Infrastructure businesses undergoing transformation for the green economy

Respondents to Pinsent Masons’ 2023 global infrastructure survey said the green transition and green economy would, among other things, offer opportunities to grow revenues and profits and improve their brand reputation. It also found strong support and appetite for developing and using an industrialised approach to the design and construction of new infrastructure to support the green transition and global green economy.

However, the survey found a mixed state of readiness across the sector for the changes that will come. It also revealed a majority view that the de-globalisation of supply chains is necessary to reduce greenhouse gas emissions, as well as widespread concerns over access to the skills and resources required to transition successfully to, and operate in, the green economy.

Most respondents suggested they intend to invest in leadership, project management or technical skills over the next three years, while green products and services, and digitisation and technology, were other prominent areas identified for investment.

Almost half of the respondents said they would turn to joint ventures (JVs) or other partnering arrangements in a bid to strengthen skills and capabilities needed for the green transition and economy, while more than a quarter said sharing financial or technical risk would be the main purpose of such collaboration for their business.

Respondents were also clear that there is a need for government intervention to help stimulate demand and growth for new green products and services in the infrastructure sector – whether by way of policy, law and regulation, or incentives to promote investment. Graham Robinson of Pinsent Masons said that countries around the world can look to the US as an example of how incentives flowing from legislation such as the Inflation Reduction Act and the CHIPS and Science Act can serve as a catalyst for inward investment and as a driver of the scale of change that is needed.

There was a mixed response in relation to how infrastructure businesses rate their readiness and maturity in disclosing climate-related risks and opportunities to investors and stakeholders, in line with the recommendations made by Taskforce for Climate-related Financial Disclosures (TCFD). More than a quarter of businesses said they are not doing any reporting of this kind currently, while a further third said they were only making limited disclosures. Just 11% of respondents view themselves as leaders in this area, but there was strong appetite among survey participants for advice in relation to climate reporting and governance.

Pinsent Masons has previously set out its view that infrastructure companies that implement the recommendations made by Taskforce for Climate-related Financial Disclosures (TCFD) stand to build their resilience against climate change and deliver significant business benefits beyond compliance. It has also explained how businesses can go from beginner to leader in their TCFD reporting journey.

“A lack of green skills and resources will hold back the infrastructure industry from transitioning to a green future,” said Rob Morson of Pinsent Masons. “However, with 70% of respondents viewing industrialised construction as central to their business strategy this promises to open up the talent pool.”

“It is a race against time for the industry, however, as the lack of skills and resources provides opportunities for technology providers to enter and disrupt the market. Some businesses in the infrastructure sector understand the extent of change and disruption that is coming with the global green economy – as evidenced by company-wide transformations planned and the acknowledgment of the need to invest in leaders and managers to drive those transformations. Those individuals are likely to be in high demand. It is clear too that policy and incentives are needed to drive change in the industry,” he said.

Graham Robinson said: “The deglobalisation of construction supply chains will be needed to help reduce greenhouse gas emissions and to build much greater resilience."

“A range of factors will play into this. These include policy interventions, such as the EU carbon border adjustment mechanism – which will impose a tax on the importation of carbon-intensive products to the EU – and US legislation like the US Inflation Reduction Act and wider ‘Made in America’ policies, which is attracting significant capital and investment into the green economy in US. Global supply chain resilience is also threatened by geopolitics and macroeconomic factors. This and the shift towards dematerialisation and use of industrialised construction is likely to promote merger and acquisitions in the sector in due course,” he said.

Pinsent Masons’ 2023 global infrastructure survey ran for approximately six weeks – from late 2022 to early February 2023 – and attracted responses from different types of organisations from across the sector based all over the world. Respondents included contractors, consultants, and infrastructure asset owners and operators, as well as government, lenders, investors and technology providers. More than half of the respondents that participated in the survey were from businesses whose annual revenues exceed $1 billion.