Measuring the Long-Term Impact of Canada’s Infrastructure Ecosystem
Author: David Booth, MBA '22
The 2022 GLOBE capstone course was an immersive culminating experience that challenged Ivey MBA students to think critically beyond the scope of single business-oriented solutions and develop actionable solutions as leaders in their local and global communities. As we progressed through the course, we gained a deeper understanding of how the wellbeing of citizens, the productivity of firms, and the preservation of the environment are all intertwined with the competitiveness and sustainability of cities and communities. Ensuring regional vitality, in turn, requires investments in “smart” infrastructure. In the recent years the Canadian Infrastructure Bank (CIB), a federal crown corporation, has become an integral player in the Canadian infrastructure ecosystem ensuring that long-term opportunistic infrastructure projects have the necessary capital to proceed. As part of our MBA capstone speaker series, Steven Robins, Head of Strategy at the CIB and Ivey alumnus, spoke to our MBA class, highlighting its priority areas for investments, its strategy and approach to financing, and broader implications of the development of smart infrastructure for Canadian cities and regional economies.
An Innovative Capital Partner
The public and private sector often come together through P3s (Public-Private Partnerships) to evaluate and execute mutually beneficial infrastructure projects. Steven, however, notes that infrastructure is a unique asset class in the sense that it requires a significant upfront capital expenditure and must be fully built before it returns a single dollar or results in societal benefit. Further, as the cash flows from infrastructure investments are often modest (but stable), the benefits of these projects are reaped over long-term horizons. Uncertainties associated with infrastructure investments can have significant negative impacts on the project and result in delayed or cancelled projects. CIB acts as an innovative capital partner to finance and de-leverage the risk associated with critical infrastructure investments so that more projects can be deemed viable, built faster, and benefits can flow more efficiently to Canadians. Further, Steven informed that CIB primarily focuses on financing projects that have measurable economic and social impacts in five primary sectors—public transit, clean power, green infrastructure, broadband, and trade & transportation projects.
Combining Financial Returns and Social Impact
It was very interesting to hear how CIB uses robust, measurable criteria, and scorecard to evaluate the impact of its infrastructure financing. Steven explained that the CIB looks to weigh financial return with societal impact such as reduction in greenhouse gas emissions, increased public transportation ridership, and job & economic growth. Steven further elaborated that as the CIB acts as an impact investor in the Canadian economy where riskier infrastructure investments generally require a higher potential return of residual societal benefits relative to their financial return. This provided a great perspective as the class continued to engage in discussion around using and analyzing data to more accurately attribute and cumulatively measure the impact of CIB-backed infrastructure projects. As strategic deployment of capital from the CIB continues to occur in the Canadian economy, measuring the long-term effects of its influence will be critical as benefits of multiple infrastructure projects will be compounded over time, which is where the development of smart infrastructure becomes increasingly important.
Looking Beyond New Technologies
Steven also shared his perspective on “smart infrastructure”. Traditionally, society perceives smart infrastructure as the implementation and utilization of technology in infrastructure projects. The reality is that only 20%-25% of infrastructure costs are driven by technology systems, leaving the remaining costs to be derived from concrete, aggregates, steel, and earthworks. In this, we should challenge the status quo by evaluating smart infrastructure not based on the extent to which technology is involved in the project but whether it is more innovative in either its design or how it is built. Steven provided a very insightful example of a subway project he was a part of to demonstrate the power of systems thinking in developing smart infrastructure. By analyzing data and leveraging technology to understand the capacity and utilization of individual subway trains, it was determined that the length of each individual train could be shortened while more frequent trips and less delays could adequately address rider demand. By shortening the train, the platform size requirement is also reduced which further reduces the requirement of concrete, steel, dump trucks, and other costs while also reducing environmental impacts. This example was further extrapolated across other capital projects and business activities to encourage emerging leaders to contemplate long-term impacts of innovative decision making.
Our interaction with Steven enabled us to better understand the economic challenges around long-term infrastructure projects and reminded us to think beyond the immediate financial impact but rather the societal impact of our decisions as leaders. As an individual pursuing a career in finance, I believe the concept of impact investing is becoming increasingly important and throughout the Ivey MBA program I enjoyed thoughtfully ideating financially viable solutions with long-term, positive impacts on our local and international communities. The GLOBE course also empowered the Ivey MBA 2022s to apply theories and concepts developed throughout the MBA program to emerging global issues and challenged us to play an active role in the sustainable vision of Canada’s future.
The LNC is grateful to the Canada Life Research Fund for supporting this work.