INFRASTRUCTURE is the backbone of economic growth, supporting everything from transportation and utilities to digital connectivity. Beyond its functional role, infrastructure has evolved into a distinct asset class — one that institutional investors, governments and private entities increasingly recognize as a resilient, long-term investment.
But what makes infrastructure such a smart bet for the future?
Historically, infrastructure projects were primarily government-led, focusing on public goods like roads, bridges and utilities. However, by the 1990s, many countries, including the Philippines, began shifting toward privatization and public-private partnerships (PPPs). This transition was particularly evident in key industries like airports and energy, where private investment brought much-needed capital, efficiency and innovation.
Today, global infrastructure investment exceeds $2 trillion, driven by the growing demand for modernized transport networks, sustainable energy and digital infrastructure. In the Philippines, private investment in infrastructure has played a crucial role in economic expansion, improving projects’ asset and service quality for the public, contributing significantly to government revenues, and boosting sectors like tourism. According to the PPP Center, total private sector involvement in the PPP program has amounted to $53 billion, which comprises 85.0 percent of private sector investment in infrastructure, with projects spanning airports, water supply and transportation networks.
Infrastructure serves a dual purpose: it fuels economic productivity and improves quality of life while offering investors an attractive, stable asset class. With long-term contracts and essential services at its core, infrastructure investment is becoming an increasingly preferred choice for institutional funds seeking steady returns.
Unlike traditional equities or bonds, infrastructure assets are typically insulated from market volatility. Their essential nature means that the underlying demand of these assets remains consistent regardless of economic cycles. Here’s why infrastructure is a strong long-term investment:
– Low volatility. Infrastructure projects, such as toll roads, airports and utilities, provide indispensable services, making them less susceptible to market downturns.
– Stable cash flows. Long-term contracts and predetermined pricing models ensure steady revenue streams for investors.
– Inflation hedge. Many infrastructure assets have revenues linked to inflation, ensuring that investor returns are preserved in real terms.
– High barriers to entry. Infrastructure requires significant capital, extensive planning, and regulatory approvals, limiting competition and enhancing long-term viability.
The Organization for Economic Cooperation and Development (OECD), in a 2023 report entitled “Improving the Landscape for Sustainable Infrastructure Financing,” underscored the role of quality infrastructure in fostering economic resilience, particularly in sustainable growth and development. A well-planned infrastructure ecosystem supports economic expansion and enhances a country’s ability to withstand financial shocks.
Despite its advantages, infrastructure investment comes with challenges. The most notable are:
– High capital requirements. Infrastructure projects require significant upfront investment, making them suitable for patient capital with a long-term horizon.
– Regulatory risks. Policy shifts and changing regulations can impact bankability and financial viability, requiring investors to prepare comprehensive concession contracts and to navigate complex political landscapes.
– Sustainability and ESG trends. Investors and governments are increasingly prioritizing sustainable infrastructure. Green projects and renewable energy investments are in high demand, requiring investors to align with environmental, social and governance (ESG) standards.
In its Implementation Handbook for Quality Infrastructure Investment, the OECD notes that improved data collection and stronger ESG frameworks are critical to advancing sustainable infrastructure investment. Investors who integrate sustainability into their infrastructure strategies are more likely to see long-term value creation.
As governments face budget constraints, the private sector is stepping in to bridge infrastructure funding gaps. PPPs have proven to be effective models for infrastructure financing, particularly in the Philippines.
Aboitiz infrastructure unit Aboitiz InfraCapital, for instance, is committed to long-term infrastructure development, with major projects such as the Mactan-Cebu International Airport and the Davao City Bulk Water Supply Project (a partnership between Apo Agua Infrastructura, Inc. and the Davao City Water District), as well as recently awarded projects such as the Laguindingan International Airport and Bohol-Panglao International Airport, demonstrating how private investment can enhance service delivery and efficiency. These initiatives provide essential services and generate sustainable economic value for communities and investors alike.
Infrastructure is more than just roads and bridges — it’s an essential driver of economic progress and long-term value creation. With stable cash flows, inflation protection and high barriers to entry, it remains a smart bet for investors seeking security and growth.
As infrastructure needs continue to evolve, investors who recognize its potential will be well-positioned to reap the benefits. Whether through direct investments, PPPs, or ESG-aligned projects, now is the time to consider infrastructure as a cornerstone of a future-proof investment portfolio.
Francis David “Frocks” M. Roque is the head of investments of Aboitiz InfraCapital, the infrastructure arm of the Aboitiz Group, where he oversees the origination, development and execution of various infrastructure investment opportunities. Aboitiz InfraCapital aims to build purpose-driven infrastructure that spurs economic growth and improves lives. For more information, visit www.aboitizinfracapital.com.