Not so long ago, infrastructure referred to the tangible—think roads, rail, ports and bridges. These days, while physical assets are still part of a well-functioning infrastructure, additional systems are being integrated.
According to a McKinsey report, “fiber-optic and 5G networks, EV-charging stations, data centers, and smart grids now sit alongside traditional concrete and steel structures. As a result, “This fundamental redefinition calls for a substantial mindset shift among stakeholders, including governments, investors and industry operators,” the report said.
By the Numbers
McKinsey suggested that a cumulative $106 trillion in investments will be needed through 2040 to ensure support in the following areas:
- $36 trillion (transportation and logistics)
- $23 trillion (energy and power)
- $19 trillion (digital)
- $16 trillion (social)
- $6 trillion (waste and water)
- $5 trillion (agriculture)
- $2 trillion (defense)
Another infrastructure mindset shift? None of the above is isolated from the other. “For instance, connecting EV corridors requires coordination among power utilities, highway authorities and payment platforms for charging stations,” the report explained.
The Role of Private Capital
In the past, infrastructure capital flows were handled by federal, state and municipal governments. However, private investors are bringing their liquidity to the table. McKinsey experts said that private infrastructure assets under management increased from $500 billion in 2016 to $1.5 trillion in 2024.
“Investors are committing large amounts of capital to single flagship funds, and the mix of verticals seeing investments is changing to reflect the new definition of infrastructure,” the report said. Additionally, governments are developing frameworks aligned with investor risk/return mandates in an effort to boost liquidity from private sources.
The Labor Challenges
While more money might be directed toward the new infrastructure requirements, labor, unfortunately, is not. “The US construction industry had more than 400,000 job openings across different skills in 2023 and early 2024,” the report said. “The renewables sector alone must add about 2.8 million jobs by 2030.”
In an attempt to address the shortages, operators and investors are working with remote operation technologies, modular methods, and automation.
The New Definition and Its Importance
The McKinsey experts explained that a new mindset and approach toward infrastructure is essential because well-functioning systems support rapid urbanization, growing populations and social well-being.
Additionally, stakeholders involved with funding, designing and building tangible and intangible infrastructure assets “should move beyond silos and embrace cross-sector collaboration to secure the foundations of economic growth,” the report said. “As infrastructure sectors evolve, their intersections are becoming just as important as their individual trajectories.”
