Infrastructure Monitor

Infrastructure Monitor 2021 provides in-depth analysis of global private investment in infrastructure projects across regions, country income groups, and infrastructure sectors, and examines infrastructure investment performance. The 2021 edition also introduces reporting on environmental, social, and governance (ESG) factors in infrastructure investment as well as project preparation and COVID-19 impacts. For this edition, we aggregated data from a significant number of leading databases covering private sector investment in developing and developed economies.

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Mobilising private capital is key to closing the infrastructure financing gap and has become even more critical as the COVID-19 pandemic limits the investment capacity of governments. This section analyses private investment in infrastructure projects in primary markets.

Key takeaway: Private investment in infrastructure projects in primary markets is not increasing, but it weathered the pandemic shocks. The private investment gap between high-income countries and others persisted in 2020, and overall private investment in infrastructure projects remains insufficient to close the infrastructure gap.

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The performance track record of infrastructure investments is a necessary input for attracting private capital and establishing infrastructure as an asset class. This section summarises the financial performance of global infrastructure equities (listed and unlisted) and infrastructure debt.

Key takeaway: In the last decade, returns for both listed and unlisted infrastructure equities have strongly increased. Although this trend stalled briefly during the pandemic, returns quickly bounced back. Historically, unlisted infrastructure equities have provided higher risk-adjusted returns than global equities and listed infrastructure equities. Infrastructure debt consistently performs better than non-infrastructure debt worldwide, although the full impacts of the pandemic and subsequent economic fallout remain to be seen.

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The major bottleneck in attracting private capital within infrastructure is the lack of bankable and investment-ready pipelines of infrastructure projects, which requires a strengthening of project preparation capabilities. This section attempts to explore the channeling of funds to emerging economies to improve project preparation through the lenses of Project Preparation Facilities (PPFs).

Key takeaway: Infrastructure project preparation needs improvement worldwide, and especially in low-income countries. PPFs are providing technical and funding support for project preparation mainly in developing countries.

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ESG factors are important for private investors in managing risk and return and are particularly important for infrastructure investment, given that infrastructure requires significant up-front investment in long-term assets that could become stranded. This section assesses infrastructure investments and performance as they relate to ESG factors.

Key takeaway: Companies investing in infrastructure are incorporating ESG factors better than other companies. Preliminary evidence shows superior performance for sustainable investments versus the overall infrastructure sector. 

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Private investment in infrastructure

1. Private investment in infrastructure projects in primary markets is not increasing, but it weathered the pandemic shocks.

Private investment in infrastructure projects has been stagnant for seven years running. However, while some other sectors of the economy were significantly affected by the COVID-19 pandemic, private investment in infrastructure projects remained resilient to pandemic shocks.  

Pandemic-related lockdowns and restrictions in 2020 negatively impacted investments in the transport and energy sectors, while pandemic control and online activities increased investment in the social and telecommunications sectors.

2. Overall private investment in infrastructure projects remains insufficient to close the infrastructure gap.

Private investment in infrastructure projects in 2020 was USD156 billion. At just 0.2% of global GDP, this is far shy of the 5% of global GDP (combining public and private investment) that some studies have indicated is required to close the infrastructure gap. It also pales in comparison to the USD3.2 trillion of public investment in infrastructure stimulus that has been announced by G20 governments in response to the COVID-19 crisis.

3. There are significant differences in private investment in infrastructure when comparing high-income countries and others.

About three-quarters of private investment in infrastructure projects occurs in high-income countries. This remained resilient in 2020. Half of this investment occurs in renewable energy generation. In contrast, private investment in infrastructure projects in middle- and low-income countries represents only a quarter of the total global private investment in infrastructure projects, and it declined by 28% in 2020. Most of this investment occurs in non-renewable sectors and transport.

4. There is a strong appetite for renewable energy.

In 2020, investors showed a strong appetite for renewable energy generation. In fact, the sector attracted the largest share of total private investment in infrastructure projects at almost 50% – mostly in wind and solar projects. 

5. Private investment in infrastructure projects is mainly financed by loans from financial service institutions, but debt capital markets are increasing.

Financial service providers, primarily commercial and investment banks, finance the largest share of the investment across all regions. About 80% of private investment in infrastructure projects is financed by debt. While loans represent 87% of debt financing, projects in developed economies are increasingly using debt capital markets. In particular, financing through green bonds rose in recent years, particularly in high-income countries.

6. In middle- and low-income countries, development banks play an important role as financiers, and export credit agencies are playing an increasing role.

In middle- and low-income countries, non-private institutions like multilateral development banks (MDBs), export credit agencies (ECAs), governments, and others play a significant role as financiers. In fact, 75% of private investment in infrastructure projects in those markets occurs in projects that involve both private sector and non-private sector financing.

Infrastructure investment performance

1. In the last decade, returns for both listed and unlisted infrastructure equities have strongly increased.

The COVID-19 pandemic temporarily stalled this trend in 2020, but it resumed in 2021.

2. Historically, unlisted infrastructure equities have provided higher risk-adjusted returns than global equities and listed infrastructure equities.

Although global equities perform better on a short-term basis, unlisted infrastructure equities generate the highest returns historically. This remains true when historic returns are considered on a risk-adjusted basis.

3. Infrastructure debt consistently performs better than non-infrastructure debt worldwide.

Infrastructure debt performs better in high-income countries than in middle- and low-income countries, but better than non-infrastructure debt in all countries.

Infrastructure project preparation

1. The lack of bankable and investment-ready pipelines of infrastructure projects is often considered the key bottleneck in mobilising private capital for infrastructure investments.

Infrastructure project preparation has substantial scope for improvement across all regions. Project preparation is a dimension that can be improved across all regions and income groups, and improvement could make an even larger difference in low-income countries.

2. PPFs are providing technical and funding support for project preparation mainly in developing countries.

PPFs are mostly being led by MDBs, and are actively providing support in lower-income countries, mostly in economic infrastructure sectors like energy, transport, and water.

ESG factors in infrastructure

1. Companies investing in infrastructure are incorporating ESG factors better than other companies.

Environmental factors (particularly climate-related factors) are the largest and most common ESG concern, whereas social and governance dimensions are less assessed.

2. Green, private investment in infrastructure projects has been increasing.

Since 2014, green private investment in infrastructure projects has been rising, mostly in the renewables sector, and now represents half of all private investment in infrastructure globally. Yet, significant effort is required to drive investment to levels that will help reach global climate targets.

3. Preliminary evidence shows sustainable investments perform better than the overall infrastructure sector.

Evidence of the relationship between ESG impact and financial performance is scarce. However, preliminary evidence shows that in the last 10 years, wind and solar equities have generated a higher return than listed and unlisted infrastructure equities.