Meet Leo, a fictional urban resident living in a smart, sustainable city of the near future. His day begins not with a blaring alarm but with smart blinds rising gently to let in just enough sunlight to wake him without irritation. The calm is short-lived. The fridge delivers its usual reminder that there’s no oat milk left. “Add to shopping list?” it asks. A sigh follows.
As the sun climbs higher, the home--equipped with rooftop solar PV panels--starts generating electricity. Energy production is monitored in real time through a mobile app, enabling Leo to optimise usage, sell excess power back to the grid or earn credits via net metering. Heating and hot water needs are met efficiently through a district heating system powered by a centralised renewable energy plant.
Leo begins his commute by unplugging his electric vehicle (EV) from its overnight charging station. Thanks to smart-grid scheduling and battery storage, it’s fully charged and ready to roll--silently, of course. Traffic flows smoothly thanks to intelligent management systems that adapt to real-time conditions. No more shouting at red lights or suspecting that the GPS is plotting against him.
Leo’s story may be fictional, but it is already becoming reality in parts of Europe--and should increasingly become the norm as the continent advances its Green Deal. In the process, Leo interacts with diverse infrastructure systems: those often-invisible enablers quietly making life more comfortable.
Cities, civilisation and the infrastructure link
Infrastructures can be defined as the structures and facilities that enable life in society, shaping how citizens interact with each other and with their environment. More broadly, infrastructures act as vectors of civilisation and progress, playing a pivotal role in defining and realising the vision of the cities we aspire to inhabit--much like those imagined in Leo’s fictional world.
Even from an etymological perspective, the connection between “city” (from the Latin civis) and “civilisation” underscores the foundational role of urban life in the development of complex societies. What are cities, if not organised ecosystems of infrastructures? Consider the Romans: their engineering prowess was no accident but the backbone of a civilisation that endured for centuries.
Recognising the immense power embedded in infrastructure, now is the time to reflect on the vision we wish to shape for the decades ahead.
Bridging the infrastructure investment gap
The global infrastructure investment gap--the shortfall between current funding levels and what’s needed to support sustainable economic growth and meet social demands--presents both a pressing challenge and a compelling opportunity.
According to Allianz Research, the world must invest approximately $4.2trn annually--equivalent to 3.5% of global GDP--until 2035 to future-proof infrastructure. Total investment needs are estimated at $11.5trn over the next decade, with two-thirds required in emerging economies.
This gap spans traditional sectors such as water, electricity and transport, but also includes fast-evolving domains like digital infrastructure, the energy transition and climate resilience. To address this, investors and policymakers must focus on three interconnected pillars: developing new infrastructure, maintaining and modernising existing assets, and transforming systems to meet future demands.
Development: building the foundations of growth
In many regions--particularly emerging markets--basic infrastructure remains underdeveloped. Limited access to clean water, reliable electricity and efficient transport continues to constrain both economic potential and quality of life. Expanding grid connectivity and deploying off-grid solutions are critical to electrify underserved areas, especially in sub-Saharan Africa and South Asia.
Social infrastructure--including schools, hospitals and affordable housing--also plays a foundational role in building human capital. Financing these sectors increasingly relies on public-private partnerships (PPPs) and impact investing. In parallel, innovative technologies such as 3D printing, modular construction and green-blue infrastructure are gaining traction, offering promising ways to accelerate delivery while reducing costs in resource-constrained environments.
Maintenance: modernising and upscaling existing structures
In developed economies, ageing infrastructure poses growing reliability risks. Large-scale grid interruptions are increasingly frequent, underscoring the urgent need to modernise power systems. In Europe alone, the average age of electricity grids exceeds 40 years. Upgrading these networks with smart technologies and digital monitoring is critical to improve efficiency, resilience, and the capacity to accommodate decentralised energy sources.
Meeting these needs will require estimated annual investments of $110bn to $150bn in electricity networks and energy storage across Europe. Transport networks face similar challenges: maintenance backlogs in road and rail systems are causing inefficiencies and safety concerns. Lifecycle asset management and predictive maintenance offer innovative ways to optimise performance and costs.
Germany, for instance, faces extensive renovations of bridges and tunnels built in the 1960s and 1970s, with special funds such as the Sondervermögen being mobilised to accelerate upgrades--particularly in energy and transport. At the same time, regional integration efforts demand robust cross-border infrastructure in electricity, gas, and hydrogen. Projects like the European Hydrogen Backbone and grid interconnectors are becoming indispensable for energy security and market integration.
Transformation: enabling the future of infrastructure
Since the Industrial Revolution, energy generation has been dominated by combustion and centralised systems. Today, energy-related emissions account for roughly 75% of global CO2 emissions. Transitioning from this legacy model to a renewable-based, decentralised energy system is central to achieving global climate goals.
This transformation involves two complementary pathways: decarbonising electricity while increasing electrification of the energy mix, and decarbonising gas alongside liquid fuels.
Solar power is set to play a leading role in this shift. Its cost has fallen dramatically, and by the mid-2030s, it is projected to become one of the dominant sources of global electricity. According to the International Renewable Energy Agency, solar PV could account for up to a quarter of electricity generation by 2050. Yet to unlock its full potential, solar must be paired with robust energy storage and integrated with enabling technologies such as smart grids.
This synergy between solar and storage underpins the energy transition. The International Energy Agency estimates that global battery storage capacity must grow from under 200GW today to over 1TW by 2030, and nearly 5TW by 2050, to sustain renewable growth and maintain grid stability.
Power-to-X technologies will further expand possibilities, linking electricity supply to green hydrogen, synthetic fuels, heating, mobility solutions, and chemical feedstocks. Green hydrogen, in particular, is emerging as a viable solution for hard-to-abate sectors such as heavy industry, aviation and freight. In contexts where green power alone cannot meet industrial energy demands--such as steelmaking or waste-to-energy facilities--carbon capture and storage (CCS) is gaining traction as a complementary solution. Looking further ahead, fusion energy holds long-term promise for delivering clean, abundant power.
Digital infrastructure will also play a transformative role. Data centres, fibre networks and cloud computing will underpin everything from high-speed connectivity to artificial intelligence. Meanwhile, circular economy models, climate-resilient designs and cybersecurity-ready systems will help make infrastructures more adaptive to shocks and disruption.
Aligning capital with climate goals
Achieving this vision requires strategic alignment across multiple dimensions. With public budgets under pressure and traditional lenders retreating, private capital has emerged as a decisive force in tapping this blue ocean of opportunities. The surge in private infrastructure assets under management--from less than $25bn in 2005 to over $1.5trn in 2024--signals a profound shift in how we fund and build the future.
Yet capital alone is not enough. Investment strategies must be anchored in four guiding principles: affordability, security, sustainability and investability. Cross-sector collaboration is essential, bridging infrastructure and real estate, public and private stakeholders, and integrating emerging technologies such as Power-to-X, renewables, data centres and storage.
Now is the moment for institutional investors to lean in. A greater appetite for risk is needed to close the gap between venture capital and traditional infrastructure funding. The stakes are high: aligning capital with climate goals is not just a financial opportunity--it is a collective obligation.
The infrastructures we build today will define the resilience, equity and sustainability of tomorrow.
*Pedro Alonso-Lamberti is director of portfolio management, private markets at Allianz Global Investors. He will be speaking at the LPEA Insights Conference on 23 October.
An alternate version of this article first appeared in the private assets supplement to the October 2025 issue of Paperjam magazine, published on 24 September. The content is produced exclusively for the magazine. It is published on the site to contribute to the full Paperjam archive. Click this link to subscribe to the magazine.
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