20 November 2020

Addressing barriers on the path to infrastructure as an asset class

20 November 2020

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

Current regulatory frameworks for banks and insurers do not differentiate infrastructure investments from corporate exposures. The GI Hub’s preliminary assessment of regulatory capital charges suggests that, as a result, banks and insurers are required to put aside more capital for infrastructure projects than is warranted by actual infrastructure credit performance. 

The report, commissioned by the GI Hub in support of its work on this topic, examines whether capital charges for infrastructure debt should be lower than the charges currently required by the Solvency II and IAIS regulatory frameworks.  

This question is important as (i) infrastructure investment is widely viewed as a key component of economic development and (ii) historical data on infrastructure debt strongly suggests that this class of corporate debt is much less risky than, for example, corporate bonds. 

The findings of the report are useful inputs for public and private sector stakeholders as they seek new approaches to regulatory capital charges as part of the pathway toward the treatment of infrastructure as a distinct asset class.