The year 2022 has seen a remarkable rebound in private investment in infrastructure projects, marking a significant shift in global markets.
Here are the key findings of the Global Infrastructure Hub’s report on private investment in infrastructure.
1. Recovery boosts private investment:
In 2022, private investment in infrastructure projects increased substantially. Primary markets saw a 29% increase in transactions and a 41% increase in value compared to the five-year average. The return to pre-pandemic levels is mainly due to growth in energy transmission, digital infrastructure, and large-scale airport transactions.
2. Geographical distribution of investment:
Private infrastructure capital raised and invested by funds was overwhelmingly concentrated in North America and Europe in 2022. These regions accounted for most of the capital raised (91%) and invested (78%). However, middle- and low-income countries also saw growth in investment, signalling a potential shift in the global distribution of private infrastructure capital.
3. Sustainable financing and green investment:
Debt remained the main source of finance for infrastructure projects, with sustainable finance gaining ground, particularly in North America and Western Europe. While green investment has seen a decline since 2020, non-renewables sectors such as power transmission and battery storage projects have seen significant growth within the ‘other green’ category.
5. Climate change risks:
Climate change remains a significant threat to infrastructure, with rising sea levels and extreme weather events impacting infrastructure assets. Under current climate scenarios, infrastructure assets are expected to experience reductions in net asset value of 4.4% on average and up to 26.7% in the most pessimistic scenario by 2050.
6. Lower default rates for infrastructure loans:
Infrastructure loans have always had lower default rates than non-infrastructure loans. The average expected loss on infrastructure loans is only a quarter of that on non-infrastructure loans.