, the global effort to respond to climate change will make energy efficiency a priority for builders. This brings new technology, challenges, and opportunities for investors in the infrastructure sector. Sadek Wahba, the founder and chairman of I Squared Capital, a global infrastructure management company, emphasizes that the sector as a whole is on an upward trajectory.

Revamping the Electric Grid

According to Wahba, the entire electric grid needs a complete revamp. Power generators often have to wait years to connect new sources of energy to the grid due to infrastructure constraints. Utility stocks are not directly correlated to infrastructure, which makes investing in specialized construction companies that build transmission and distribution lines a lucrative opportunity.

The Electrification of Urban Transportation

Wahba is also bullish on the electrification of urban transportation. As cities implement congestion pricing plans, electric urban transportation becomes a desirable investment. For example, New York City plans to implement a congestion pricing plan for drivers entering central Manhattan. This shift towards electric urban transportation presents a promising investment opportunity.

The Technology Supporting Infrastructure Growth

The growth of infrastructure also spurs demand for technology that supports its development. Wahba highlights the need for systems that measure and record road usage for congestion pricing plans. Additionally, there will be a demand for technology products that improve building efficiency and adapt to changing conditions in real-time.

The Importance of Cybersecurity

With the increasing digitization of infrastructure, Wahba emphasizes the importance of cybersecurity. As more infrastructure systems become vulnerable to cyber attacks, the need for robust cybersecurity measures grows. Wahba highlights potential risks, such as hackers gaining control of hospital HVAC systems or power generation backups. The need for cybersecurity solutions presents a significant investment opportunity.

The Limited Publicly Traded Market in the US

Unlike the rest of the world, the publicly traded market for infrastructure investments is limited in the United States. Most infrastructure in the US is funded by states, cities, and municipalities through the municipal bond market. Wahba believes that widening the ownership of infrastructure assets in the US is necessary to create a market and attract capital. This would lead to increased competition, efficiency, and lower pricing for consumers. In conclusion, the growing demand for infrastructure presents various investment opportunities. From revamping the electric grid to investing in the electrification of urban transportation and supporting technology, investors have a range of options to capitalize on this trend. Additionally, addressing cybersecurity concerns and widening the ownership of infrastructure assets in the US can further enhance the sector's potential.

Conclusion: Infrastructure's Impact on New Businesses

The growing demand for infrastructure and the numerous opportunities it presents will also have a significant impact on new businesses entering the market. As more people flock to cities and climate change efforts prioritize energy efficiency, new businesses that can meet these infrastructure needs stand to benefit greatly. One area of immense potential lies in revamping the electric grid. With power generators facing infrastructure constraints, specialized construction companies that build transmission and distribution lines can carve out a lucrative space in the market. New businesses that offer innovative solutions for connecting new sources of energy to the grid will find themselves in high demand. The shift towards electrification of urban transportation also opens doors for entrepreneurial ventures. As cities implement congestion pricing plans, investing in electric urban transportation becomes highly attractive. Startups that provide electric transportation options and innovative charging infrastructure solutions can tap into this growing market and establish themselves as leaders in the industry. Furthermore, the technology supporting infrastructure growth will create opportunities for new businesses. From road usage measurement systems for congestion pricing plans to real-time building efficiency solutions, innovative tech startups can provide the tools and services necessary for efficient infrastructure development. However, it is essential for new businesses in the infrastructure sector to prioritize cybersecurity. With increasing digitization, the vulnerability of infrastructure systems to cyber attacks is a concerning reality. Startups specializing in cybersecurity solutions for infrastructure assets will be in high demand as governments and corporations seek to protect critical systems and prevent potential disruptions. Although the publicly traded market for infrastructure investments is limited in the US, this does not discourage new businesses from entering the sector. In fact, widening the ownership of infrastructure assets provides an opportunity for entrepreneurs to collaborate with states, cities, and municipalities through the municipal bond market. By investing in infrastructure projects and partnering with public entities, new businesses can actively contribute to building the necessary foundation for future growth. In conclusion, the growing demand for infrastructure offers new businesses a wealth of opportunities. By embracing the need for infrastructure improvements, climate change efforts, and innovative solutions, entrepreneurs can position themselves at the forefront of this flourishing sector. It is an exciting time for new businesses to make a lasting impact on infrastructure development while driving economic growth and sustainability. Article First Published at: https://www.cnbc.com/2023/07/20/sadek-wahba-i-squared-capital-how-to-invest-in-infrastructure.html

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