Why labor matters in infrastructure investing
The energy transition will require vast amounts of new infrastructure, and the workers to build it. Considering how those jobs are created can sit alongside the search for attractive returns and portfolio diversification.
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The energy transition will not be delivered by capital alone. It will be built by hundreds of thousands of skilled workers constructing the solar projects, wind farms and battery-storage facilities needed to meet rising US power demand.
Therefore, while investors typically focus on megawatts, investment flows and emission reductions, labor is a critical input – and should be a significant economic beneficiary of the transition.
Supply and demand
After more than a decade of relatively stagnant electricity consumption, US power demand is rising again, driven in large part by data centers, electrification and industrial growth. Meeting that demand will require substantial investment in generation, storage and supporting infrastructure, creating a significant pipeline of construction activity and associated employment across the country.
By way of example, electricity generation reached a record 4,430 terawatt hours in 2025, up 2.8% from the previous year. The US Energy Information Administration expects electricity use across the country to increase by another 1% in 2026 and 3% in 2027 and beyond, driven in large part by data centers.
US power demand is increasing
Source: Schroders Greencoat, EIA.gov and Bloomberg New Energy Finance, August 2025. Forward-looking views and forecasts may not materialize.
As we have discussed previously, clean energy assets such solar and wind farms are a key part of meeting this growth in power demand, as they can often be developed and constructed faster than large traditional energy plants. These projects can also be among the most cost competitive sources of electricity, even after accounting for the winding down of federal tax subsidies, and they benefit from involving no commodity price risk, allowing investors to project their operating cost base more reliably.
Beyond those operational advantages, another economic consideration is at play: building new clean energy generation also drives the creation of new jobs. In short, a great many people, including specialized construction workers, must be hired to construct this new generation.
For investors that apply labor-related objectives across their investment portfolios, this creates important opportunities and considerations – and is where labor-aware investing comes in.
Beyond cost: labor standards and long-term outcomes
At its simplest, labor-aware infrastructure investing means incorporating the treatment of workers into investment and contracting decisions.
In an infrastructure context, a Responsible Contractor Policy (RCP) reinforces accountability and specificity with regard to those decisions. One way in which this is accomplished is by contractors that are brought in to oversee new development or construction being assessed not simply on price, but on factors including experience, dependability, safety and environmental records, and compliance with labor and employment law.
More generally, RCPs cover areas ranging from minimum and prevailing wages and overtime requirements, to non-discrimination, labor relations and occupational safety.
At Schroders Greencoat, the adoption of an RCP guides our investment team to partner with responsible contractors who provide competitive, high-quality services, while paying fair wages and benefits, judged against comparable projects and local market conditions.
Source: Schroders Greencoat, 2026.
Crucially, applying high labor standards need not sit in opposition to financial discipline – or investment outcomes. Infrastructure projects are typically complicated undertakings. Delays, defects, change orders and disputes can rapidly turn an apparently cheap construction contract into an expensive one.
Schroders Greencoat’s RCP explicitly recognizes the importance of adhering to labor market priorities to create enduring value. High-quality construction supports value creation by capitalizing on specialist labor experience, reducing future operating costs and enhancing long-term asset performance and valuation.
Infrastructure provides a natural route
This approach has a particularly natural fit with infrastructure because of the way assets are funded and developed.
Unlike buying shares in an established listed company, investing directly in a new infrastructure project can give investors influence at a formative stage of the asset's life. Decisions around engineering, procurement, construction and operations all have to be made, and labor sits across many of them.
The opportunity can be particularly pronounced in energy transition infrastructure. Wind farms, solar installations and battery-storage facilities require significant construction activity before producing (or storing) their first unit of power.
While investor interest in the energy transition sector may vary over time, and is subject to a variety of drivers including economic activity and regulatory support, on a longer-term basis increased power generation is essential to meet market demand, which is expected to grow considerably over the next decade.
Identifying the most compelling opportunities
Given the scale of the build out to meet rising energy demand, the next question is where to invest to achieve the best outcomes, from both a financial and labor perspective. From our perspective as a dedicated energy transition investor, the most interesting opportunities across the market are often not the largest operating assets.
There is a clear funding gap in the market between development and construction, particularly among smaller developers without the balance sheet depth to finance increasingly capital-intensive projects. At the same time, construction risk has re-priced in response to higher interest rates, supply-chain disruption and greater policy uncertainty.
This creates a potentially attractive entry point towards the back end of development.
By investing when permitting is substantially complete and key contracts are in place, but before construction begins, investors can seek some of the return premium associated with development and construction – and directly support the associated new job creation – without assuming the full speculative risk of early-stage development.
There is another advantage. Entering before construction gives the investor greater ability to influence who actually builds the project.
We believe the most compelling opportunities can currently be found in US solar, battery storage and onshore wind, targeting entry near the end of development and before construction, allowing influence over the selection of construction contractors.
The RCP adds a framework around that selection. In markets with an established union presence, for example, relevant unions can be identified and notified of appropriate bid solicitations, allowing unionized, responsible contractors to submit proposals for consideration as part of the competitive process.
Where union representation is weaker, the framework calls for commercially reasonable efforts to obtain bids from at least three qualified responsible contractors. Crucially, this is not an instruction to hire regardless of cost. Commercial discretion and fiduciary responsibility remain central to contractor selection.
A diversification case
For labor-aware investors not already exposed to infrastructure, there is a broader portfolio argument, too. Infrastructure brings a variety of potential portfolio diversification benefits, from asset-backing to reliable, premium cashflows that behave differently from those generated by conventional equities and bonds.
Depending on the asset and jurisdiction, revenues may be contracted, regulated or explicitly linked to inflation. Renewable generation also provides exposure to risks – and therefore risk premia – that are differentiated compared to other real asset sectors such as transportation, logistics, waste and real estate.
Operational risks associated with energy transition assets, for example, are influenced by variables such as wind and solar resource, which have little connection to operational risks experienced by other real assets and are less exposed to commodity prices. Some energy transition assets even have a positive correlation to global energy prices, where there is merchant price exposure.
These distinctions can become particularly valuable when inflation surprises on the upside. Geopolitical fragmentation, energy security, supply-chain restructuring and rising electricity demand all point towards a world in which inflation may prove more volatile than during the decade following the global financial crisis.
Other real assets may not offer the ability to moderate inflation risk in every case; much depends on the asset and its contractual structure. But where revenues are linked to inflation, it can provide a useful source of resilience, while also bringing differentiated return drivers to a portfolio dominated by public markets.
Labor as an investment consideration
Investors should not need to choose between returns and labor standards. In infrastructure, the two can reinforce one another.
Good construction requires skilled workers; poor workmanship, safety failures and contractor disputes can destroy value. Because direct infrastructure investors can have meaningful influence over projects before and during construction, labor practices can become part of the same due-diligence process used to assess engineering, financing, counterparties and execution risk.
The energy transition will ultimately be measured in new generating capacity, more resilient electricity systems and lower emissions. But getting there will require enormous amounts of physical construction.
For investors financing that build-out, the opportunity is not simply to provide capital. It is to consider how the infrastructure is built, who builds it and whether doing so well can contribute to better long-term investment outcomes.
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