Renewable energy, telecoms and primary care have proven to be the most pandemic resilient sub-sectors of infrastructure, according to a new study published by Foresight Group LLP (Foresight).
The analysis examined 23 sub-sectors spanning economic and social infrastructure. It revealed that while infrastructure as an asset-class has proved to be highly pandemic resilient, there are substantial differences in the performance of various infrastructure sub-sectors.
Foresight’s white paper assessed the resilience of infrastructure to global pandemics through five investment factors: revenues; costs; financials; political and regulatory environments; and operations.
The infrastructure sub-sectors that expressed the greatest overall resilience to global pandemics were positively correlated with a high degree of both revenue resilience and financial resilience. By contrast, the least correlated fndamental with overall pandemic resilience was operational resilience.
This was also the investment fundamental that infrastructure sub-sectors most frequently scored lowest on, suggesting that sector-wide, businesses have potentially underestimated pandemic risk and its implications on real assets.
It is consequently no surprise that while fibre, data centres and primary scored the high marks with overall global pandemic scores between 13-15, coal powered fire stations and airports languished at the bottom with scores of -24 and -21 respectively.
The private equity investment manager believes the results reflect the defensive qualities of infrastructure, and provide investor stability when the lockdown of societies is significantly altering demand patterns. Diversification by investors across a range of infrastructure sub-sectors will be important in helping to mitigate future pandemic risk and limit adverse impacts.
Nigel Aitchison, partner and head of infrastructure at Foresight, explained: “Infrastructure as an asset class has long been sold on its robust defensive and uncorrelated characteristics. The Covid-19 global pandemic has been the biggest test of its resilience yet. Foresight’s research drills down into the infrastructure sector and reveals substantial differences in the performance of 23 sub-sectors. Diversification across a range of these sub-sectors will be key to limiting the adverse impact of future pandemic threats.”