Social Infrastructure: A dual return asset class
Social infrastructure projects, such as hospitals, schools and community centres, may be attractive assets for institutional investors seeking to make both a market rate of return and an impact return, which is the measurable improvement on environmental and community related aspects. However, this dual return focus requires managing the social and environmental impact of an in- vestment while also managing for market-rate financial returns.
ince the 2008 financial crisis and its aftermath, governments across Europe have been struggling to meet the growing demand for the building blocks of strong communities – affordable housing, schools and libraries, and hospitals and nursing homes. Government cutbacks opened an investment gap in social infrastructure estimated at €150 billion a year, according to the EIB. Institutional investors are stepping into the breach.
Between 2009 and 2016, private investment in social infrastructure grew to €247 billion, according to Preqin data. Of the 1,264 deals completed globally, 71 per cent were in Europe – the top region for this growing asset class.
These assets are particularly attractive to long-term investors because they can offer a dual return: a market rate financial return that typically comes from long-term inflation-linked lease contracts, and an impact return, which is the measurable improvement in the quality of life of communities resulting from investments that upgrade a school or a hospital, for example, or increase the supply of social housing.
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