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How is the 'infrastructure' asset class defined?

Answer

There are several ways to define what constitutes or is considered 'infrastructure'. The OECD proposes a broad definition encompassing the 'system of public works in a country, state or region, including roads, utility lines and public buildings'. However, this can be hard to implement.

Our TICCS® classification system improves upon this by suggesting a number fundamental economic criteria have to be present for a company and its assets to be meaningfully designated as infrastructure:

  • Single use investments

  • Sunk or irreversible capital investment

  • Large size requiring a long repayment period

  • Inflexible total cost structure

  • Infrastructure as a service

  • Not a store of value

Assets and companies that can be categorised under TICCS® are expected to meet these fundamental criteria. All of them stem from the long-term and durable nature of infrastructure assets and the companies that hold them and the commitment of their owners to only recoup the value of their investment over a long time period.

For more information see the TICCS® documentation.


Things to consider

The choice of Unit of Account is an important step in the IFRS 13 fair value framework. By focusing on actual registered companies (or corporate entities) we ensure that each constituent of the universe is investable. The same applies for the debt instruments found on the balance sheet of each such company.


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