Peter Adriaens, PhD PE BCEEM NAE
Director, Center for Smart Infrastructure Finance
Professor of Engineering, Finance and Entrepreneurship
The University of Michigan, Ann Arbor
A ‘Moneyball’ Approach to Closing the $5.4 Trillion Infrastructure Finance Gap:
InfraTech, Data, and Financial Innovation
The US is underinvesting in infrastructure, resulting in macro-economic impacts for cities and regions. The American Society for Civil Engineers estimates that the finance gap will be $4.5trn by 2025, resulting in a loss of 2.5 M. jobs. Deferred maintenance and inadequate funding models have resulted in demographic inequalities of access to quality infrastructure, further exacerbating economic disparities. Globally, $5.4 trn. of capital earmarked for infrastructure sits on the sidelines annually because of mis-matched business and risk-return models. According to a recent OECD study, less than 1% of pension funds are invested in infrastructure as an asset class. How can we unlock this capital? We argue the answer lies in data.
The definition of infrastructure in the digital age is changing, asset ownership is becoming blurred, and new data-driven operating and financial models are emerging. Whether transportation infrastructure such as roads and bridges, or water, energy and waste-to-energy systems, intelligent infrastructure is enabled by IoT and communications. By “twinning” infrastructure into digital assets, informational inefficiencies can be uncovered that change how we design, value, price and invest in infrastructure assets. So-called ‘infratech’ models have been piloted in private financing of infrastructure, but they are trickling down to public-private partnerships and public finance. Cities and States can harness the power of information to identify new cash flows and equity value from improved operations or new derivative products and services. We are referring to this as a Moneyball approach to link data to hidden value and investment opportunities. Tomorrow’s digitized infrastructure is resulting in new operational models that can be financed using performance bonds, securitized products, swaps and options for risk transfer and digital financing models including blockchain tokens. The value of information derived from the asset will outstrip that of the physical asset itself, as infrastructure is going ‘tech’, impacting their design. Data-driven financing models, privacy and cybersecurity considerations will be discussed based on real world pilots.
Dr. Peter Adriaens is Professor of Environmental Engineering, Finance and Entrepreneurship at the University of Michigan, with appointments in Civil and Environmental Engineering, Ross School of Business and the School for Environment and Sustainability. He directs the Center and Master of Engineering program in InfraTech Finance, focused on data platforms and efficient financing mechanisms for public and private infrastructure and asset management. The Center is a cofounder of the University’s FinTech Collaboratory with the Ross School of Business FinTech Initiative and the Center on Finance, Law and Policy in the Ford School for Public Policy.
He was President of the Association of Environmental Science and Engineering Professors, is a member of the American Academy of Environmental Engineering, and of the Belgian Royal Academy of Applied Sciences and the Arts. Previously, he was Distinguished Professor of Entrepreneurship at Sichuan University (China) and at the Research Institute of the Finnish Economy (Helsinki, Finland) focused on investment and financing models for green economic transitioning. He serves as investment advisor to the Great Lakes Impact Investment Platform under auspices of the Council of Great Lakes Governors.
His research and teaching focus on data-driven (digital) business and finance models for infrastructure, blockchain applications for smart cities infrastructure, and AI/ML models for water risk pricing in securities. He is co-founder of Equarius® Risk Analytics, a financial technology firm focused on pricing and indexing water risk using waterBeta® data platforms for index providers and factor investors.