This content is from: Opinion

How Should Investors Define Infrastructure?

Do graveyards and parking tickets constitute infrastructure investments? A new report by Harvard University academics has an interesting insight.

I was once at an infrastructure conference when a fellow attendee told me that the two most promising ‘infrastructure’ opportunities in the marketplace were in ‘graveyards’ and ‘parking tickets,’ Graveyards I could wrap my head around but parking tickets? That’s not even close to being infrastructure, right?

Actually, the individual was insistent and, truth be told, went on to do a decent job of convincing me. Parking tickets are infrastructure because they require an investment in an army of meter maids and equipment, which (once in place) generate steady, inflation-protected cash flows over the long term. Also, the threat of parking tickets keeps people honest about their parking, which (so the logic went) makes existing parking more efficient.

Touché.

I bring this up because I think there’s actually an important take-away: Infrastructure as an asset class is still very hard to define. And I think that's an important problem, because the lack of consensus around what we mean by infrastructure has knock on effects for financing.

For example, how many interesting and worthwhile infrastructure opportunities have been killed for no other reason than they don’t fit neatly into the silos of investment institutions? Viable projects aren’t getting funded because we simply haven’t figured out how to define (and where to send) “infrastructure” investment opportunities.

Anyway, maybe we can finally start getting everybody on the same page, as a couple of Harvard University academics have just released a new paper focusing explicitly on figuring out exactly what it is we mean when we say “infrastructure”. The paper is good, as it digs in (deep) to the definitional challenge associated with this asset class. And here's a spoiler: the definition for infrastructure they come up with at the end is as follows: “Facilities, structures, equipment, or similar physical assets – and the enterprises that employ them – that are vitally important, if not absolutely essential, to people having the capabilities to thrive as individuals and participate in social, economic, political, civic or communal, household or familial, and other roles in ways critical to their own well-being and that of their society, and the material and other conditions which enable them to exercise those capabilities to the fullest.”

Parking tickets? Maybe, just maybe.

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