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Visualizing the $5.7 Trillion Infrastructure Investment Gap

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Infrastructure Gap

Infrastructure Megatrends: Filling the Investment Gap

With each passing year, significant investment is required to maintain and improve America’s infrastructure.

When these investments fall behind their targets, an infrastructure gap can emerge. These deficits have a negative impact on the entire American economy, affecting things like roads, highways, water lines, and schools.

In this Markets in a Minute chart from New York Life Investments, we quantify America’s infrastructure gap using research from the American Society of Civil Engineers (ASCE).

The Big Picture

According to ASCE’s 2021 report, $13 trillion in infrastructure spending will be required through 2039 to support America’s economic growth. These projections include the cost of building new infrastructure, as well as the cost of maintaining existing assets.

With expected funding estimated at $7.3 trillion, that leaves a deficit of $5.7 trillion.

If this gap is not filled, the ASCE warns there will be widespread consequences. Goods are likely to become more expensive to produce and transport, resulting in higher costs for consumers. Higher costs could also reduce the international competitiveness of American companies.

The table below outlines some of the most critical findings from the ASCE’s research.

Costs Associated with the Infrastructure Gap, by 2039Details
$23 trillion in lost business productivity
  • Deteriorating infrastructure can increase commute times and decrease productivity

  • Americans spend nearly $130 billion each year on extra vehicle repairs due to poor road conditions
$10 trillion loss in GDP
  • Aging utilities can be a drag on the U.S. economy

  • 65% of counties have average internet speeds that are lower than the FCC’s* definition of broadband
$2.4 trillion in lost exports
  • Higher business costs will reduce the competitiveness of U.S. exports

  • U.S. manufacturing suffers from poor infrastructure because it often relies on energy, water, and transportation.

*Federal Communications Commission

For the average American household, these impacts could lead to a $3,300 decrease in annual disposable income.

Aviation: A Critical Need for Investment

U.S. airports are facing mounting capacity challenges as more people travel each year (this trend has taken a pause during the COVID-19 pandemic).

Over a two-year period ending in 2019, traffic through America’s airports grew 24% to reach 1.2 billion passengers per year. On the supply side, flight service increased by just 5%. Altogether, insufficient aviation infrastructure resulted in a total of 96 million delay minutes in 2019, up from 66 million in 2017.

The following chart shows a breakdown of how U.S. aviation investment would need to be distributed.

Airport Infrastructure Needs

The Federal Aviation Administration estimates that the capital needs for terminal buildings is already more than $6.6 billion.

How Investors Can Benefit

Efforts to address the infrastructure gap are gaining steam—Democrats and Republicans recently joined together to pass a $1 trillion infrastructure bill—but this won’t be enough to fill the gap completely. Nor will it secure the future of the America’s infrastructure.

The good news is that publicly listed infrastructure companies can play a significant role. As owners of essential long-duration assets, these businesses are investing billions annually into upgrades and expansions.

For investors, this supports consistent organic growth and steady income. Analysis by CBRE Clarion Securities determined that income growth has accounted for 50% of listed infrastructure’s total return over the past 20 years.

Income-seeking investors may also find the sector’s defensive characteristics to be attractive. CBRE’s analysis found that listed infrastructure has captured just 65% of the global equity market downside, compared to 81% of the upside.

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Markets in a Minute

Data Centers: Investing in the Infrastructure of the Future

Infrastructure refers to any asset that provides an essential service. In today’s interconnected world, data centers are exactly that.

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Data Centers

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Data Centers: Investing in the Infrastructure of the Future

Digital transformation is one of the world’s most prominent trends today.

For evidence, consider the growth in internet users worldwide. By 2023, 5.3 billion people (66% of population) will be using the internet, up from 3.9 billion (51% of population) in 2018.

This growth has resulted in an incredible amount of data being produced each day, whether its from streaming music on Spotify or buying goods on Amazon. But how is all this data being processed?

In this Markets in a Minute chart from New York Life Investments, we shed light on the importance of data centers, and why they should be considered as core infrastructure.

The Role of the Data Center

A data center is a facility that stores, processes, and disseminates data. There are thousands of them around the world, and collectively, they’re referred to as the “cloud”.

This puts data centers at the center of nearly everything we do online: e-commerce, communications, storage and back-up, and even online gaming. To gain a better sense of what this all looks like, the following table breaks down the storage capacity of the world’s data centers.

Segment2016 Storage Capacity (exabytes)2021 Storage Capacity (exabytes) 
Compute160470
Collaboration170400
Database & analytics150380
Enterprise resource planning180420
Video streaming50180
Social networking60160
Search engine30100
Other consumer apps70190
Total8702,300

Source: Statista (2021)

One exabyte is equal to one billion gigabytes, which means the world currently has 2.3 trillion gigabytes of total storage.

The largest segment is compute instances, which are cloud-based workstations used by data scientists. At the lower end of the scale are segments like video streaming (includes Netflix and Hulu) and social networking (think Facebook or LinkedIn).

Cloud Spending Reaches a Historic Milestone

For businesses that create and use data, moving to the cloud (as opposed to maintaining their own servers) has plenty of advantages like cost savings, flexibility, and security.

This is driving exponential growth in cloud infrastructure spending, which reached a record $130 billion in 2020. At the same time, spending on data center hardware decreased from $96 to $90 billion. These results are partly attributed to COVID-19, which forced many businesses to switch to a work-from-home operating model.

A survey conducted by 451 Research found that 40% of businesses had increased their usage of cloud services during the pandemic. In addition, 85% of those who were impacted indicated that the move would be a permanent one.

Data Centers are Infrastrcture

The scope of an infrastructure investor has historically been limited to companies in construction, energy, and transportation.

But what defines infrastructure?

It’s any physical system that is vital for an economy’s development and prosperity—and in a world where over 5 billion people are expected to be online by 2023, the data center is the perfect embodiment of that.

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Sustainable Investing Assets Worldwide (2018-2020)

From 2018-2020, global sustainable investing assets grew by 15% to reach $35.3 trillion. Here’s how they break down across five major markets.

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Sustainable Investing

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Sustainable Investing Assets Worldwide (2018-2020)

Sustainable investing is top-of-mind for many investors, but how fast is it actually growing?

Between 2018 and 2020, global sustainable investing assets grew 15% to reach $35.3 trillion. This works out to more than a third of total assets under management.

In this Markets in a Minute from New York Life Investments, we explore the value and growth of sustainable investing assets across five major markets.

What is Sustainable Investing?

Sustainable investing considers environmental, social, and governance (ESG) factors in portfolio selection and management. For the purposes of this data, it is a broad definition that includes seven main approaches:

  • ESG integration
  • Corporate engagement & shareholder action
  • Norms-based screening
  • Negative/exclusionary screening
  • Best-in-class/positive screening
  • Sustainability themed/thematic investing
  • Impact and community investing

In most regions, it is becoming increasingly common to combine several of the above strategies within the same product.

Sustainable Investing Assets by Region

Sustainable investment data comes from five major markets: the U.S., Europe, Japan, Canada, and Australasia. Currencies have been converted to U.S. dollars at the prevailing exchange rate at the day of reporting. We’ve based growth rates on U.S. dollar values.

Here is the value of sustainable investing assets in U.S dollars, sorted by asset amounts in 2020.

Region20182020Growth Rate
United States$12.0T$17.1T42%
Europe$14.1T$12.0T-15%
Japan$2.2T$2.9T32%
Canada$1.7T$2.4T43%
Australasia$734B$906B23%

All 2020 assets are reported as of December 31, 2019 except for Japan which reports as of March 31, 2020. Australasia is Australia and New Zealand. In 2020, Europe includes: Austria, Belgium, Bulgaria, Denmark, France, Germany, Greece, Italy, Spain, Netherlands, Poland, Portugal, Slovenia, Sweden, the UK, Norway, Switzerland, and Liechtenstein.

The U.S. makes up almost half of global sustainable investment assets, and saw the second highest growth rate. One strong theme in the country is racial justice investing. Over 120 investors and organizations signed a call to action for the investment community to dismantle systemic racism and promote racial equity and justice. They plan to achieve this through various actions, such as hiring people of color and financing Black entrepreneurs.

Europe makes up over a third of all sustainable investing assets. The region has seen important regulatory developments, such as:

  • Institutional investors, asset managers, and advisors must report on how they integrate sustainability risks and adverse impacts at the entity level
  • Advisors are required to ask about their clients’ ESG preferences and advise appropriate products

While Europe saw a decline in growth from 2018-2020, this is because the region has changed how they define sustainable investing. Tighter legislation means that some products that previously qualified as sustainable may not meet the new requirements. The goal of the legislation is to create clear standards for sustainable products, promoting trust and easier access for investors.

The Mounting Pressure

Globally, the proportion of sustainable investing assets is growing. In fact, sustainable investments make up 36% of global assets under management, up from 28% in 2016.

Investment professionals say the top drivers of sustainable investing are to help manage investment risks, and because clients demand it. Not only that, the recent Intergovernmental Panel on Climate Change (IPCC) report has reinforced the importance of sustainable investments.

“The climate crisis poses enormous financial risk to investment managers, asset owners and businesses….. The public and private sector must work together to ensure a just and rapid transformation to a net-zero global economy.”
António Guterres, UN Secretary-General

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