Infrastructure: built for yesterday, needed for tomorrow

Describing infrastructure as boring was a compliment. A building used to have a relatively straightforward job: keep the weather out and the people inside reasonably comfortable. Roads moved traffic, power systems supplied electricity and factories made things. Once infrastructure had been built, the task was largely to maintain it until it needed replacing.

Sure, politicians like to throw themselves behind a flashy, expensive project that raises the profile of their country (example: the HS2 railway in the UK), but what ordinary people need is reliable systems that are ticking along in the background, making everyday life efficient and manageable for the entire population. 

Still, the reality is that today we need more from our buildings and infrastructure.

Buildings are now expected to cut emissions, manage energy demand, protect people from heat and pollution, support health and even help balance the electricity grid. Transport, water and energy networks must withstand conditions they weren’t designed for. Industrial systems are expected to become cleaner, more efficient and more resilient– often all at the same time.

Considering that half the buildings that will be standing by 2050 already exist, retrofitting them is the only way to get us to net zero. Meanwhile, cities must manage the relationships among all these systems while remaining liveable, competitive and capable of adapting to a changing climate.

In the final episode of our latest arc, hosts Felicia and Giulia explore one of the great challenges of our time: adapting decades-old infrastructure to the requirements of the contemporary era. More often than not, this requires investment in invisible tools, such as sensors and insulation, that most people won’t notice, but will benefit massively from.

Rodrigo Fernandes of Bentley Systems introduced us to digital twins and the possibility of understanding cities as interconnected systems. Katie McGinty of Johnson Controls described buildings evolving from inert brick and mortar into active participants in energy, resilience and business performance. Sophie Graham of IFS explored how AI and operational intelligence are changing the way industrial assets are managed. And, it turns out, sensors, insulation, and waste heat recovery aren’t boring after all. 

We explore what happens when infrastructure stops being passive and starts operating as part of a dynamic system. Can intelligence help ageing assets become more adaptable and resilient? Should we invest less in building new things and more in making existing systems work better? And as buildings and industrial systems begin to sense, learn and optimise, who decides what they should optimise for?

The real transformation may not be in the concrete and steel, but in what we enable them to do.

This episode explores:

• The shift from static assets to dynamic, adaptable systems
• The role of operational intelligence and digital twins in infrastructure
• The importance of retrofitting and upgrading existing buildings
• Circularity and reuse of materials in construction
• The economic and environmental benefits of smarter infrastructure
• The systemic interconnectedness of urban systems
• The impact of climate change on infrastructure design
• The role of AI and data in optimising asset performance

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Transcript

Felicia (00:20)
Hello and welcome to the latest episode of Shake and Not Burned. I'm your host, Felicia Jackson.

Giulia Bottaro (00:25)
And I'm your other co-host Giulia Bottaro.

Felicia (00:29)
Today we're here to talk through the issues and questions that have come up through our latest arc on the built environment. What we discovered over the course of the interviews is that we're not really talking about the built environment, we're talking about infrastructure and how it's changing. Rodrigo Fernandez from Bentley Systems started us off talking about cities as

Giulia Bottaro (00:37)
What we discovered over the course of the interviews is that we're not really talking about the built environment, we're talking about infrastructure and how it's Fernandez from Bentley Systems started us off talking about cities

Felicia (00:52)
understanding the relationships between transport and energy, water and buildings is becoming just as important as understanding the individual assets themselves. So really we were talking about the need to design infrastructure differently.

Giulia Bottaro (00:50)
interconnected systems.

where understanding the relationships between transport and energy, water and buildings is becoming just as important as understanding the individual assets themselves. So really we were talking about the need to design infrastructure differently.

Felicia (01:06)
With Katie McGinty from Johnson Controls, we actually explored what that means inside the buildings where we spend most of our lives. So she's arguing that assets, that buildings, are really becoming active participants in energy systems, resilience, and business performance, rather than simply places we occupy. So she's talking about how we need to operate buildings differently. And then we were joined by Sophie Graham from IFS,

where we talked about how AI is increasingly being embedded inside industrial operations. So helping make better decisions about how assets are run and managed and optimized. And what she asked us to imagine is if we're going to operate buildings differently, what it would be like if we operated every critical system that way. So while we had different entry points for each of the conversations, they were all circling around the same idea.

That for the last century we thought about infrastructure, about buildings and bridges as something we built. They were judged rather by the fact that they existed. If a hospital was where it needed to be, that was the job done. Whether they could perhaps cope with the demand for their services. But once they were built, the job was simply to maintain them, repair them when necessary, and then eventually replace them. That's now beginning to change.

Today, infrastructure is expected and needed to do a great deal more than just exist. It's supposed to perform, to do all sorts of things it was never designed for, especially in a changing environment. These days, buildings don't just provide shelter, they manage energy, they improve health, they reduce emissions. They respond to changing occupancy and they even help to balance the grid. So the assets themselves may not have changed that much, but

What we expect them to do has. So, in a sense, what we learnt during this discussion was that the transition isn't really about building and replacing infrastructure. It's about how we change how we think about infrastructure, so that we see them not as static assets, but as dynamic systems that can continuously adapt, optimize, and respond.

So really the transformation we're talking about with the transition, it's not in concrete or steel. It's actually in the intelligence with which assets are operated and how we value that. Because if we can get more out of the infrastructure we already have, should we be investing less in building new infrastructure and more in making existing assets smarter?

So, for much of the 20th century, we've talked about this, success was measured by what we actually built. But we've got a different challenge today. We all know that buildings are responsible for about a third of global emissions, dependent on which report you read, 37 to 42 percent. It's a combination of the materials that are used: cement, iron, steel, aluminium, the embodied carbon in buildings, and the operational footprint.

Giulia Bottaro (04:14)
Most of the buildings that we have and use today are expected to last for at least 30 years, but we are expected to reach net zero in just 25. So what do we do with them? And the issue is that a lot of them are really not up to date. Taking the example of the UK, a lot of the buildings have been built before the 1970s. And so they lack insulation, efficient heating, and

increasingly more importantly efficient cooling. So the World Building Council says that four-fifths of today's infrastructure is not going anywhere anytime soon. Really. So we can't just rely on building new infrastructure that is also green up to the latest standards.

we need to look at refurbishing what we already have or just using it in the most efficient way possible. At this point, our net zero targets really depend on upgrading the buildings that we have. The question is, how can we do that? And also upgrading to green, is it going to be enough? And will this ultimately address the challenges that we need to manage?

Felicia (05:24)
Well, I actually think there's a really interesting question underlying that, which is maybe we shouldn't be thinking about green. Maybe we need to think not even just about efficiency, but about how we make buildings, infrastructure, the systems that underpin the world actually work more effectively. Because the one thing we do know is most of the buildings and roads and railways that we now have, they were built a long time ago and they weren't designed.

For prolonged heat waves and more intense rainfall. There's a brilliant story that you may never have heard, but it was a few decades ago, but in the UK, the railways ground to a halt because they had the wrong leaves on the line. How how how does that stop things working? It's absolutely crazy, but there were the wrong kind of leaves and it was wet and everything got slippy, so it didn't work. We've got to look at what we do in a different way. But I also think the other thing we need to think about.

when you're talking about retrofit versus build, is the what I think most people call the maintenance deficit. The fact that we haven't actually updated things. There was a huge furore in the UK about Thames Water because they were apparently leaking three hundred and sixty million litres of water a day from their pipes. And there was a lot of public feeling

That those pipes were leaking because they hadn't been invested in, because a lot of money was going to Thames Water's equity owners. It was crazy. And then, you know, they introduced a hose pipe ban, which made people even crosser, I think on fifteen million people. So if the infrastructure is creaking and not fit for purpose and people are having to pay extra and be upset about the way in which it's working, what are we supposed to do? Because I know the r there's a

heat wave in Italy at the moment, there's a heat wave in the UK and Thames Water just reported that water demand is up thirty percent. So our buildings, our infrastructure and our systems aren't fit for the world we're living in now.

Giulia Bottaro (07:28)
it's interesting to look at the building efficiencies during COVID, for example, which really highlighted how we're not using these buildings very well.

Commercial occupancy fell by 80 % because obviously people weren't going to the office, they weren't going to the shops, etc. But energy consumption actually was down only by 20%. We need to recognise ultimately that climate adaptation does change the economics of it all.

For example, now Rolls-Royce does predictive maintenance on plane engines with sensors monitoring vibration, temperature, performance, and then they also carry out maintenance before it becomes a problem. And this is what technology can do these days. It can be very advanced. can tell us what's wrong before it becomes a really, really big problem. Siemens also does that for trains and rail infrastructure, and it actually does save a lot of money.

We need to look at this at a larger scale and we also need to address the fact that maybe the sensors are not very exciting. know, it's... And the money saving is, it builds over time. Maybe it's marginal at the beginning, but these things are important investments that need to be made.

Felicia (08:33)
Yeah, absolutely.

Well I

but I do think it's a huge part of this is how we think about it because you're thinking about sort of marginal improvements. But if you actually have to pull a a a train out of operation, that can cost a huge amount. Or if, God forbid there's a crash or a problem with the rails, that is the kind of thing that you really do want to be avoiding. And I think avoiding problems is one of the things we do need to think about.

Not just in terms of predictive maintenance, but actually in maybe predictive deployment. Because I'm thinking this is probably again before your time, but about Hurricane Sandy in New York, it cost billions. The it obviously part of that was because it hit New York and New Jersey, but everything was flooded. there was a degree of protection from natural infrastructure, but pretty much all the built stuff was

Not wiped out, that's too strong a term, but it really was an expensive disaster. What was really interesting to me about it was there was a lot of analysis done on what it cost, what was lost, insured losses, uninsured losses, all that kind of stuff. What stuck out to me was what it showed was that for every dollar invested in preparing against a flood and coastal defenses, in actually building resilience.

Would probably save at least $6 in future cost of a disaster. That to me is really important because we're constantly having this conversation about why aren't we investing in resilience? And one of the biggest problems we have is we don't know how to ring fence revenue associated with resilience because that's what bankers want to see if they're going to invest in a project. And I think there's also, sorry, you know, I obsess about insurance, there's something.

Giulia Bottaro (10:32)
I knew you were going to bring it up

at some point.

Felicia (10:35)
But insurance is a real problem. And not just because we've got the insurance gap, which is in itself a really big problem, but actually it's the way the insurance industry works. So I heard this story about someone whose home got flooded and they wanted to rebuild it protected from flooding. But the insurance company wouldn't let them do it because that's not in the letter of the contract. And I did look into this.

And it turns out there is a thing called a betterment clause in insurance, which means the insurance company can't give you money to reduce something that adds value to your property. And the problem is what that proves is that building for resilience is considered to add value to your property. So surely we should be thinking about that on a wider scale.

Giulia Bottaro (11:12)
Really?

Yeah,

this sounds a bit mad considering the fact that everybody needs to be, well, not everybody, but a considerable amount of people need to be upgrading their homes to face extreme weather events.

Felicia (11:33)
I have to say I'm sitting in London in a heat wave in a flat with a window that doesn't have curtains, thinking, why didn't we design like Italy does and have shutters on the outside? I'm desperate to find someone who wants to build shutters in London. It's quite it's quite hard to find.

Giulia Bottaro (11:52)
business, new business idea. Maybe

we can start. I know so much about building, so that really helps.

Felicia (11:58)
Well, there we go.

to bring it back to this question of maintenance, whether it's better value to have something that works in the long run, that seems intuitively to make sense. And I think the idea that operating infrastructure intelligently is going to extend its lifetime seems like common sense. that's a shift from ownership to stewardship.

And it does mean we're looking at our environments in a different way because we've always separated nature and the built environment. And maybe we need to start thinking differently about the way we look at everything around us, as well as the way that they interact. Because if we're looking at what the asset can do in terms of the services it can provide to different levels of the economy.

We've got to think about how we value that in a completely different way, which to me reflects a lot of the conversations we're having about the current financial system and whether or not we need to look at different ways of valuing other things. Because the model we've got at the moment, this extractative, exploitative model, which basically tries to wring out any piece of financial return from something before ignoring it, it doesn't seem like the best way to run

an economy or a society.

Giulia Bottaro (13:23)
So essentially we are talking about applying a circular approach to infrastructure and building in the sense that we have already so many buildings, so many roads, railways. Let's just upgrade them and use them. Now we have all of this amazing technology

that allows us to make all of these buildings more intelligent and really integrate them into the energy system, for example. And I don't think you need to just create something out of nowhere, just create new foundations. And with a significant environmental impact, you can just use things that already there.

Felicia (14:01)
one of the things that's really interesting about this idea of intelligence and predictive maintenance is that one of the things that's always been holding back the circular economy is the challenge of what materials are you allowed to reuse to build a building according to a certain standard. there was some work done a few years ago and we were actually exporting a whole load of steel to China because

under UK regulations you couldn't reuse steel bars from an old destroyed building in a new building, even if they were okay. But if we've got the technology that enables us to understand where the stresses are and what's wrong and what's right and how it works and measure and manage all those things like temperature and vibration and changes in the materials,

Giulia Bottaro (14:32)
Right.

Felicia (14:49)
That should help us actually accelerate a shift towards circularity.

Giulia Bottaro (14:53)
Yeah, absolutely. We have the technology, we need to make the most of it and continue to innovate. But I think that ultimately a lot of countries are still passionate about mega infrastructure projects because they are exciting, they drive politics and they forward, they create conversations. And it's like the point that we were making earlier about the fact that maybe implementing efficiency systems in your

you know, back end essentially is not that exciting and maybe people don't really understand what it means, but then you're like, new shiny object. And that immediately captures the attention of people. And I have one example here, which is again in the UK HS2, which was this huge plan to build new railways, new railway lines that would connect London, but most importantly, the north of England, because a lot of the

Felicia (15:40)
So

Giulia Bottaro (15:50)
Northern England is poorly connected between the East and the West because it kind of feels like all the trains go to London and everyone else isn't allowed to have you know, quick ways of reaching each other.

Felicia (16:02)
The crazy thing

sorry to interrupt, but the crazy thing about HS two is when it was announced it was such a brilliant idea, but it got more and more expensive so they kept cutting all the bits off. What was going to be exciting was the development across the whole of the UK and across the north and developments building out around the train stations and connecting out into the countryside into smaller towns. It was such a brilliant idea, but with the expense it just kept getting ooh no, we're not going to do that bit. Ooh no, sorry, we're not going to do that bit.

Giulia Bottaro (16:11)
Yeah, exactly.

Yeah,

Felicia (16:31)
It's crazy.

Giulia Bottaro (16:32)
it's been very controversial because things like forests have been touched and entire areas have been emptied to make space for it. The costs of balloon to 102.7 billion pounds, which is crazy. And now they think that trains may not even start until 2039. So another 13 years.

And they have already spent 44 billion pounds, but they've only built two viaducts out of 52 and only 11 % of the 169 bridges. And as you said, the point was this is exciting because finally the North of England is gonna get decent connections. And then they scrapped the Manchester leg. So again, you felt like this was a project that would have benefited London the most because it would have just created better.

Felicia (17:02)
I mean.

Giulia Bottaro (17:27)
connections into London.

Felicia (17:29)
I mean the thing that's crazy

is there are actually fast trains into London from lots of different places if that's where you wanna go. It was never meant to be about that, which is really frustrating.

Giulia Bottaro (17:36)
Exactly. Exactly. So,

and I think this shows how politicians from five, 10 years ago really pushed for this idea. It got a lot of support. The concept was exciting, but now a lot of people are actually advocating for just, you know, accepting the loss and move on and just scrap it entirely. And this shows that do we need all this new infrastructure? Do we need new projects when

maybe again we can look at investing limited taxpayer money on improving what we already have.

Felicia (18:13)
To me that's exactly where the focus needs to be. Because HS2 as it was originally imagined, I as I said, I thought it was an amazing idea and I thought it would be amazing for the country. But the cost was crazy. The way it's been developed is crazy. People losing their homes for something that isn't being built is crazy. We need to start thinking about the reality of how and where we live. Because, you know, one of the things that I think has come

become really clear is how challenging Europe is going to find it, as the I believe the phrase is it's the most rapidly heating continent. And yet it's got you know, so little has air conditioning. And air conditioning is a challenge because that takes energy and that's a problem, but people still have to function. So how do we how do we get livable spaces that are cooled down? That's a much more urgent question in my mind than

Giulia Bottaro (18:53)
Yes, yes.

Felicia (19:12)
whether or not we need another line on the railway.

Giulia Bottaro (19:14)
Absolutely.

Yeah, absolutely. The thing with air conditioning is that it's what we need to make you through these very hot days and very hot nights, but it spits hot air outside. So it's actually making the outside even less livable, which is a huge problem because some people have to be outside. Plus, as you said, it's very energy intensive. It puts a huge strain on the grid. It's expensive. All of that.

And I see this and then all the new builds, at least in London and in Milan that I see, are built with huge glass windows, which basically will make them greenhouses. And maybe they're really small, the walls will be quite thin to make the most of the space inside, which then sacrifices insulation. So I feel like we're not really building buildings for the weather conditions that we're in and are getting increasingly worse. I mean,

Each summer we have is the coldest summer we will ever experience, which is terrifying. I think about it quite a lot, but it's true. this is extremely hot and it's insane. And then I was thinking in 15 years time, I will look back and think, oh, how nice it was only 37 degrees. You know what I mean? So we can't just keep building and even...

Felicia (20:18)
That is the most depressing thing I have heard.

Yeah.

Giulia Bottaro (20:37)
I was experiencing the heat release from the pavement yesterday as I was walking through Milan, which is a not very green city and desperately needs more trees. And the pavement was hot and emanating hot air. And I thought, is there maybe another type of cover, another type of material that can be used to pave it? Because this is just unbearable.

So we need to really plan adaptation. We need to do adaptation basically. That's it.

Felicia (21:02)
Well is

But it's also thinking

about how things are connected. I remember years ago I came across a company called Pavegen, which had paving which when you walked on would generate energy. and I'm thinking in this moment, ooh, wouldn't it be amazing if you had pavement that when you walked on generated energy that cooled everything down? And it's about making those connections. You talked about those huge glass windows in modern new builds, and what if they were made of

Giulia Bottaro (21:27)
Yeah.

Felicia (21:34)
glass that contains solar generating cells, because that has that does exist. It's thinking about how you build things differently, but also how you put things together. So one of the things that makes London so unbearable in the summer is public transport and being underground in the tube, in the unair conditioned lines. But you can actually make a difference. So London Underground is fairly old.

It's narrow, deep tunnels, deep underground. There's nowhere for the heat to go, so it sort of bakes in. But a few years ago they developed this project in Bunhill where they actually took waste heat from the London Underground and put it through a heat pump and then basically created hot water and heating for thirteen hundred people in in the area.

Giulia Bottaro (22:23)
Amazing. I

love reusing waste heat. It's the best.

Felicia (22:26)
It's such a fantastic

idea. And there's so much of it. I mean, one of the things that Katie mentioned in our interview at Johnson Controls was actually about process industries, which for those of you who don't know, it's those companies that use a lot of heat in industrial processes, so pharmaceuticals, food and drink, chemicals, pulp and paper. So she told me that apparently

The process industry spend about 60% of their budget, of their operating budget, on natural gas to provide the heating that they need. But after using that heat, they also dump about 70% of that heat because they've got nowhere to put it and no process in place. And what she actually said was that the

Giulia Bottaro (23:00)
Wow.

Can we just,

sorry, just clarify, just dumping heat means the heat just is released into the atmosphere, right? Exactly.

Felicia (23:18)
Yeah, they don't do anything with it. So

as you said with the air conditioning, it just heats up the air around you. they just consider it to be waste. But if you took that waste heat, so the waste heat available from European process industries could meet the space heating, water heating and process heating needs of Europe and the UK combined, that blew my mind.

Giulia Bottaro (23:24)
Yeah.

Yeah, I love this topic. I think I may be almost as obsessed about, as you are with insurance. the first time I heard the fact that we could just literally hit the entirety of Europe using the industries and the factories and the waste heat, it blew my mind. The problem is that you need to basically revamp the entire plumbing system.

Felicia (23:51)
Damn.

Giulia Bottaro (24:11)
And exactly.

Felicia (24:11)
And the energy system and

bring in processes and transformation. But that's why I get excited about operations.

Giulia Bottaro (24:17)
But, this, yeah,

and this would require a lot of political courage because obviously you're going against natural gas and the whole fossil fuel, let's call it establishment. I didn't want to say words like cartel, but you know, it may spring to mind. yeah, and again, it's not maybe too sexy because

Felicia (24:33)
But you know, if the shoe fits.

Giulia Bottaro (24:42)
It's not exciting, it's just pipes underground. You don't see them, they connect to your radiator. But imagine the savings that it would generate to families, to other businesses as well, like offices, for example.

Felicia (24:54)
But that's the whole

point. It's everybody. It's it's at every scale. And this is why the operational stuff and the intelligence is really, really interesting to me. Because the challenge with that waste heat is how do you capture it, transform it, deliver it to where it needs to be? Yes, that's really complicated. But if we understood and accepted the interconnectedness of how our systems work economically, we could start looking at

Giulia Bottaro (24:57)
everyone.

Felicia (25:24)
Different ways of doing that operationally. Now I know there's a problem that we have just in terms of the sort of innovation that's needed. It's process innovation. It's putting pipes together better. It's connecting X to Y. It's not about an exciting new technology, you know, some transformational energy technology or some new

material created from AI doing something I don't understand with chemicals in a lab. you were talking about politicians and the lack of political will, and I think there is an element of that which is they can't be photographed in front of a pipe. Well, I suppose they could be, but it's not gonna make news, you know? and the other thing is the fact that we don't really notice when things work.

even with the systems we have, if the water comes out of the tap when we turn it on, great. Not paying any attention. Exactly.

Giulia Bottaro (26:19)
Yeah, yeah, we give it for granted. Yeah, it's when it stops

that is a problem. But having said this, you know, now there is a bit of a rise in, let some people call it green populism because populism has traditionally been on the far right or on the right side. But then a lot of environmentalists are saying, OK, we need to talk to the people in a way that is accessible to them, because when you're struggling with the cost of living crisis, then

whether emissions go up or not is not really a major concern in your life. And so if we could really convince everyone that, and after this I will probably contact some local politicians, convince everyone that reusing this waste heat essentially lowers the bills and keep us warm, considering that there are things like oracle, there is so much fuel poverty. Some people currently can't afford the aircon.

Felicia (27:06)
Mm-hmm.

All cool.

Giulia Bottaro (27:16)
And some people won't be able to afford the heating in December or January. And so this is about communicating the good things. I'm getting lost. I'm just so excited. I don't know what I'm saying.

Felicia (27:27)
No, but but I'm loving I'm loving what you're

saying 'cause what you're talking about is the fact that we need to reframe what it is that we're doing. Because

Giulia Bottaro (27:34)
Exactly. Reframing. What is important?

HS2 or low bills? Really?

Felicia (27:41)
Yeah.

But especially when low bills for you comes with lower bills for manufacturers, which means lower costs for the things that they make. It's a way of perhaps transforming greenhouse growth. it's about as I always come back to, but it's about the interconnections and how they're managed. And what's interesting to me about intelligence in operations is that it enables you to track

manage and respond to those interconnections because when something happens in one area it has a knock on effect somewhere else. But if you contract that, if you can see it, that fundamentally changes what you can do about it. there's this wonderful idea that Sophie was talking about, this idea of imagining a world where you scale up an intelligent building to all the critical systems, but if you're inter if you're connecting everything

Then you should be able to manage everything much more efficiently and not necessarily just more efficiently, but optimise it for what you need.

intelligence is becoming part of infrastructure because it's part of what we need in infrastructure. And that doesn't mean it's about AI. It's about making better decisions. if you think about digital twins, Rodrigo was talking about this and talking about how this

actually helps you understand complex systems and how they interact before you build something. So you could plan ahead for how people will go in and out of a building or wh wh who will use what when. Katie was talking about how buildings themselves can respond to changing conditions. So you can do things like when there's a wildfire, put filters in the air system and make sure that toxins don't get into the building.

And Sophie was talking about helping organizations actually optimise their industrial processes, which is what we were talking about with waste heat. The thing is that thread isn't AI. It's operational intelligence. We may be getting that from AI, but what that looks like, I don't think is clear. the infrastructure hasn't necessarily got to change overnight.

But what is changing is the information we have about it and what we can do with it.

Giulia Bottaro (29:57)
what you're saying about this is not AI, this is operational efficiency and intelligence. It makes me think about the fact that sometimes, and I might be wrong, of course, but in the investment space, there is a lot of interest in hype. now AI is all the rage, obviously, and in fast returns.

Felicia (30:16)
Mm-hmm.

Giulia Bottaro (30:19)
fast and exponential returns. But as we were saying earlier, operational efficiency may not generate crazy returns, may not generate crazy savings. It's just compounding improvements that over time deliver significant savings. so, exactly. So then I'm thinking, know, could this be perhaps a barrier in...

Felicia (30:36)
And benefits.

Giulia Bottaro (30:43)
creating excitement, creating a hype about improving infrastructure because again, it's not like it's not a silver bullet solution. It's not a new exciting object. It's just a bunch of sensors and a type of software that puts them all together. I mean, not to, I don't want to be reductive, but really, you know, from a PR perspective, I suppose.

Felicia (31:06)
Yeah. I mean i i it's a valid point and I think there is a concern because obviously equity investors want a high level financial return, preferably as fast as possible. But what you are seeing with pension funds who have a much longer term issue, you know, they've got to provide funds to someone in thirty years, in forty years. So they've s th the assets that they've got still need to be there. Those things that they've bought and that they are expecting to make money from.

Giulia Bottaro (31:19)
Mmm.

Felicia (31:35)
And I think information is a way that we can keep those assets running longer, be more effective, integrate into a more interconnected system. And I do want to be clear, you know, I did say it's not AI, but what I meant was it's not AI as we generally understand it. Generative AI and, creating pictures or weird videos that suck up huge amounts of water and energy. It's actually about taking data

And transforming how we operate our environment through the use of that data. Because as I said, it's the information that changes how assets perform. And I think asset managers are gonna have to wake up to this. I mean it's definitely a problem. I was reading a paper the other day about real estate, and how climate risks are being assessed in real estate deals. But they're not actually changing the deals being done.

And that's because it's really hard to integrate climate risk analysis into the traditional way that real estate deals have been done. And there's lots of different method methodologies and there's different approaches and there's different concerns. And ESG climate is strangely enough, I think it might be. really in many ways what we're talking about is the intelligence.

Giulia Bottaro (32:45)
Sounds like a systemic issue.

Felicia (32:55)
AI can provide us with the ability to assess that intelligence. It's adding a layer to infrastructure. It's not instead of. It's almost increasing what we mean by infrastructure and how we operate it. And I think that is where you transform the value of the asset because you can do more with it. You can

provide more services. GPS that didn't have any effect on roads. It had a huge effect on navigation and how people experience the use of roads. So for us, as the customer of these assets, we just care about outcomes. And if you can get to an outcome that makes the person feel better, isn't that a new opportunity?

Giulia Bottaro (33:31)
Mm.

Felicia (33:44)
one of the most interesting things that came out of the interviews was just that we traditionally haven't expected very much from infrastructure, certainly from buildings.

Giulia Bottaro (33:52)
Yeah, I thought it was an interesting

way of seeing it.

Felicia (33:56)
Yeah, 'cause I mean, nowadays we expect our buildings to reduce emissions, support the grid. They've got to improve health and well being, you know but they're also supposed to use resources more efficiently and withstand more extreme weather. That's a huge change of what we actually expect from the built environment.

Giulia Bottaro (34:16)
Yes, our expectations seem to be changing quite fast. I think it's quite visible from the concept of offices because a lot of companies these days are investing money into making their offices a nice space where you can work in, attractive, give you an incentive to be there because in a lot of companies it's not.

mandatory while back in the day, back in the day, mean, pre-pandemic, you know, six years ago, it could have just been a white empty room with two tables and an okay chair. So things are changing quite fast. And I suppose the issue is that you can't really change infrastructure as fast.

Felicia (34:59)
Exactly, you've got to change the way that you use it. one of the things that does come up quite regularly is the speed at which we're having to make decisions. Because infrastructure decisions traditionally they take a really long time. And infrastructure projects take a really long time to build. And there is time to think and there's time to research and there's time to plan. But

w our expectations of buildings have fundamentally changed so fast that they're no longer really fit for purpose. So what you have to think about is what is that purpose? What are we trying to get buildings and other forms of infrastructure to do for us? Because what used to be a capital asset could now be an energy asset if you're providing demand response services to the grid.

It could be a resilience asset if in some way it's helping to defend or protect against a hazard. It could be a health asset, you know, if you're if you've got clean air and virus protection and all sorts of different stuff. not only is the environment changing faster than our ability to change infrastructure, our expectations are changing too.

And that's got to be paid for. Somebody's got to do the work. One of the things that came out in the interviews quite clearly was that this kind of work can save businesses a lot of money. Shifts in efficiency and energy consumption, huge amounts of money. Where it gets really interesting for me is that big office buildings, as you mentioned, they're not being used in the same way. They've always been a huge

Excuse praise for the company, aren't we glorious? Look at my artwork, I'm in the centre of the city, that sort of thing. Now you've got to think about it differently.

it's actually about thinking about what the buildings needed for. And one of the things I absolutely loved, which I came across last year at a wholesome conference, was this concept of zombie buildings. No well, I mean, I don't love zombie buildings, I just love the fact that we get to call them zombie buildings. They're awful.

Giulia Bottaro (36:54)
You love the zombie building.

Felicia (37:01)
But they're actually a real issue for real estate. So you talked about building occupancy. These are buildings, real estate assets, that basically aren't financially viable anymore because nobody wants to work in them. But they're legally stuck because lenders don't want to foreclose on them because then they'll have a hole in their portfolio. You know, the people who own them can't afford to renovate them because they're so old. And

Giulia Bottaro (37:20)
Mm.

Felicia (37:29)
Who's gonna want to take over a forty storey building? I mean, this was a story told about Midtown in New York. Because what happens is the properties just get trapped in a legal and financial vacuum because they can't renovate to what we want buildings to do today.

but it's not just zombie buildings. Think about competitiveness.

in terms of operations. So if you're an airline and you use your fuel more efficiently and you turn around your planes faster and you get customers where they want to go, clean, comfortable, sorted, logistics managed, customers are happy because the outcomes are great, you have spent less money. So you're going to be more competitive than your rival who didn't do any of that. So you need to think about this as something that businesses actually require.

we've talked about buildings being monuments to the ego of individuals. But actually the new way we're looking at it is about operational competitiveness. It's about saying this is a way you differentiate what you do, not just in terms of reputation, but actually functionally, in making your business work more effectively.

That's much more than simple efficiency. It is about competitiveness. It is about actually operating in the 21st century in a far stronger way. And I think this has a really important point about what sustainability is going to become. for years we've associated it with targets and reporting and compliance and the backlash.

To ESG, which is not the same as sustainability, but related, but the backlash has been really driven by reporting, by the huge burden in having to t find out all the details about your business that you never knew and not really being able to see any benefit from it, because people just took the data. They didn't do anything with it. You need to turn that around and turn that data into a strategic shift. Because if you understand

where the hotspots are in your operations, you understand where to intervene. Either to improve a process, to cut resource use, whatever it might be, but you will be more effective. It's going to improve performance and you could well be building resilience as well. So that to me says that what's happening is sustainability is going to move into operations. Because this is an operational challenge. And this is what intelligence provides to a business.

Giulia Bottaro (39:59)
I really hope that sustainability turns into operations because I suppose it's what it always meant to do. Always observe what's going on and act accordingly while it's been siloed, it's been cut, it's been under-resourced. So yeah, I would love to see that. I would love to see the learnings from the sustainability teams being applied in other parts of all the businesses.

Felicia (40:07)
Exactly.

Giulia Bottaro (40:25)
my fear is that whilst I'm sure a lot of companies are doing this already, it's not quite commonplace yet. I was listening recently to a podcast interviewing a CEO of a major steel company and he was saying that decarbonization is all well and good, but it's actually not their first priority.

And he was repeating that their first priority is the fiduciary duty to shareholders, which is essentially making money. And then he also said that the company cannot reach net zero if it's not profitable, which is really fascinating because the same conversation covered the fact that they had billions to spend in innovation. So I think a lot of people are still, let's say, afraid to take this,

brave step of acting on sustainability of sure investing a lot of money in something that may not generate the returns that you expect or maybe it's really hard to forecast. But whilst we keep treating sustainability as a nice to have then it will not be embedded into operations. the relevant sustainability teams will just write really big reports that will lie abandoned in a

shared folder of the company. But you know, I am optimistic slash delusional. So yes, I would like to say that maybe in the face of increasing climate risk companies will see the value of implementing sustainability across all parts of the business.

Felicia (41:56)
But this was actually my entire point, that we've we've done so much work on identifying risks and problems and challenges, and we haven't spent enough time paying attention to potential, to opportunity. Because I think there is a really big issue that has to be dealt with, and it's a systemic one, and this is the fact that most of what business operations do does not incorporate the full cost of what it does. So it doesn't include the cost of consuming materials.

or dirty water, or none of the social costs of operation. But this is not gonna be a conversation about economics or who's right and who's wrong. So I'm gonna move on from that, but I still stand by my point. There is potential advantage in resilience. If you are more able

To manage your energy costs because you're using less of it or because you're generating your own. That is a competitive advantage. If you are able to keep your expensive workers happier than your rivals, you will retain your staff. And the one thing that's always been said, it's a lot more expensive to recruit someone than it is to retain someone. And yes, we have an economic

Giulia Bottaro (43:09)
Absolutely.

Felicia (43:12)
era at the moment which is not entirely comfortable. But even during the worst times, companies still operate, people still have jobs. And what we need to do is kind of maximise the possible potential for these things. One of the things that Johnson Controls was talking about was the ESCO model. which literally is you don't even as a business have to find the money.

To do these transformations. Someone will provide finance to you and they will get paid back out of the money you save. That to me is crazy if you don't take advantage of it. It's a model that's been around for years. It's never been terribly popular, and I've never really understood why. I don't know whether it's because it's associated with the wrong budget, because don't get me started, on OPEX versus CapEx. But Johnson Controls provides that.

Giulia Bottaro (43:46)
Fascinating!

Felicia (44:02)
There are ways to achieve these goals of intelligence and optimization and connection. And we're definitely nowhere near the basis of an interconnected system yet, but we are building the base blocks of that. And I think that's what we really have to pay attention to. It's the outcomes, Once sustainability starts becoming really important to finance.

not just emissions and carbon credits where, you know, they are a problem for finance if they operate in a jurisdiction where there are carbon credits or carbon taxes or whatever it might be. But this is actually about a much wider remit. And if you can build something exciting out of that, it's really powerful. And you were talking about the way we we should sell things, the way we should talk about things. And I think we need to reframe

operations and operational intelligence from something that's about keeping the lights on. You know th that actually it's about keeping the power on for everybody. It's about being competitive.

Giulia Bottaro (45:10)
I suppose that a lot of people may think of operations as something boring and I'm sorry if I've offended anybody who really cares about operations. But the point is boring is good. We are living through endlessly unprecedented times. We need something boring to just be the base, the foundation of our lives.

and that is great and that is the foundation that we can build everything on We need to create stability, we need to be proactive, I suppose, rather than reactive in the face of climate change, extreme weather events, biodiversity loss, all geopolitical issues.

Which is why if we have a system that is reliable, that is ticking along in the background, then we can focus our energy, money, effort, time into dealing with the crisis. looking at emerging trends in recent research, the OECD has

done some work on systemic urban resilience. And it essentially argues that cities should now be understood as interconnected systems rather than collections of separate sectors. So this talks about, you you said you were nowhere near as connecting all of, well, what did you say?

Felicia (46:28)
We haven't got a fully interconnected system, but we are building the base blocks of it.

Giulia Bottaro (46:33)
Exactly. And so, and cities would be a great starting point to achieve that. And meanwhile, there is a World Bank which is saying that resilient infrastructure is actually a driver of productivity and competitiveness, not just climate adaptation.

overall we are talking about reusing infrastructure and the need to do more of that, which doesn't mean that a lot of companies aren't doing that. A lot of engineering and technology companies are looking at improving and upgrading their existing assets rather than simply building new ones because it's a done thing. And so overall, when we look at

the interviews in our arc, the conversation today, the research out there, we see a common threat, which is the fact that value is now coming not just from owning infrastructure, but from understanding, operating, and adapting it more effectively.

Felicia (47:34)
I think that's beautifully put, Julia, and a really good note on which to draw our conversation to a close. for our listeners, the key things that came out of this particular arc is that the biggest opportunity, both in terms of the climate and economically, is not going to be about building new stuff, but actually about unlocking the performance of the infrastructure we've already got. Because the real transformation is not in concrete or steel.

It's actually about the intelligence that we use to operate these assets. once infrastructure starts sensing and learning and optimizing, it stops being passive and it can become an active participant, one of those base blocks in how cities and economies actually function. Katie had a brilliant comment which I loved, which was

Buildings can go from inert brick and mortar to much more organic, agile, adaptable systems. And industrial systems are going the same way. So we need to stop thinking about whether or not we need to build new infrastructure or how we retrofit, but actually how valuable our existing infrastructure actually is. So to be fair, that raises as many questions as it answers, because who decides what those systems are going to optimize for? And for what?

You know, is it energy, cost, comfort, profit, carbon, health? How do we balance efficiency with resilience? All of these questions, especially the ongoing conversation around AI and energy consumption and impact and decision-making, because where should human judgment remain central? And as our infrastructure becomes more intelligent, how do we ensure it also is trustworthy? that brings us back to our conversation about AI and how it should be governed.

But luckily for you, this is not the place for it. You can actually look at some of our past issues or I'm sure it's something we're going to touch on again. those are questions we'll continue to explore. So thanks again for listening. Don't forget to like and subscribe and share the episode with anyone you think might find it useful.

And we will be back soon, and until then we remain shaken not burned.