Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 622

An investing theme you can bet on for the next 30 years

To most investors, infrastructure is viewed as a defensive asset class with characteristics that support long-term, visible and resilient earning streams. However, it offers much more than a defensive allocation. What many investors do not appreciate is the huge and growing investment need underpinning the asset class. This growth makes infrastructure a really exciting opportunity.

Infrastructure may well be the best fundamental growth thematic for the next twenty to thirty years, if not longer.

There are five integrated dynamics driving growth in the infrastructure space that are long term, significant, and completely immune to short-term economic or geopolitical events. That is, they must happen regardless of who is running America, regardless of the interest rate trajectory around the world, and regardless of equity market noise.

Some of these themes may seem obvious, and even boring. But, put simply, if we don’t support investment in them, then society will go backwards. Socially, economically and environmentally.

1. Developed market replacement spend

A significant portion of infrastructure in the developed world is in dire need of replacement. It is old and inefficient, and failures to upgrade it is having social and economic consequences in terms of health, safety and efficiency. For example, in the UK, over 50% of London's watermains are over 100 years old.

In the US, the average age of a bridge is over 45 years old and 75,000 are past their ‘useful life’, including the recently collapsed Baltimore Bridge. Also in the US, 80% of water pipes are over 30 years old and some are over 100 years old – there are still towns being serviced by 100-year-old wooden pipes.

The market replacement of all these ‘essential services’ is a multi-decade investment thematic, and Australia is not immune. For example, the train from Sydney to Newcastle is currently slower than it was in 1929, and the distance is shorter.

2. Population growth

The global population currently sits at just over 8 billion, while some of the infrastructure we are still using today was built to service less than a quarter of that. The world's population is expected to peak at 10.4 billion by around 2084, underpinning yet more spend to replace the old while investing to support future generations.

As the developed world gets older, the majority of the growth will come from the emerging world, where 85% of the global population currently reside and where demographic trends are very supportive of economic evolution and infrastructure investment.

3. The emergence of the middle class in developing economies

The emergence of the middle class in developing economies offers huge opportunity for the sector, as infrastructure is both a driver and a first beneficiary of middle-class evolution.

It should come as no surprise that people everywhere want a better life and, given the potential size of the middle class in emerging markets, this will have significant implications for infrastructure needs both in country and globally (e.g. airports). Let's look at it from an individual’s perspective.

As personal wealth increases, consumption patterns inevitably change. This starts with a desire for three meals a day and moves to a demand for basic essential services – like clean water, indoor plumbing, gas for cooking/heating, and power – that all require infrastructure.

With power comes demand for a fridge or a TV, which increases the usage as well as the need for port capacity and logistics chains. Over time, this progresses to include services that support efficiency and a better quality of life, such as travel, with an increasing demand for quality roads (to drive that new scooter and then car on) and airports (to expand horizons). 

Infrastructure is the clear and early winner of this growth in the middle class, as it is needed to support the evolution outlined above.

4. Energy transition and decarbonisation

The world has accepted the challenge of working towards a cleaner, sustainable future. While the speed of ultimate decarbonisation remains unclear, there appears to be a real opportunity for multi-decade investment in infrastructure as every country moves towards a cleaner environment.

Energy transition and decarbonisation of the power sector is an obvious thematic and will have the greatest impact on countries looking for Net Zero. However, it is not just the energy sector. Other forms of infrastructure - namely transportation and technology - also have a key role to play.

There will be no Net Zero without significant new infrastructure spend. Importantly, there will also be no Net Zero if the emerging world is not involved in the goal, with over 50% of investment needs in these economies and growing.

5. Technology

The rapid growth in AI and particularly GenAI has resulted in a seismic shift in the outlook for the electricity industry.

Data centres consume huge amounts of electricity and for the technology to be a success, it is essential that it is powered by secure base load, green supply and supported by continuous data bandwidth. Incredible amounts of infrastructure investment are required across communication towers, green generation and most importantly in networks to support the load growth.

Not only are these five themes important individually, but they are also interrelated in ways that can cause disaster if they are not managed correctly. 

A prime example is the collapse of the Baltimore bridge last year. The bridge collapsed because it was past its useful life or, in other words, because it was old and needed to be replaced. But the ship hit the bridge because it was under automation, and it briefly lost power. That single incident encompasses the three themes of replacement, technology and the energy transition.

Infrastructure also offers truly global exposure with assets across developed Asia, Europe and North America as well as emerging markets. This allows investors to capitalise on in-country economic cycles and gain exposure to domestic demand and investment thematics as they evolve.

With active management, an infrastructure portfolio can be positioned to take advantage of the long-term structural opportunity set discussed above, as well as whatever cyclical events the future throws at us whether they be economic, political or environmental. As long as people need transport, power and technology, I can think of no more compelling or enduring global investment thematic for the coming 30 years.

Sarah Shaw is CIO and global portfolio manager at 4D Infrastructure. This article provides general information only and does not consider the circumstances of any individual.

 

RELATED ARTICLES

The quiet asset class delivering structural growth

US trip reveals inflection point for $6 billion global industry

Buying miners for a new regime

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Latest Updates

Economy

The ‘priced out generation’ and what they should do about it

A fiery interview on housing exposed deep generational divides, sparking youth outrage and political backlash. As homeownership drifts out of reach, young Australians face a choice: fight the system - or redefine success.

Taxation

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

Superannuation

Meg on SMSFs: Ageing and its financial challenges

Ageing SMSF members can face issues funding their pension income as cash reserves dwindle. Potential solutions include involving adult children in contributions to secure future financial stability.

Economy

US earnings season was almost too good to be true

The second quarter US earnings season has wrapped up, with a record 82% of S&P 500 firms beating earnings estimates. As tailwinds fade, Q3 may reveal whether AI momentum can offset rising economic headwinds. 

Gold

Does gold still deserve a place in a diversified portfolio?

9,000 years and no devaluations later, gold is the world’s most enduring store of value. It remains attractive as the value of several paper currencies, including the US dollar, are threatened by deficits and rising debt.

Shares

Checking in on the equity market's silent engine

Consumer spending directly impacts corporate earnings, sector performance and market sentiment. The latest data from different economies uncover risks and pockets of opportunity for investors.

Fixed interest

6 key themes driving bond markets

The Fed could soon be prompted to join other central banks in cutting interest rates. This would have ripple effects across global fixed income markets and provide an especially attractive backdrop for emerging market bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.