6/30/2011 10:05:19 AM

AFL-CIO Joins Pensions in Commitment to Infrastructure Development, Job Creation

The AFL-CIO has announced plans to work with pension fund managers to ensure that at least $10 billion in union pension money is made available to fund infrastructure projects within the next five years.

(June 30, 2011) -- The AFL-CIO has said it will join investors and businesses in a $10 billion initiative during the next five years to invest in infrastructure projects that will create jobs.

As the largest US labor federation, the AFL-CIO will work with financial institutions, pension funds, and money managers to create the capital needed to finance a variety of construction projects, including roads, bridges, and commercial buildings. A statement from the union revealed that it pledged at least $20 million to retrofit buildings over the next 12 months.

The US labor group said the pledge to raise millions of dollars for construction investment is a reaction to the lack of financing from banks. In order to generate at much as $10 billion in new funding, AFL-CIO will work with Deutsche Bank AG (DBK), Johnson Controls Inc. (JCI) and other financial entities with a goal of attracting investments from pension funds and money managers, AFL-CIO officials told aiCIO.

Advertisement

AFL-CIO President Richard Trumka said in a statement: "We at the AFL-CIO believe that together, with our partners in business and government, we can profitably invest significant resources to make America more competitive and energy-efficient."

American Federation of Teachers President Randi Weingarten and Building and Construction Trades President Mark Ayers, who has been leading a working group of public sector unions focused on infrastructure investment, said: "We need to find new and smart ideas to both create jobs and rebuild our country's infrastructure. Investing public pension funds, when done prudently, may be an avenue to do just that. All of us need to be engaged in forming partnerships that will create thousands of new jobs, revitalize our communities and make our country more competitive."

Pension funds and other institutional investors sitting on large reserves of cash have a tremendous influence over the pace of infrastructure development. With the burgeoning popularity of infrastructure investment, an April study by Deloitte has affirmed that the sector has gained sufficient influence to be seen as a separate and distinct asset class within the alternatives space. More specifically, according to research by the advisory firm, infrastructure fund managers are focusing their efforts on roads, rail, airports and ports, regulated gas, electricity and water utility assets.

A recent study by Preqin has provided further evidence supporting the uptick in infrastructure investment, particularly in Europe. Europe is leading the growth in cleantech unlisted infrastructure with public pension funds ranking as the most prominent investors, the firm showed. "It is unsurprising that the industry is particularly advanced in Europe; all governments are bound by the 20:20:20 agreement and are offering strong incentives for development of clean technology and renewable energy solutions," Elliot Bradbrook, Manager of Infrastructure Data, said in a statement, referring to the European Union's overall goal of reducing greenhouse gas emissions and energy use by 2020.

To contact the aiCIO editor of this story: Paula Vasan at pvasan@assetinternational.com; 646-308-2742