With the infrastructure boom set to fuel global economic growth over the next decade, the construction industry must address the mounting pressures associated with climate change and the race to net zero greenhouse gas emissions (net zero), according to a report published today by Marsh and Guy Carpenter.
The report, Future of Construction: A Global Forecast for Construction to 2030, written with Oxford Economics, a global leader in economic forecasting and analysis, provides a view on the future of construction as the industry recovers from the unprecedented effects of COVID-19 and the key drivers shaping its future over the next decade.
According to the report, global construction output is expected to grow by 6.6 per cent in 2021 and by 42 per cent by 2030, driven largely by government stimuli and the demand for residential construction. As the sector grows, however, so too does the risk of greater pollution and waste, the report warns. Construction and the wider built environment currently accounts for around 40 per cent of the world’s global greenhouse gas emissions.
Climate change and the race to net zero are arguably the greatest challenges that face the construction industry, according to the report. The need to radically reduce the amount of carbon embedded in new construction will drive the growth of a deconstruction industry that reuses huge existing urban stockpiles of construction materials, the report predicts.
The reports states that in 2020, environmental, social, and governance (ESG)-related capital for infrastructure grew 28 per cent, which was largely due to a flow of fundraising into sustainability-related strategies. Given that significant equity is usually allocated to infrastructure by major construction companies and developers using their own corporate balance sheets, opportunities exist for those companies that develop new technologies, designs, and processes.
Richard Gurney, Global Head of Construction, Marsh Specialty, said climate change and the ESG agenda were among the biggest challenges the global construction industry faces over the next decade.
“These forces are changing risk profiles for the sector. Organisations must adapt in order to harness the sector’s massive potential for growth while playing a pivotal role in the advancement of economies and communities around the world,” Mr Gurney said.
Simon Liley, Co-Head, Global Engineering, Guy Carpenter, said the construction and engineering industry was entering a period of exciting opportunity but also one that will require new ways of approaching risk by the insurance and reinsurance sectors.
“These dynamics call for effective knowledge sharing from industry innovators at one end all the way through to reinsurance actuaries at the other. Understanding the shifting profile of exposure, technology, and sources of capital will be important to enable insurers and reinsurers to establish underwriting platforms and offer products that meet the construction industry’s changing needs.”
For Australia, the report predicts that permanent inward immigration will support construction demand.
While most developed nations will see a plateau in the growth of working age populations, Australia’s working age population is expected to grow at an average of close to one per cent per annum to 2030, which will help drive the need for workplace construction. A higher demand is expected for industrial and logistics space to support growth in online retailing and manufacturing.
With the infrastructure pipelines a focus of government acceleration in stimulus, Australia is also well positioned to accelerate infrastructure development amongst the top 10 global construction markets. A significant pipeline of infrastructure in Australia will also see growth averaging 3.4 per cent per annum over the period to 2030 – rivalling growth in infrastructure construction in China averaging 3.8 per cent per annum over the same period.
According to the report’s analysis, Australia remains a successful PPP market. Australian governments remain firmly committed to the use of private financing for public infrastructure.
Australia is also among the best placed economies out of the global Top 10 construction markets to utilise additional public financing to support infrastructure development.
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