1. Develop potential approaches to collect credit performance data for infrastructure asset class subsets. The December 2021 EBA report on the application of the infrastructure supporting factor relied on survey data and highlights that the data currently collected by regulators is not sufficient to provide assessments on infrastructure. EBA COREP supervisory data does not separate infrastructure from specialised lending exposures – a wider category. The proposed effort could potentially leverage data collection and monitoring exercise conducted with banks through the Quantitative Impact Studies (QIS). This would enable more evidence to justify the introduction of more risk-sensitive regulatory rules for the infrastructure asset class and to monitor future trends.
2. Develop a custom risk assessment to carve out low-risk subsets for infrastructure that could demonstrate the average superior performance of the infrastructure asset class than non-infrastructure project finance and non-financial corporate asset classes. This is particularly needed for the greenfield phase for which financing is most constrained by the absence of such risk-sensitive rules.
3. Explore avenues to recognise the infrastructure asset class in the Basel III framework, drawing from the GI Hub work on infrastructure debt performance and on infrastructure taxonomies (for the G20), and on the International Association of Insurance Supervisors (IAIS) work on infrastructure definition. The G20 Indian Presidency has tasked the GI Hub to map existing infrastructure taxonomies and highlight gap in definitions and data collection.
4. Address barriers and simplify the use of risk-mitigation instruments for applying regulatory capital discounts towards infrastructure investments. Basel III reforms place many leading banks on the standardised approach which is not sufficiently sensitive to the de-risking instruments (such as guarantees) being scaled up for infrastructure exposures by governments and development banks.
5. Explore options for incentivising infrastructure projects that pose low climate risks.
6. Explore how regulatory frameworks can support optimal financing of infrastructure projects across the lifecycle. Among private investors, banks provide a large portion of the financing for the construction phase, while long-term investors often finance the operations phase.
7. Explore the challenges in obtaining credit ratings for infrastructure projects. The absence of credit ratings implies higher risk weights and capital charges for infrastructure projects, which is concerning as the Basel III reforms push banks towards the standardised approach, which is primarily based on credit ratings. The high recovery rates for the infrastructure asset class than other asset classes suggests that the ratings should be based on final loss and recovery metrics not just default metrics.

Investors group financial instruments that have similar characteristics (e.g. similar risk) and performance (e.g. similar returns on investment) into asset classes, and then build portfolios of asset classes that are diversified and optimised to meet their objectives or the objectives of their clients. A group of individual assets that can’t be placed into a defined asset class is more difficult for investors to assess, and thus is viewed as more risky, and is less likely to attract investment.

In 2018, the G20 Eminent Persons Group recognised that several factors were blocking the establishment of infrastructure as a distinct asset class: the heterogeneous nature of infrastructure assets, insufficient data on the investment performance of these assets, and lack of a strong pipeline of continuous projects. Under the Argentinian Presidency in 2018, the G20 endorsed a Roadmap to Infrastructure as an Asset Class.

In our role supporting the G20’s infrastructure agenda, the GI Hub is acting on the Eminent Persons Group recommendation of a case for infrastructure as an asset class, distinct from generic corporate exposures with its own differentiated risk profile, in order to increase private investment in infrastructure and help fill the infrastructure gap with sustainable, resilient, and inclusive infrastructure.