A $106 trillion challenge: How private investors can help build the infrastructure the world needs

Say the word “infrastructure” and roads, bridges, sewers and other concrete structures probably spring to mind.

That is all correct, but it falls well short of describing the 21st-century reality, which must also include things like optical fibre for data transmission, renewable power and technology for electric vehicles (EVs). And given the growing importance of artificial intelligence (AI), cloud services and automation, countries that fail to build a robust digital infrastructure will be poorly positioned to compete.

Whether it’s a sewer or a cellphone tower, however, every kind of infrastructure needs to be safe, reliable, affordable and adaptable. The latter is particularly important because infrastructure needs to continually evolve. Both public and private investment have a role to play in building the infrastructure of the future.

Beyond the fundamentals, scale presents another challenge. Recent McKinsey research shows that meeting the world’s infrastructure demand will require $106 trillion in investment by 2040 – not only to build, but for modernization, resilience and system integration.

The biggest single category of infrastructure demand will be transport and logistics, accounting for $36 trillion, followed by energy and power ($23 trillion) and digital ($19 trillion). Asia will account for about 65% of this projected expenditure, followed by the Americas (about 15%) and Europe (10%).

These numbers are eye-watering and the situation is complex because infrastructure needs can overlap. Data centres, for example, are necessary for the digital economy and they run on energy. EVs require charging stations (transportation), power (energy) and payment platforms (digital) to buy that power.

Or consider the connections between waste, agriculture and energy. Farm waste, such as livestock manure and food scraps, can be converted into renewable natural gas, which is then fed back into the grid to power on-site equipment. But that will only happen if the farm, the converter and the electricity system are coordinated.

Railroads are classic forms of infrastructure dating to the 19th century. The most advanced 21st century rail providers will integrate high-capacity fibre networks, edge data centers and 5G. They will not only seek to lower labour costs by optimizing crew planning, but also aim to simultaneously achieve greater reliability for customers through AI-enabled predictive maintenance.

To meet these needs, it is best for the private and public sectors to work together. One place to start is by repurposing portions of their existing infrastructure stock. In the US, the federal government owns about 28% of the country’s land and has recently taken steps to repurpose some of this acreage for data centre development.

The private sector has also stepped up. Assets under management in dedicated infrastructure funds have tripled since 2016, to $1.5 trillion. In addition, nearly half (46%) of private market investors surveyed by McKinsey in 2024 said they planned to increase infrastructure allocations, citing the sector's predictable cash flows and inflation protection.

But intentions don’t always turn into actions and, as business people know, past performance does not guarantee future results. In this regard, several trends – higher interest rates, longer exit timelines, tougher competition and rising labor costs – could depress investor enthusiasm.

To continue to find value, investors may have to change the way they assess opportunities. Many are looking to pockets of critical infrastructure, such as aerospace and defence. And they are going beyond traditional ecosystems into areas such as repurposing underutilized government or industrial facilities or developing dual-use infrastructure.

Finally, it is worth exploring how AI and other technologies can be deployed to improve margins and capital productivity. The latest wave of AI innovation is already showing results over the entire lifecycle of infrastructure assets, from AI-enabled construction scheduling compressing project timelines, to better predictive maintenance and more efficient procurement practices.

Will the world find the money and the commitment to build the infrastructure it needs?

That depends, in part, on investors rethinking what infrastructure is, being more creative and exploring new opportunities – even the complicated ones. Leaders who act decisively will position their companies for long-term competitiveness, while also helping to build up society for generations to come.