Insights

The credit risk metrics for infrastructure debt improved during the COVID-19 pandemic, while those for non-infrastructure debt worsened. The performance of infrastructure loans demonstrates that infrastructure assets are resilient to adverse economic scenarios like pandemics.

In 2022, infrastructure assets improved their ESG scores in all three pillars of ESG. The scores are encouraging, but they do not mean the assets themselves are more sustainable.

Private infrastructure investment has been stagnant for eight years running, however the number of transactions has been trending up since 2016. This is mainly due to a tripling in the number of solar photovoltaic projects. Unfortunately, their average transaction size is the lowest among all infrastructure sector projects so does not translate to an increase in the total private investment amount.

Rapid and sharp interest rate hikes in 2022 lowered the market value of existing infrastructure debt locked-in at the previous lower rates. Still, the attractiveness of infrastructure debt increased among private investors on account of its lower credit risk than corporate debt and increasing investors’ risk aversion

Infrastructure equities provide stronger protection against inflation shocks than the broader equity market. During the rapid inflation shocks in 2022, the return on infrastructure equities was more resilient than that on global equities, which drove private fundraising for infrastructure to record levels.

In 2021, private investment in infrastructure projects in primary markets recovered to its pre-pandemic level but remains stagnant and far shy of what is needed to close the infrastructure investment gap.

In 2021, global green private investment in infrastructure projects in primary markets rose to a record-high share of 60%, but this trend needs to accelerate and expand beyond renewables to meet climate goals.

Green investment in infrastructure outside of renewables is limited. While renewables represent almost 90% of total green private investments in infrastructure projects, green investment in other sectors only represent 14%.

Co-financing provide a supportive enabling environment that minimises risk exposures, catalysing private co-financing for infrastructure in middle- and low-income countries.

The green bond market has seen exponential growth since its inception in 2007. In 2020, green bonds represented 60% of bond issuances for private investment in sustainable, primary infrastructure globally, mostly concentrated in developed regions.

Preliminary evidence shows superior performance for some sustainable infrastructure investments in comparison with other infrastructure sector investments

Private investors have shifted away from non-renewables in both developed and developing markets. The appetite for renewables is stronger in developed markets.

Low private investment in the social, telecommunications, water and waste infrastructure sectors

Private investment in infrastructure is dominated by the energy and transport sectors

Infrastructure project preparation capacity is weak across most regions of the world. It is critical to strengthen these capabilities to address one of the major bottlenecks in attracting private capital to infrastructure, which is the lack of a bankable, investment-ready pipeline of infrastructure projects

For investors seeking to diversify and optimise their portfolios, infrastructure debt and unlisted infrastructure equities are very strong options, according to long-term data

Unlisted infrastructure equities have provided higher risk-adjusted returns to investors than an average global listed equity. With greater recognition of its attractive performance, investors’ demand has increased, and returns have aligned over time with its lower risk or volatility

Infrastructure debt has a highly attractive and resilient risk-return profile for investors. Expected losses are particularly low given high recovery rates in cases of default

Private investment in infrastructure projects in primary markets has been stagnant for seven years running

Private investment in infrastructure projects in primary markets was resilient to COVID-19 pandemic shocks