The following article was published by Pensions & Investments on October 10, 2025 and is made available here with permission.

When it comes to the vital infrastructure on which our country’s economy, competitiveness and quality of life depend, America is barely getting a passing grade.

In fact, when the American Society of Civil Engineers (ASCE) released its 2025 infrastructure report card earlier this year, it awarded U.S. infrastructure an overall “C” grade. America’s aviation (think Newark), dams, energy, roads, schools and wastewater scraped by with a D-plus. Our stormwater and transit infrastructure received a D.

The good news is that these grades represent progress. For the first time since 1998, none of the 18 infrastructure categories the ASCE assesses were graded lower than a D-minus.

Let that sink in. Not failing counts as progress?

America must do better. Private capital can and should be part of the solution.

Fixing aging infrastructure shouldn’t be this hard for the world’s largest economy with ample private capital ready to invest. Focusing only on direct public spending is a major miss.

The One Big Beautiful Bill carves out funding to improve our airports, but its funding for infrastructure is limited. It makes it clear in fact that public spending will be insufficient to improve our infrastructure anywhere above just a passing grade.

Private sector investment in our infrastructure is an opportunity for that rarest of social outcomes: a quadruple win.

Consumers get better service quality. Politicians can claim credit for more jobs and an economic lift for the districts they serve. Government balance sheets can be markedly improved. And investors gain the potential for attractive returns and predictable cash flows in a market that increasingly values stable and growing income with diversification.

Yet signs of the poor state of the country’s infrastructure are everywhere. System outages and near-misses across the country, from Newark to Denver, plague air travel. Public transport is too often an exercise in frustration. Our local schools are run down. One bridge collapse is too many, let alone the fact that 56% of the country’s 623,000 bridges are considered to be in fair or poor condition.

That doesn’t account for future demand drivers. Artificial intelligence, precision manufacturing, cryptocurrency and the electrification of the economy are driving unprecedented electricity demand. More severe and frequent damage from intense weather tests the resiliency of our infrastructure. Bringing manufacturing back onshore demands more investment.

The ASCE estimates the U.S. needs to invest another $3.7 trillion to close the infrastructure funding gap. That is assuming current funding remains intact.

Yet the public sector doesn’t appear to present a viable solution. Government debt balances are ballooning (and the bond market has already sounded the alarm). Federal spending and government efficiency are under the microscope. The Trump administration’s efforts to improve the nation’s infrastructure in his first term never gained traction, and the current administration has set an agenda focused on spending cuts.

The public sector hardly has a strong track record on such projects to begin with—from Boston’s Big Dig, which was nearly 10 years late and five times over budget, to more recent efforts to create high-speed rail in California, which are now in doubt given a projected cost that has climbed from around $30 billion to over $100 billion.

By contrast, private sector investors can provide much of the capital needed, if only they are given the opportunity and pathway to deploy it. Private investment is efficient and accountable, and it does not increase public debt. In fact, money raised can be put to work improving public sector projects or lowering our country’s deficits.

Asset recycling, where government-owned fixed assets are sold or leased to private owners—with the proceeds used to improve other public infrastructure assets—is a proven, viable option for governments to pursue.

The U.S. can follow successful models used around the world, where airports, bridges and ports are being upgraded with private capital.

Tokyo Metro’s 2024 initial public offering (IPO) raised $2.3 billion for subway line extensions and transit-oriented developments, which enhance urban mobility and property values along the commuting lines. The firm’s shares are up more than 40% since that IPO.

Similarly, a 2024 IPO of the Athens International Airport is funding a $1.4 billion investment that will enable the airport to increase its capacity by nearly 20 million passengers.

We believe passenger railroads could be one example of the asset recycling opportunity in America. Amtrak holds a de facto monopoly on U.S. train travel, but it lives off government subsidies and loses money on most of its lines. An exception is the heavily trafficked and profitable Northeast Corridor, which could be monetized through an IPO, with the proceeds reinvested to improve service quality and efficiency across Amtrak’s other service lines.

What’s needed, however, is a push from the federal government to bring transaction and ownership structures for infrastructure into the American mainstream. Before infrastructure investors can deploy capital to fix America’s water system or make transportation infrastructure safer and more reliable, the government must create pathways for putting private money to work.

The real estate investment trust (REIT) structure, which has a market capitalization of more than $1 trillion, could be a model.

For example, data centers, which are essential to meeting the world’s computing needs, show that private capital can rise to the challenge. McKinsey estimates that global demand for data center capacity will nearly triple by 2030. AI workloads will drive 70% of that demand. McKinsey’s mid-range scenario is that $5.2 trillion will be invested by energy companies, real estate developers and data center operators, among other organizations, to meet that demand. Both listed and private markets will supply the capital.

To accelerate additional private capital investment across infrastructure, the government should remove excessive red tape and ease political gridlock, which have made investments a glacial process. Establishing clear, uniform guidelines for public and private partnerships across states and federal agencies would eliminate bureaucratic inconsistencies that deter private sector participation.

The cost of doing nothing could be disastrous. A public reckoning for the current spending shortfall is inevitable, and it may come sooner than we think.