In my 2020 blog series on the impacts of COVID-19 on government sub-sectors, I said investing in infrastructure was a great way to revitalize economies. I also observed that governments need to invest in the right things – including big strategic projects that will help transform the economy in the longer term.

One year on, I’m encouraged to see how many governments are prioritizing infrastructure as a vehicle for building back better. Australia and the UK have published ambitious national infrastructure strategies, the latter of which includes establishing a new infrastructure bank. Greening infrastructure is a key pillar of the national recovery and resilience plans of EU member states. Meanwhile, the US Congress continues to negotiate a US$1t package covering everything from upgrading roads, bridges and transport to closing the digital divide.

I’m encouraged to see how many governments are prioritizing infrastructure as a vehicle for building back better.

The scope for private investment is bigger than ever, too. According to financial information provider Preqin, there’s now more than US$300b in unspent private capital (“dry powder”) for infrastructure. That’s more than twice as much as in 2016.

All of this provides much needed capital to narrow the infrastructure gap, currently estimated to reach US$15t by 2040. But with a long list of priorities, governments must plan and spend wisely. How?

Yesterday’s infrastructure won’t withstand tomorrow’s shocks and stresses

Let’s start by looking at what not to do: invest in rebuilding the infrastructure of yesterday. Here’s why.

First, catastrophic floods in northern Europe, China and the US, and devastating wildfires in Russia, Turkey and Australia, have exposed the weaknesses of “deferring maintenance.” Aging roads and buildings were flooded, bridges collapsed and electric grids failed. According to a recent UN climate report, these challenges will only intensify as extreme weather becomes more common in the face of a warming planet.

Second, most of the existing roads, bridges and waterways in mature economies have large environmental footprints. Older infrastructure is also more likely to pose health risks, from lead pipes to poor sanitation.

Finally, as digital technologies have spread, cyber attacks have increased on critical infrastructure that isn’t equipped to withstand them, such as power, water and transportation.

These examples make a clear case for planning and investing in infrastructure that’s more sustainable, future-oriented and smarter. As Julieanne Alroe, Chair of Infrastructure Australia, reminds us: “Tomorrow’s infrastructure is likely to look very different to today’s, and the way infrastructure is planned needs to embrace this uncertainty.”

Balancing nature and new technologies can help future-proof infrastructure and the economy

So, what might this more sustainable, future-oriented and smarter infrastructure look like? Well, it certainly won’t only be concrete and steel. In green infrastructure, nature integrates with advances in scientific knowledge and technology to transform road designs, manage wastewater and improve energy efficiency. Take roadside green spaces, which can allow stormwater to “percolate” instead of flooding city streets and overflowing sewage systems, for example.  

Digital technologies will also play a huge role in supporting more sustainable infrastructure. 5G will provide the smarter, faster connections we need to make the shift to electric vehicles, for example, while digital technologies will make sure the charging systems and software are “smart.” The economic and environmental gains will be huge: according to recent EY research, the market for electric vehicles will be worth an estimated US$72b in the US and US$210b in Europe by 2030. In the US, the transition will also create around 1.4 million new jobs by 2040 and save an estimated US$113b in environmental impacts by 2050.

Digital technologies will also play a huge role in supporting more sustainable infrastructure.

The benefits don’t end there. The rollout of 5G technologies and better IoT sensors will allow governments to better predict and plan when their public infrastructure assets will need maintaining. Enterprise asset management technologies and digital twins will also help them determine the resilience of their existing public infrastructure in a range of future scenarios.

Delivering the infrastructure of tomorrow means making shifts in mindset and management

I have three suggestions for governments looking to achieve these kinds of benefits:

1. Take advantage of new tools to promote long-term planning across projects. To deliver better value for money and society, public investments must shift from a project-to-project mentality to a more long-term planning approach aimed at solving systemic challenges. Recent innovations such as “Smart Scale” Virginia can help planners set up formal and more open processes to determine which projects get funding. They can then make sure those projects link to their medium- and long-term plans.
2. Place local needs at the center. Many of our most impoverished communities also have the poorest-quality, least well-maintained infrastructure. They’re also vulnerable to flooding. Governments must understand these historic inequities and proactively use infrastructure to build more inclusive city and regional economies. For example, the Australian Infrastructure Plan engaged more than 5,500 community members, then aligned infrastructure to meet local needs.
3.  Collaborate with other governments and the private sector. A recent IMF study found that “If G20 countries act together [on infrastructure], they can achieve two-thirds more at the same cost than if each country acts alone.” Infrastructure initiatives such as the Blue Dot Network, Build Back Better World and the European Commission’s new Global Gateway strategy are a step in the right direction. But these initiatives will only be effective if governments dedicate people and funding to delivering them across borders.

Finally, working closely with the private sector will be vital. In the case of electric vehicle infrastructure, for example, governments will need to collaborate with car manufacturers, utility companies and software developers.

Like anything worth having, of course, making these changes won’t come easy. But the rewards of better quality, more sustainable infrastructure will benefit us all,

If you’re interested in reading more about how governments can rebuild after COVID-19, look out for my forthcoming blog series on the lessons they can learn from historical crises.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.