INFRASTRUCTURE MONITOR 2024 Global trends in private investment in infrastructure Infrastructure Monitor 2024 Infrastructure Monitor 2024 2 © 2025 The World Bank Group 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Website: www.worldbank.org Disclaimer This work is a product of the staff of the World Bank Group. “The World Bank Group” refers to the legally separate organizations of the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). 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All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Infrastructure Monitor 2024 Executive summary 3 About The Infrastructure Monitor report covers global trends in private investment in infrastructure to inform investors, policy-makers and other practitioners. The objective is to deliver global insights on global infrastructure trends across key topics such as investment volumes, performance, blended finance, and ESG drivers, facilitating the monitoring of private infrastructure investment and its performance. These insights aim to support policymakers, investors, and other stakeholders in developing sustainable, resilient, and inclusive infrastructure while fostering effective partnerships with the private sector. Acknowledging the significant infrastructure data gap — with notable variations in coverage, quality across countries and income groups, and differences in the availability of regional breakdowns — our approach leverages the best available aggregated data from leading infrastructure databases to generate market insights while also providing context on its limitations. 2025 will be the fifth version of the report, the first under the World Bank. Our data partners PPI Database | Benchmarking Infrastructure Development 4 CONTENTS Acknowledgements5 Abbreviations and Glossary 6 List of Tables and Figures  13 Executive summary 20 Chapter 1: Private investment in infrastructure 34 Chapter 2: Infrastructure funds 54 Chapter 3: Financial performance of infrastructure investment 73 Chapter 4: Environmental, social, and governance factors in infrastructure  100 Chapter 5: Blended finance and guarantees in infrastructure 109 Appendix137 References138 Definitions, data sources and methodology 143 Infrastructure Monitor 2024 Acknowledgements 5 Acknowledgements This knowledge product was funded by the Public-Private Infrastructure Advisory Facility (PPIAF), the World Bank, and managed and authored by a World Bank team that includes Henri Pierre Francis Blas (Senior Infrastructure Specialist), Manpreet Kaur Juneja (Infrastructure Specialist), Candice Trinh Thuy Tien Nguyen (Consultant) and Katrina Yu (Consultant). Aisha Elaine Williams (Infrastructure Finance Global Director) Aijaz Ahmad-CIC (Lead PPP Specialist), Jane Jamieson (Global Programs Manager) and Fernanda Ruiz Nunez (Senior Economist) provided overall guidance. Peer reviewers for this knowledge product were Stephane Straub (Chief Economist for Infrastructure, World Bank), Omar Chaudry (Manager, IFC), Maria Vagliasindi (Lead Economist for Infrastructure, World Bank), Pranab Ghosh (Principal Investment Officer, Blended Finance, IFC) and Chun Lan Wang (Senior Investment Officer, Risk & Analytics, Treasury, World Bank). The team also thanks Deblina Saha (Senior Infrastructure Finance Specialist, World Bank) and Seong Ho Hong (Analyst, World Bank) for their input. Any inquiries on this knowledge product may be submitted to Henri Blas at hblas@worldbank.org and Manpreet Kaur Juneja at mjuneja1@worldbank.org. About PPIAF PPIAF helps developing country governments strengthen policy, regulations, and institutions that enable sustainable infrastructure with private sector participation. As part of these efforts, PPIAF promotes knowledge transfer by capturing lessons while funding research and tools; builds capacity to scale infrastructure delivery; and assists subnational entities in accessing financing without sovereign guarantees. Donor-supported and housed within the World Bank, PPIAF’s work helps generate hundreds of millions of dollars in infrastructure investment. While many initiatives focus on structuring and financing infrastructure projects with private participation, PPIAF sets the stage to make this possible. (http://www.ppiaf.org). Infrastructure Monitor 2024 Abbreviations 6 Abbreviations Abbreviation Description Abbreviation Description BID Benchmarking Infrastructure Development LMICs Low- and middle-income countries CDR Cumulative default rate MDB Multilateral development bank CPI Consumer price index MENA Middle East and North Africa DEI Diversity, Equity, and Inclusion NA North America DFI Development finance institution NGO Non-government organization EAP East Asia and Pacific P/E Price-to-earnings ratio ECA Export credit agency PCM Private sector mobilization ECA Europe and Central Asia PDF Project development fund EMDEs Emerging markets and developing economies PPA Power purchase agreement ESG Environmental, Social, and Governance PPF Project preparation fund G20 Group of 20 PPI Private Participation in Infrastructure GDP Gross domestic product PPP Public-private partnership GEMs Global Emerging Markets Risk Database SDG Sustainable Development Goals GHG Greenhouse gas emissions SOE State-owned enterprise HICs High-income countries SSA Sub-Saharan Africa IRR Internal rate of return WACC Weighted average cost of capital LAC Latin America and the Caribbean Infrastructure Monitor 2024 Glossary 7 Glossary Term Definition Infrastructure asset and corporate acquisition refers to the purchase of existing infrastructure assets or Acquisition companies that own and operate them. This is typically done by investors, infrastructure funds, or strategic buyers looking to gain ownership, control, or returns from operating infrastructure. Additional financing refers to supplemental funding provided to an existing infrastructure project that Additional financing has already received an initial round of financing but requires more capital to continue or complete implementation. Share price appreciation and income from regular cash distributions (cash dividend payments or capital Annual total return repayments) that are reinvested on the intended date, without considering withholding taxes. Availability-based payments are a type of payment mechanism used in infrastructure projects — especially Availability-based payment public-private partnerships (PPPs) — where the private operator is paid by the government or public authority based on the availability and performance of the infrastructure, rather than usage or demand. The use of catalytic capital from public or philanthropic sources to increase private sector investment in Blended finance sustainable development. It is a structuring approach that allows public, private, and philanthropic to work together to address the investment barriers while achieving their own objectives. Blended finance Funds in which investors from public and private sectors pool money to partner and support infrastructure infrastructure fund projects. A brownfield project refers to the redevelopment, upgrading, or expansion of an existing infrastructure. Brownfield An existing asset or structure that requires improvements, repairs, or expansion. The asset or structure is usually partially operational and may already be generating income. A type of finance that deals with the capital structure of a corporation, including its funding and the actions that management takes to increase the value of the company. The lender looks at the creditworthiness of Corporate finance the corporation including all the projects run by the company as opposed to project finance that focuses on a single project. A cross-border guarantee is a financial commitment provided by a guarantor (typically a bank, financial Cross-border guarantee institution, or government entity) in one country to cover the obligations or liabilities of a borrower or project located in another country. Infrastructure Monitor 2024 Glossary 8 Term Definition The weighted average marginal default rates (hazard rates) for all cohorts. The marginal default rate (hazard rate) is the ratio of the number of project defaults in a specific time period divided by the number of projects exposed to the risk of default at the beginning of that time period. For the purposes of this study, marginal default rates were calculated on a monthly basis. Cumulative default rates A default is assumed to take place on the date S&P Global Ratings revised the rating to ‘D’, which could occur when a payment on the issue is missed, a distressed exchange offer is completed, or the issuer filed for or was forced into bankruptcy. When an issue defaults, it is not uncommon for S&P Global Ratings to subsequently withdraw the ‘D’ rating. Cumulative private The total investment value of all the financial assets in a fund’s portfolio plus the fund’s dry powder. infrastructure capital Dividend refers to the share of a company’s profit paid to shareholders. Dividend yield is the ratio of Dividend yield dividends paid out each year, relative to its stock price. Capital committed by investors that is available to fund managers but has not yet been invested Dry powder or allocated (capital committed is the sum of unallocated capital and portfolio returns, minus any disbursements to investors). Equity investment Money that is invested in a company by purchasing shares. A function of the probability of default and ultimate recovery rates to indicate the creditworthiness of debt Expected loss obligations. Transaction stage where all financing documentation has been signed, all conditions precedent have been Financial close satisfied or waived, and initial drawdown is contractually possible. An infrastructure fund is a type of investment vehicle that pools capital from investors to invest in Fund infrastructure assets. Since there is no agreed global definition of a green project – for this report – it has been defined as either Green investment investment in renewables or investment financed with a sustainable financing instrument. Infrastructure Monitor 2024 Glossary 9 Term Definition Green unlisted equity The scope in this analysis covers investments in solar and wind projects worldwide to provide a unique view investment of the renewable energy sector. The scope in this analysis covers outstanding senior debt of the constituents of the infraGreen Equity index Green unlisted infrastructure which tracks over 100 investments in solar and wind projects worldwide and provides a unique view of the debt renewable energy sector’s performance. A greenfield infrastructure project refers to the construction of new infrastructure. An asset or structure that does not currently exist and needs to be designed and constructed. Investors fund the building of Greenfield the infrastructure asset as well as the maintenance once the asset has been designed and built and is operational. Debt that is believed to have a lower risk of default and thus receives higher ratings by the credit rating Investment grade agencies as Baa3 or higher (by Moody’s) or BBB- or higher (by S&P and Fitch). Investment time horizon Length of time for which money is held as an investment until investors need the money back. Investment value The market value of the portfolio (including mark-to-market gains from investments in infrastructure assets). Investment in shares of a company that are traded on a stock exchange. The shares are issued to the public Listed equity investment through an initial public offering (IPO). Non-availability-based Projects that do not have an availability-based revenue scheme. Such projects are subject to demand risk projects and/or price risk. Non-financial corporates Includes all the corporates excluding those operating in the financial sector. Includes unregulated corporate infrastructure i.e., unregulated electric and gas and unregulated water and Non-revenue-resilient waste utilities, transportation infrastructure corporates, and project finance other than availability-based infrastructure PPPs Infrastructure Monitor 2024 Glossary 10 Term Definition Infrastructure primary markets refer to the initial phase where capital is raised to finance new infrastructure Primary markets projects. This is where investors, lenders, or public entities provide funding directly for the development or construction of infrastructure assets—such as roads, power plants, water systems, or ports. Private infrastructure capital Capital invested is estimated using the ‘capital called up’ data series, which refers to capital committed by invested by funds private investors that has been called up for investment. Private infrastructure capital Aggregate capital raised by funds with a commitment to invest in the infrastructure asset class. raised by funds Funds in which private investors pool money to invest in infrastructure projects to achieve their risk-return Private infrastructure fund targets. Investment made by the private sector in infrastructure projects in primary markets (financed by private Private infrastructure and public financiers). Investment values represent commitments made at the financial close of investment investment and not executed investment. It includes both debt and equity transactions. A method of funding in which the lender looks primarily to the revenues generated by a single project, both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex, and expensive installations. This can include power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunication infrastructure. Project finance can include financing the construction of a new capital installation, or refinancing an existing installation, with or without improvements. In project finance transactions, the lender is usually paid solely or almost Project finance exclusively out of the money generated by the contracts for the facility’s output. This includes the electricity sold by a power plant. The borrower is usually an SPV that is not permitted to perform any function other than developing, owning, and operating the installation. The consequence is that repayment depends primarily on the project’s cash flow and on the collateral value of the project’s assets. In contrast, if repayment of the exposure depends primarily on a well-established, diversified, credit-worthy, and contractually obligated end user for repayment, it is considered a secured exposure to that end user. Project preparation/ Funds created to identify and prepare a pipeline of infrastructure projects. development funds An infrastructure Public-Private Partnership (PPP) is a long-term contractual arrangement between a Public-Private Partnership public authority and a private sector entity for the development, financing, construction, operation, and/or maintenance of infrastructure assets or services. Infrastructure Monitor 2024 Glossary 11 Term Definition Refinancing refers to the process of replacing an existing loan or financial structure with a new one, usually Refinancing to improve the terms of borrowing—such as lowering interest rates, extending repayment periods, or adjusting risk allocation. This group encompasses electric and gas utility companies that are influenced to a large degree by regulation. It includes investor-owned and commercially oriented government-owned companies that are engaged in the production, transmission, distribution and/or sale of electricity and/or natural gas, including Regulated power vertically integrated utilities and local gas-distribution companies. This group also includes companies that are primarily engaged in the transmission and/or distribution of electricity and/or natural gas in markets where these services are separated from supply and generation activities. They are monopoly providers of essential services and their activities and rates/tariffs are supervised by a regulator. Revenue-resilient Includes availability-based payments Public Private Partnership (PPPs) and regulated corporate infrastructure infrastructure including regulated electric and gas industry, and regulated water utilities The excess return investors expect to earn from their investments in addition to the prevailing risk-free Risk premium return. Scope 1 emissions, also known as direct emissions, are defined as emissions from sources that are owned or controlled by the organization. This might include, for example, natural gas combusted in a boiler at a Scope 1 emissions company’s head office. Scope 1 emissions physically occur in assets owned or controlled by the reporting company. Scope 2 emissions, also known as indirect emissions, are emissions from purchased electricity, heat, steam Scope 2 emissions or cooling consumed by the company, but generated elsewhere. Scope 3 emissions, or other indirect emissions, are emissions that occur as a consequence of the operations Scope 3 emissions of the organization but are not directly owned or controlled by that organization. Infrastructure secondary markets refer to the buying and selling of existing infrastructure assets or stakes Secondary markets in infrastructure projects after the initial financing and development phase (i.e., after the project is built or operational). Securitization Transaction in which a pool of assets is collateralised into one vehicle of loan products for sale. Infrastructure Monitor 2024 Glossary 12 Term Definition Senior secured debt Debt that is backed by collateral and has priority in repayment. Senior unsecured debt Debt that a company owes that takes priority over other debts and is not backed by collateral. Subordinated debt Debt that is paid after all other debts are repaid in the event of a borrower default. Recovery of trading prices on an issuer’s bonds 30 days after its initial missed payment or bankruptcy filing. Trading price recovery Such prices provide a useful and early indicator of ultimate recovery, especially in cases of bankruptcy, where it may take years for debt holders to know how much will ultimately be recovered. Recoveries following emergence from default. Emergence from default occurs after any of the following events: Repayment of overdue interest; Restructuring with no subsequent default; Restructuring with the Ultimate recovery lender out of the deal e.g. by repayment of the defaulted loan with no participation in a restructured debt facility; Material restructuring; Liquidation. Investment in shares of a company that are not traded on a public stock exchange and are privately held by Unlisted equity investment a limited number of investors. Unlisted infrastructure debt Debt associated with infrastructure assets that are not listed on a stock exchange. Volatility The extent of fluctuation in the value of an investment over a given period. Weighted average cost of It represents the average cost paid to finance assets. It measures the average cost of a company’s sources capital of capital (debt and equity) weighted by the proportion of each source in the total capital. Infrastructure Monitor 2024 List of Tables and Figures 13 List of Tables and Figures Chapter Title Page No. 1. Private investment in Private investment in infrastructure projects in primary markets 40 infrastructure (US$ billion, and number of transactions, all countries) Private investment in infrastructure projects in secondary markets (US$ billion, all countries) 40 Private investment in infrastructure projects in primary markets by income group 41 (% total private investment, HICs and LMICs) Private investment in infrastructure projects in primary markets by sector (% of GDP, all countries) 42 G20 infrastructure construction cost indexes (cost index adjusted for broader inflation, G20 only) 44 Private investment in infrastructure projects in primary markets by income group (US$ billion, HICs and LMICs) 46 Private investment in infrastructure projects in primary markets by region (US$ billion, all countries) 47 Private investment in infrastructure projects in primary markets by sector (US$ billion, all countries) 48 Private investment in infrastructure projects in primary and secondary markets by sector 49 (% of GDP, all countries) Green and non-green private investment in infrastructure projects in primary markets 50 (% of total private investment, all countries) Green private investment in infrastructure projects in primary markets by region 50 (% of total green investment, all countries, 2023) Private investment in renewable and non-renewable energy generation projects in primary markets by 51 income group (% of total energy generation private investment, HICs and LMICs) Private investment in energy generation projects in primary markets by income group and subsector 52 (% of total energy generation private investment, HICs and LMICs, 2023) Private investment in alternative fuel projects in primary markets (US$ billion, all countries) 52 Infrastructure Monitor 2024 List of Tables and Figures 14 Chapter Title Page No. Preparation of PPPs by region and income group (Average score 1-100, N=140) 53 Lowest adoption of good international practices by score area (%, N=140) 53 Financing of private investment in infrastructure projects in primary markets by financing instrument (US$ 54 billion and % of total private investment, all countries, 2023) Financing of private investment in infrastructure projects in primary markets by financier type 55 (US$ billion, all countries) Local currency financing of private investment in infrastructure projects in primary markets 56 (% of total private investment, LMICs) Local currency financing of private investment in infrastructure projects in primary markets by financier 56 source (% of total private investment, 2019-2023 average, LMICs) Financing of private investment in infrastructure projects in primary markets by financier mix 57 (% of total private investment in infrastructure projects, LMICs) 2. Infrastructure Funds Annual capital raised by funds for the infrastructure asset class by region (2010-2024, US$ billion) 59 Value of infrastructure assets managed by funds (2010-2024) 59 Risk-return profile of private infrastructure funds launched during 2010-2020 by risk strategy 60 Share of North America and Europe in private capital raised through infrastructure funds (%) 64 Factors driving private investors by asset class (% of surveyed investors) 66 Institutional investors: Target returns distribution by asset type (%) 66 Value of infrastructure assets managed by funds by risk strategy (% in total value) 67 Top challenges for return generation for the infrastructure asset class (% of surveyed investors, 2019 and 2023) 68 Annual return (Internal Rate of Return (IRR)) earned by funds by asset class (% 2016-2022 and 2022-2028F) 69 Aggregate capital raised by private infrastructure funds for the energy generation sector by subsector (%) 70 Infrastructure Monitor 2024 List of Tables and Figures 15 Chapter Title Page No. Aggregate capital raised by private infrastructure funds with exposure to energy storage (US$ billion) 70 ESG reporting requirements by type of private fund (%) 71 Infrastructure funds: Main challenges in implementing ESG policy 71 (% of infrastructure fund managers) Blended finance infrastructure funds: type of finance offered (% of funds) 73 Blended finance infrastructure funds: focus areas (% of funds) 73 Blended finance infrastructure funds: Geographical focus (% of funds) 74 Financing used for creation of blended finance infrastructure funds by financing type and geographical 74 focus (% of total financing) Private investment with and without Project Development Fund (PDF) (% of GDP, 2020-2022) 75 Project preparation costs can average up to 10 percent of the project cost (% of total project cost) 76 Scope of PPF support for project preparation (% of total) 76 3. Financial performance of infrastructure Private investment in infrastructure projects by financial product (% of total private investment) 78 investment Loans default rates (DR): Infrastructure vs non-infrastructure (%) 79 Equity risk-return: Infrastructure vs non-infrastructure (%) 80 Average increase in net asset value of global infrastructure equities by factor and time period (%) 82 Risk premium of unlisted infrastructure equities (%) 83 Cost of Capital by market and year (%, 2019-2024) 83 Unlisted infrastructure equities: Return and risk by market and investment time horizon (%) 84 Green unlisted infrastructure equities: Return and risk by investment time horizon (%) 85 Infrastructure Monitor 2024 List of Tables and Figures 16 Chapter Title Page No. Global return on capital employed by transport subsectors (%, 2009-2023) 86 Global listed equity markets: Financing scale in context of infrastructure needs 87 Stock market traded value for 46 countries with a value of greater than 1% (% of GDP, 2019) 87 Listed equity markets: Gross annual average returns by investment time horizon 88 (US$ %, as of October-end 2024) Listed equity markets: Volatility in returns by investment time horizon (US$ %, as of October-end 2024) 89 Top two factors that drive return for listed infrastructure equities by market (as of October-end 2024) 90 Cumulative default rates of rated debt by asset class, rating category, and loan duration (%, 1983-2023) 92 Share of investment-grade rated debt securities in total rated debt securities by asset class (%, 1983-2023) 93 Average trading price recovery rates for rated infrastructure corporate and project finance debt securities 94 by debt seniority and asset class (%, 1983-2023) Average ultimate recovery rate for unrated infrastructure project finance loans by income group and 94 asset class (%, 1983-2021) Cumulative Default Rates (5-year) for rated infrastructure debt by revenue resilience (%, 1995-2023) 95 Credit risk metrics for infrastructure debt by project type and payment mechanism (%, 1983-2020) 96 Credit risk metrics for infrastructure project finance loans by green tag (%, 1983-2020) 97 Cumulative default rate for infrastructure debt by country income group (%) 98 Credit risk metrics for MDB/DFI contracts with private counterparts by asset class (%, 1994-2022) 99 Credit risk metrics for MDB/DFI contracts for energy sector in low- and middle-income countries by type of 100 counterpart (%, 1994-2023) Cumulative default rates for infrastructure debt in power sector by country income group (%) 101 Unlisted infrastructure debt: Return and risk by market and investment time horizon (%) 102 Infrastructure Monitor 2024 List of Tables and Figures 17 Chapter Title Page No. Green unlisted infrastructure debt: Return and risk by investment time horizon (%) 103 4. Environmental, Social, and Governance (ESG) GRESB ESG Score for infrastructure assets (0=worst and 100=best, 2018-2024) 105 factors in infrastructure Identification and assessment of climate risks by type (% of reporting assets, 2023 vs. 2024) 106 ESG Scores for infrastructure assets by ESG pillar (0=worst and 100=best, 2023 vs. 2024) 107 Infrastructure assets that have a GHG emissions target aligned with net zero (% of reporting assets) 108 Infrastructure assets that have a GHG emissions target aligned with net zero and is aligned with a net zero 108 target-setting framework (% of targets) Infrastructure assets that have a GHG emissions target aligned with net zero and is 108 science-based (% of targets) Infrastructure assets that have a GHG emissions target aligned with net zero and is publicly communicated 108 (% of targets) Infrastructure assets that have a GHG emissions target aligned with net zero and includes an interim target 108 (% of targets) Net zero targeting by type and region (% of emissions scopes covered by targets) 109 Net zero targeting by type and sector (% of emissions scopes covered by targets) 109 Physical risk identified by risk type (% of reporting assets that identify physical risk) 110 Material financial impacts identified by impact type (% of reporting assets that assess impact of financial risk) 110 Transition risk identified by risk type (% of reporting assets that identify transition risk) 111 Commitment to DEI by sector (% of reporting assets) 112 Commitment to DEI by region (% of reporting assets) 112 Infrastructure Monitor 2024 List of Tables and Figures 18 Chapter Title Page No. 5. Blended finance Blended finance infrastructure deals (2000-2024): Private capital mobilization ratio by range and guarantees in 114 of values (% share of deals) infrastructure Impact of guarantees on private commercial debt mobilization 115 Global cross-border guarantees by type: New commitments value (US$ billion) 117 Global cross-border guarantees performance by sector (%, average 2021-2023) 117 Blended finance infrastructure deals: Private capital mobilization ratio by time period 119 Blended finance infrastructure deals: Private capital mobilization ratio by range of values (2000-2024, %) 120 Blended finance infrastructure deals by use of guarantee: Impact of guarantees on private commercial debt mobilization and Mobilization of private equity and private commercial debt by use of guarantees holding 121 concessional capital and grants constant at $1 (2000-2024) Blended finance infrastructure deals by use of guarantee and time period (2010-2024) 122 (Shares of financial instruments in deal value,%) Blended finance infrastructure deals by use of guarantee and time period (2010-2024) 122 Blended finance infrastructure deals by operating structure (2000-2024) 123 Blended finance infrastructure deals: Geographical use by operating structure (2000-2024) 124 (Shares in total number of deals, %) Blended finance infrastructure projects by country income groups (2000-2024) 126 Impact of political risk insurance on financing costs by country’s credit rating 127 Blended finance infrastructure projects by country income groups (2000-2024): Private capital mobilization 128 ratios and Investors’ shares in a typical project Blended finance infrastructure projects by region (2000-2024): Project characteristics and Private capital 129 mobilization ratios Blended finance infrastructure projects by sector (2000-2024): Project characteristics and Private capital 130 mobilization ratios Infrastructure Monitor 2024 List of Tables and Figures 19 Chapter Title Page No. Blended Concessional Finance and Grants for Private Sector Projects Shares by financial instruments, 131 sector and year (%, 2019-2021) Blended finance infrastructure companies by use of guarantee (2000-2024): Private capital mobilization 133 ratios and Shares in a company’s deal value by financial instruments Blended finance infrastructure bonds by use of guarantee (2000-2024): Private capital mobilization ratios 134 and Shares in total bond value by financial instruments Global cross-border guarantees by guarantee type: New commitments value (US$ billion, 2017-2023) 136 Share of risk type by region in total claims paid to non-performing loans (%, 2023) 138 Global cross-border guarantees for longer-tenor business by provider type: 138 New commitments value US$ billion, 2017-2023) Global cross-border guarantees by guarantee type and country income group 138 (% of new commitments value, 2020) Share of infrastructure in medium/long-term and political risk cross-border guarantees by country income 139 group (%, 2020) Average country risk premium by country income group (%, 2024) 139 Sovereign debt rating level: Share by country income group (%, 2024) 139 Global cross-border guarantees: Medium/long-term and political risk Claims ratio by sector 140 (%, average 2021-2023) Global cross-border guarantees: Medium/long-term and political risk Recoveries relative to 3-years’ claims 140 paid by sector (%, average 2021-2023) Executive summary Infrastructure Monitor 2024 Executive summary 21 Greenfield investment continues to rebound in developed markets, while growth in emerging markets lags Global private investment in infrastructure projects in primary markets rose notably in nominal terms in 2023, increasing by 10 percent. The majority of this growth took place in developed markets, while low- and middle-income countries (LMICs) experienced a slight decline. This marks a continuation of strong post-pandemic growth, with investment levels significantly higher than the five-year average (2018-2022). However, infrastructure delivery costs have increased significantly in the meantime — potentially 10 percent above inflation based on the construction cost index across G20 countries — necessitating a cautious interpretation of the trend especially for greenfield projects. Meanwhile, secondary market investments declined by 17 percent in 2023, largely due to reduced acquisition activity, a reflection of the impact of higher interest rates on asset valuations. The share of LMIC countries for secondary market continued to decrease slightly and only represented around 12 percent of the global volumes. Preliminary data for 2024 indicates some significant rebound for secondary activities as many central banks globally initiated interest rate cuts, driven by declining inflationary pressures. Private investment in infrastructure projects in primary markets Private investment in infrastructure projects in secondary markets (US$ billion, all countries) (US$ billion, all countries) 1,600 20% 400 112 G20 countries Av 2015-2017 = 100 18% Cost index over GDP Deflator 350 110 16% LMIC % share of global 300 108 1,200 private investment 14% 106 US$ billion US$ billion 250 12% 104 200 800 10% 102 8% 150 100 6% 100 400 98 4% 50 96 2% 0 94 0 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Deals volume (nominal) — LMICs Deals volume (nominal) — HICs Acquisitions Refinancing Additional Financing Other LMICs% Construction cost above inflation (average across G20 countries) Source for volumes: Authors’ analysis based on Realfin data, PPI database and IMF Outlook Source for construction cost index: Data from G20 agencies – see Chapter 1 for detailed sources Note: Throughout this report, private investment in infrastructure projects refers to private sector investment in infrastructure projects in primary markets (financed by private and public financiers) including greenfield and brownfield infrastructure, as well as privatizations, unless otherwise specified. Investment values represent commitments made at the financial close of investment and not executed investment. ‘Acquisitions’ includes corporate and asset acquisitions, and ‘Other’ includes transactions such as securitizations. The data does not capture the entirety of corporate investment and therefore represents a subset of total private sector investment. Chapter 1 of this report provides detailed data by market Infrastructure Monitor 2024 Executive summary 22 Rising interest rates weigh on acquisitions and fundraising Investor sentiment surveys also highlighted rising interest rates as the primary challenge in generating attractive returns and this has tempered return expectations across most infrastructure fund types. Consequently, infrastructure fundraising also faced significant challenges in 2023, with total capital raised dropping to $94.9 billion, nearly half of 2022 levels. While the decline stabilized in 2024, fundraising remained subdued, reaching $70.5 billion by Q3. Despite these challenges, investment from infrastructure funds – still stocked with significant dry powder — is expected to remain relatively resilient compared to other asset classes. Between 2016 and 2022, infrastructure funds yielded an average return of 11.3 percent, with only a slight projected decline to 10.9 percent over 2022-2028. This is in contrast to steeper declines forecasted for private equity and venture capital, thereby improving the relative attractiveness of infrastructure funds for equity investors. Top challenges for return generation for the infrastructure Annual capital raised by funds for the infrastructure asset class by asset class (% of surveyed investors, 2019 and 2023) region, 2010-2024 (US$ billion) 21% Rising interest rates 65% 35% 180 Geopolitical landscape 32% 160 49% Asset valuations 30% 140 40% Competition for assets 29% 120 US$ billion 23% Regulation 28% 100 15% Exit environment 26% 80 17% Deal flow 20% 60 3% Currency market volatility 10% 40 2% Commodity market volatility 20 9% 4% Stock market volatility 0 7% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Q1-Q3 0% 10% 20% 30% 40% 50% 60% 70% 2019 2023 North America Europe Asia Pacific Rest of World Source: Preqin Investor Survey, Global Infrastructure Report 2024 Source: Preqin Global Infrastructure Report 2025 Chapter 2 of this report provides detailed data on infrastructure fund raising and investors’ sentiment Infrastructure Monitor 2024 Executive summary 23 Infrastructure demonstrates resilience amid macroeconomic uncertainty Despite evolving market conditions and differences across markets, private infrastructure financing has maintained a stable debt-to-equity ratio over the past decade, with debt financing comprising 77 percent of total investment in 2023. Infrastructure debt remains attractive to investors due to its reliable cash flows and historically lower default rates compared to non-financial corporate debt — a trend consistent across countries of all income levels. Even in non-investment-grade categories, infrastructure debt demonstrates stronger credit performance and higher recovery rates upon default than non-infrastructure debt. This bodes well for investors as they still prefer low-risk strategies for infrastructure investment. The presence of contractual provisions and revenue resilience further enhances infrastructure debt stability. Revenue-resilient infrastructure is defined to include availability-based payments Public Private Partnership (PPPs) and regulated corporate infrastructure including regulated electric and gas industry, and regulated water utilities, according to Moody’s. Between 1995 and 2023, revenue-resilient infrastructure loans had a five-year cumulative default rate (CDR) of just 0.7 percent, compared to 5.4 percent for non-revenue-resilient infrastructure debt. Availability- based public-private partnerships (PPPs) and regulated utilities exhibited particularly low default rates, reinforcing the importance of well- structured financing models. Those schemes can indeed reduce project risks and the likelihood of default by ensuring predictable cash flows, but they can also impose significant fiscal commitments on governments (for example, renegotiation or bailout, contingent liabilities, exchange rate and inflation risk compensation, underperforming assets or projects, etc.). While this is true for LMICs as well, there is scope to strengthen the contractual and regulatory arrangements to further lower the default rates. Loans default rates (DR): Infrastructure vs non-infrastructure Average trading price recovery rates for rated infrastructure corporate and project finance debt securities by debt seniority and asset class (%, 1983-2023) Global (20-year cumulative DR) 70 Senior secured 55 LMICs (20-year cumulative DR) 61 Senior unsecured 38 LMICs MDB/DFI with private counterparts (Average annual DR 1994-2022) 38 Subordinated 32 0% 2% 4% 6% 8% 10% 12% Loan default rates 0 10 20 40 60 80 Non-infrastructure Infrastructure Green infrastructure Infrastructure Non-financial corporates This graph illustrates the materially lower DR for infrastructure than non-infrastructure Source: Moody’s (2023a), Moody’s (2023b). across leading data sources (Moody’s, S&P, and GEMs) Note: Estimates for trading price recovery rates are based on 1,146 rated corporate Note: Metrics from Moody’s and GEMS differ slightly and cannot be compared directly infrastructure and project finance debt securities that originated from 1983-2023. Chapter 3 of this report provides detailed data on infrastructure financial performance across equity (listed and unlisted) and debt markets Infrastructure Monitor 2024 Executive summary 24 Policy and incentive changes set to influence investor strategies and sector priorities Since 2013, renewable energy and transport have consistently dominated primary market infrastructure investment, together accounting for two-thirds of total activity. Digital infrastructure has emerged more recently as a key sector, driven by Covid-related stimulus and the rapid pace of digital transformation. In 2022, transport briefly surpassed renewables, largely due to several large-scale transactions in North America. However, renewable energy rebounded strongly in 2023, with investment more than doubling and reclaiming its leading position. Within the renewables space, private investment in hydrogen projects surged by over 400 percent, spurred by targeted policy incentives — though solar and wind continue to represent the bulk of activity. Digital infrastructure, along with energy storage, transmission, and distribution, accounts for a significantly larger share of secondary market transactions, as corporates continue to invest in expanding and upgrading their networks. Trends in LMICs generally mirror global patterns across both primary and secondary markets, though with a greater emphasis on transport and a smaller share of digital infrastructure compared to high-income countries (HICs). Private investment in infrastructure projects in primary and secondary markets by sector (% of GDP, all countries) Primary markets Secondary markets 0.4% 1.4% 1.2% % of GDP % of GDP 0.3% 1.0% 0.8% 0.2% 0.6% 0.4% 0.1% 0.2% 0.0% 0.0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Digital infrastructure Waste Water Social infrastructure Energy (General) Gas storage, transmission & distribution Energy storage, transmission & distribution Non-renewable energy Renewable energy Transport Source: Authors’ analysis based on Realfin data. Infrastructure Monitor 2024 Executive summary 25 As shown in the two graphs above, infrastructure investments classified as green — whether through direct renewable energy projects or sustainability-linked financing — have grown steadily over the past decade, in particular for primary market activity for which it now represents half of the volumes. This upward trend reflects broader shifts in policy, with many governments committing to carbon neutrality and tightening ESG disclosure requirements. In response, asset managers are increasingly integrating sustainability and climate risk considerations into their investment decisions. The graph below illustrates both the sectoral evolution of primary market investments and the rise in ESG scores across a large global sample of infrastructure assets. Private investment in infrastructure projects in primary markets by sector – 3 year moving average 100% 100 Renewable energy Non-renewable energy % share of total private investment 80% 80 Energy storage, transmission & distribution (0=worst and 100=best) Average ESG Score 60% 60 Transport Waste & water 40% 40 Social Digital infrastructure 20% 20 GRESB ESG score for 0% 0 infrastructure assets 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (H) Source: Authors’ analysis based on RealFin and GRESB Infrastructure Asset Assessment. GRESB data covers 720 assets across 81 countries. Data for the GRESB Infrastructure Asset Assessment is provided and self-reported on a voluntary, opt-in basis. Resultingly, the analysis is not totally representative of the state of ESG for infrastructure assets across the world. In 2024, 88 percent of the participating assets in the assessment came from high-income countries. Notes: While ESG Scores have been subject to some methodological changes and changing component weights over time, they are still comparable across years. Chapter 4 of this report provides ESG and climate-alignment metrics at the asset-level data Infrastructure Monitor 2024 Executive summary 26 Despite this momentum for new Value of infrastructure assets managed by funds by risk strategy sectors and financing instruments, (% in total value) private infrastructure investors remain Low risk High risk focused on opportunities that offer long-term predictability. Infrastructure 2023 funds allocate over 70 percent of 2022 capital to low-risk strategies (debt, 2021 core, and core-plus investments), while 2020 higher-risk opportunistic strategies 2019 have declined from 10 percent in 2010 2018 to 6 percent in 2023. 2017 2016 Higher-risk strategies have not 2015 consistently delivered higher returns, 2014 with increased volatility outweighing 2013 potential gains. Aligning with 2012 government policies, managing the 2011 risk of stranded assets, and leveraging 2010 incentives are therefore likely to be 0% 20% 40% 60% 80% 100% crucial for driving growth in these and other emerging sectors — at least until Debt Core Core plus Value added Opportunistic they achieve financial sustainability on Source: Preqin (2024b) their own. Infrastructure Monitor 2024 Executive summary 27 Shifting market conditions and policies widen investment gaps Among markets, a growing divergence in investment levels between HICs and LMICs continued in Share of North America and 2023. HICs saw a 15 percent increase in infrastructure investment in primary markets, compared to a Europe in private capital raised small decline in LMICs. through infrastructure funds (%) Beyond primary markets, high-income volumes have also increased significantly faster than in LMICs — in particular across secondary markets – and overall LMICs represent less than 20 percent 2020-24 of the overall volumes compared to 30 percent a decade ago. And while investment in LMIC markets rose, it was driven by an increasing concentration of investment in the largest LMIC markets — China, India, Brazil, Mexico, Turkiye and Indonesia — whose collective share of private investment 2015-19 rose from 66 percent (2013-2019) to 71 percent (2021-2024) in primary and secondary markets. Fundraising also remains heavily concentrated in North America and Europe, in part due to strong investment incentives in developed markets, particularly for energy transition initiatives. In contrast 2010-14 secondary market activity was more impacted in HICs than in LMICs as the increase in interest rates in these markets was proportionally less dramatic. 0% 20% 40% 60% 80% 100% Source: Preqin Global Infrastructure Report 2025 Private investment in infrastructure projects in Private investment in infrastructure projects primary markets by income group in primary and secondary markets by income group (% total private investment, HICs and LMICs) (% total private investment, HICs and LMICs) 100% 100% % of total private investment 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 High-income Low- and middle-income LMICs excluding Top6 LMICs Top6 High-income Source: Authors’ analysis based on Realfin data | Note: The top 6 LMICs are Brazil, China, India, Indonesia, Mexico and Turkiye Infrastructure Monitor 2024 Executive summary 28 Strengthening regulatory frameworks is critical to accelerating investment in emerging markets To address investment gaps in emerging markets, strengthening regulatory frameworks remains essential for attracting private capital. New data from the World Bank’s Benchmarking Infrastructure Development study shows that each improvement in regulatory frameworks can increase investment by approximately $500 million. The availability of Project Development Funds (PDFs) is also positively associated with private capital mobilization although PDFs appear less impactful in low-income countries where the pre-conditions for mobilizing private investment are not sufficient. Private investment with and without Project Regulatory PPP reforms associated with almost Development Funds (PDF) (% of GDP, 2020-2022) US$488 million increase in infrastructure PPP investments* High income Upper middle income Lower middle income US$488 mil. increase in infrastructure PPP investments Low income 0.0% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% Without PDF With PDF Source: World Bank BID and RealFin Note: *The correlation was determined using data from the average country in the Note: The sample size for Low income and With PDF is too small to be representative sample, which has a gross domestic product (GDP) per capita of US$4,000, spanning the years 1990 to 2019. Infrastructure Monitor 2024 Executive summary 29 Development institutions remain key to mobilizing private capital in emerging markets In 2023, whilst 63 percent of total private investment was solely financed by private investors in primary markets in LMICs, much of the remaining investment was underpinned by development institutions such as multilateral development banks (MDBs) and development finance institutions (DFIs). Development institutions formed part of the financier mix for 30 percent of total private investment i.e., they provided co-financing, in addition to other private investors. However, directly, development institutions only provided financing for 10 percent of total private investment in LMICs, highlighting their degree of involvement and pivotal role in mobilizing private capital into infrastructure markets, particularly in LMICs. More generally MDBs and DFIs remain critical in catalyzing private investment – especially in lower-income and smaller markets. In middle-income markets, it gives way to government own funding and a larger commercial financing stack. In 2023 infrastructure-related total private mobilization by MDBs/DFIs was particularly effective across all emerging markets with a 23 percent increase in 2023 compared to 2022 according to the 2023 Joint Report: Mobilization of Private Finance by MDBs and DFIs. Financing of private investment in infrastructure projects in primary markets by financier mix (% of total private investment in infrastructure projects, LMICs) 100% Private with MDB Private with MDB and DFI 80% % of total private investment in Private with Blended and DFI infrastructure projects 60% Private with ECA or non-MDB DFI Private with state and DFI 40% Private with SOE 20% Private institutional Private only 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Authors’ analysis based on Realfin data Note: Includes only transactions for which financier details are available. Financier type data was only available for 80 percent of total private investment from 2013-2023. ‘Development institutions’ for the purpose of this analysis includes MDBs, DFIs, and blended DFIs. Infrastructure Monitor 2024 Executive summary 30 Guarantees and blended finance offer targeted solutions to bridge investment gaps Within the approaches developed by DFIs, blended finance and guarantees offer targeted solutions to bridge market gaps. While definitions and data on blended finance remain difficult to gather consistently, evidence gathered for this report underscores its potential to attract private investment through the strategic use of public and philanthropic capital. While private capital mobilization ratios vary widely across income levels, regions, and sectors, approximately 20 percent of infrastructure deals mobilized more than $2 of private capital for every $1 of non-private capital, underscoring the potential for scaling successful approaches. As innovative approaches continue to be deployed, data and examination of high-performing deals will provide valuable insights to refine and enhance blended finance strategies in infrastructure. For example, while projects comprised the majority of blended finance transactions, bonds and corporate investments exhibited higher leverage ratios, demonstrating greater private capital mobilization potential. To address shortcomings within the regulatory environment and other local risks, guarantees appeared to be particularly effective for private capital mobilization - increasing the share of commercial debt by covering some default risk. Evidence gathered a large sample of blended finance deals showed that those backed by guarantees had 80 percent private commercial debt participation, compared to 42 percent for non- guaranteed deals and that their coverage remains critical in lower-income countries. However, since the COVID-19 pandemic, the availability of cross-border guarantees for infrastructure deals has barely recovered while financing and delivery costs have increased significantly. Number of deals Average deal value Private capital Global infrastructure cross-border guarantees: in sample (US$ million) mobilization ratios new commitments value (US$ billion) (Shares, %) Median values 20.8 17% 99 1.0 27.7 11% US$ billion 19 20% 142 1.3 20.9 16.9 11 328 0.6 18 52% 16.8 23.9 20.4 304 0.6 12.8 8 0 100 200 300 400 0.0 0.5 1.0 1.5 2020 2021 2022 2023 Company* Bond/note Fund/Facility Project Renewable energy Non-renewable energy Other infrastructure Source: Authors analysis based on Convergence database. Source: International Union of Credit and Investment Insurance Industry Reports, Note: The analysis is based on 407 blended finance infrastructure deals for which data 2020-2024 was available. Note: Data by sector includes medium and long-term, political risk, and other cross- border guarantees. Other Cross-Border guarantees are included in the estimates because of their strategic shift towards long-term solutions and the overall greater support through non-traditional products. Chapter 5 of this report provides detailed data on blended finance and the use of cross-border guarantees Infrastructure Monitor 2024 Executive summary 31 Opportunities to expand Local currency financing of private investment in infrastructure projects in primary markets by financier source local currency financing and (% of total private investment, 2019-2023 average, LMICs) capital markets beyond major Secondary markets Primary markets LMICs HICS In 2023 in LMICs, 37 percent of financing for private investment in infrastructure projects in primary markets is local currency financing – a 16 percentage point decrease from 2022 when more than half of financing was conducted in local currency. Local currency financing can LMICs Top6 protect against foreign exchange volatility, strengthen local markets, and attract local investors. The top 6 LMICs have however a much greater LMICs Others proportion of local currency financing (LCF) when measured up against other LMICs and closer to HICs ratios, from both private and non-private financing sources – 61 percent of investment, 100% 75% 50% 25% 0% 25% 50% 75% 100% compared to 21 percent. Private LCF Private FCF Non-private LCF Non-private FCF Other LMICs rely more heavily on financing from Source: Authors’ analysis based on Realfin data. non-private sources, with more of the investment Note: Includes only transactions for which transaction currency and financier details are available. Currency data coming from financiers like development was only available for 64 percent of private investment in LMICs – with 75 percent of the financier types known institutions, who tend to provide finance in foreign within these. The top 6 LMICs are Brazil, China, India, Indonesia, Mexico and Turkiye. currencies (FCF). Infrastructure Monitor 2024 Executive summary 32 Another opportunity for emerging markets is leveraging capital markets. Banks and loans remain the leading financier and main financing instrument for infrastructure projects in primary markets. In recent years, as traditional sources such as concessional finance and government budgets face constraints, there also has been a growing shift toward leveraging domestic and international capital markets to mobilize long-term funding at scale. Emerging market governments and infrastructure developers are increasingly turning to instruments such as green, sustainability-linked, and project bonds to attract institutional investors seeking stable, long-duration assets. This potential is however still mostly captured in the large LMICs markets. Financing Financing of private investment projects inin infrastructure projects in primary 2019-2023 of private investment in infrastructure markets primary markets by financier type (US$ billion, all countries) By financier type (US$ billion, all countries) By tranche type (% shareTranche types investment, 2019-2023) of total private 20% 400 US$ billion private investment 15% 300 % share of total 200 10% 100 5% 0 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 LMICs Top 6 LMICs Others HICS Commercial bank, investment bank Developer Infrastructure and other financial services company SL Bonds Other Bonds Asset manager Public Sector and State-owned Enterprise (SOE) Source: Authors’ analysis based on Realfin data. State bank National Development Bank Multilateral Development DFI and blended funds Bank (MDB) The top 6 LMICs are Brazil, China, India, Indonesia, Mexico Export Credit Agency (ECA) Insurance Pension fund and Turkiye. company SL bonds refer to both green bonds and sustainability-linked bonds. Other fund Private (Other) Unknown Infrastructure Monitor 2024 Executive summary 33 Conclusion and report structure Private investment in infrastructure has encountered considerable volatility — particularly in fundraising and secondary markets — while primary market investment has continued to rebound from the impacts of COVID-19, supported by substantial incentives in developed markets. The increased dominance of renewables and digital infrastructure demonstrated how sectoral priorities for investors respond quickly to government policy priorities and disclosure requirements with ESG considerations playing an increasingly central role. At the same time, secondary market activity has faced headwinds from higher interest rates and shown how overall economic conditions can impact investors appetite in the infrastructure asset class. Recent macroeconomic shifts, particularly interest rate hikes, are reshaping return expectations, but infrastructure investment has demonstrated resilience. Investors prefer infrastructure for its lower risk and volatility in returns than non-financial corporates. Infrastructure debt continues to exhibit lower default rates and higher recovery rates than non-financial corporate debt. This bodes well for investors especially during the current economic environment characterized by high uncertainty and increased investors’ risk aversion. For markets in which the risks remain high and especially smaller markets, the involvement of MDBs and DFIs and Government remain critical. Data also shows that blended finance and guarantees can be effective tools for mobilizing private capital in such markets. Going forward, closing the investment gap between HICs and LMICs will require targeted policy interventions, regulatory strengthening, and innovative financing solutions to unlock greater private sector participation in sustainable infrastructure development. The full report offers deeper insights and is structured across the following chapters: • Chapter 1: Private investment in infrastructure • Chapter 2: Infrastructure funds • Chapter 3: Financial performance of infrastructure investment • Chapter 4: Environmental, Social, and Governance (ESG) factors in infrastructure • Chapter 5: Blended finance and guarantees in infrastructure Private investment in infrastructure INTRODUCTION This section presents data and analyses related to levels of private investment in infrastructure. Unless otherwise stated, the analyses refers to private sector investment in primary market projects financed by public as well as private financiers, including greenfield projects (new projects on undeveloped sites), brownfield projects (construction on previously developed sites, such as upgrades), and investment via the privatization of public sector assets. Compared to previous years’ reports, and for select insights, the analyses has been extended to investment in secondary markets and additional financing.​ Similar to Monitor 2023, the analyses draw on a project-by-project dataset developed in partnership with Realfin, which has a more Note the following: comprehensive coverage of transactions. Additionally, the new • The dataset focuses on project-based private investment dataset also incorporates supplementary information from The World and does not capture most corporate private investment in Bank’s Private Participation in Infrastructure (PPI) database, which infrastructure, which may represent a significant portion of focuses on private participation in infrastructure project in low- and private investment in some infrastructure sectors. For example, middle-income countries. ​ balance sheet financing is estimated to account for 70 percent With this additional coverage, the consolidated dataset represents of total private investment in renewable energy. the most comprehensive global dataset on project-based private • Coverage of green, sustainable, and sustainability-linked bonds investment in infrastructure. However, it is important to note that is limited, particularly as use-of-proceeds (intended and actual) (a) project-by-project validation of the 40,000+ transactions in the are typically not reported and difficult to identify as either dataset was not possible, and discrepancies may exist, and (b) it primary or secondary investment. remains incomplete—meaning the figures presented in this section The estimates in this report are best interpreted as indicative of likely underestimate the true levels of global private investment in the broad trends in the size and nature of private infrastructure infrastructure. investment. Infrastructure Monitor 2024 Overview 36 Private investment in infrastructure projects in primary markets continued their post-pandemic rise in 2023, while secondary market activity slowed amid rising interest rates. In 2023, global private investment in infrastructure Private investment in infrastructure projects in primary markets OVERVIEW projects in primary markets increased by 10 (US$ billion, and number of transactions, all countries) percent, continuing its post-pandemic rise to 500 1,600 be 46 percent higher than its five-year average No. of transactions 400 1,200 (2018-2022). This followed an eight-year period of US$ billion stagnation prior to 2022. Regionally, the Middle 300 800 East and North Africa (MENA) region saw notably 200 strong investment growth in 2023, while the level 400 100 of investment in North America remained at a decade-high. However, infrastructure delivery costs 0 0 have increased significantly in the meantime — 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 around 10 percent above inflation — necessitating Private infrastructure investment (left-axis) No. of transactions (right-axis) a cautious interpretation of the trend, especially for greenfield projects. Private investment in infrastructure projects in secondary markets In contrast, global private investment in (US$ billion, all countries) infrastructure projects in secondary markets 1,600 decreased by 17 percent in 2023, driven by a decline in acquisitions, although it remained 1,200 US$ billion higher than pre-pandemic levels in 2019. The 800 overall decline in secondary market activity is likely to reflect higher interest rates and investors 400 moving away from secondary markets, once seen as a safe haven amid heightened global 0 uncertainty during the pandemic. 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Acquisitions Refinancing Additional Financing Other Source: Authors’ analysis based on Realfin data. Note: Throughout this report, private investment in infrastructure projects refers to private sector investment in infrastructure projects in primary markets (financed by private and public financiers) including greenfield and brownfield infrastructure, as well as privatizations, unless otherwise specified. Investment values represent commitments made at the financial close of investment and not executed investment. ‘Acquisitions’ includes corporate and asset acquisitions, and ‘Other’ includes transactions such as securitizations. Infrastructure Monitor 2024 Overview 37 However, growth in primary markets was uneven and likely insufficient to close the infrastructure gap – especially in emerging economies. In 2023, private investment in infrastructure Private investment in infrastructure projects in projects in primary markets increased by 15 primary markets by income group OVERVIEW percent in high-income countries (HICs) and fell (% total private investment, HICs and LMICs) by 2 percent in low- and middle-income countries 100% (LMICs). Levels of investment in LMICs remain % of total private investment below 2019 levels and represent under a quarter 80% of total global investment. This disparity is also evident on a share of GDP basis, with the gap 60% between HICs and LMICs further widening in 2023. There are also disparities within LMICs, with 40% an increasing share of primary and secondary investment concentrated in the largest LMIC 20% markets – China, India, Brazil, Mexico, Indonesia and Turkiye. These markets also see a higher 0% proportion of local currency financing compared 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 to other LMICs and are also more likely to have projects financed solely by private investors. High-income Low- and middle-income Development institutions, such as MDBs and Source: Authors’ analysis based on Realfin data. DFIs, play a critical role in LMICs and are directly involved as a co-financier in 30 percent of total private investment in these markets. The current pace of increase – especially in emerging markets — remains inadequate to meet the estimated doubling of infrastructure investment required to bridge the infrastructure gap and does not fully realize the potential of private capital to complement public funding. Infrastructure Monitor 2024 Overview 38 Investment continues to be dominated by renewables and transport, although digital infrastructure is emerging as a rapidly growing sector. Renewable energy and transport have consistently Private investment in infrastructure projects in dominated private investment in infrastructure primary markets by sector OVERVIEW projects, together accounting for an average (% of GDP, all countries) two-thirds of total investment since 2013. While 0.4% transport led in 2022, renewables regained the lead in 2023, with investment more than doubling due to a surge in hydrogen and continued growth 0.3% in wind and solar which remained the most prevalent technologies. % of GDP 0.2% Green investment (either renewables or investment financed with a sustainable financing instrument) has been rising for the past 10 years 0.1% and now accounts for a record 62 percent of total private investment. At the same time, as digital connectivity 0.0% accelerates worldwide, digital infrastructure has 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 emerged as a top-performing sector with record Waste Energy (general) Water Transport Renewable energy growth over the past three years. Digital infrastructure Social infrastructure Non-renewable energy Gas storage, transmission & distribution Despite evolving sectoral preferences over the Energy storage, transmission & distribution past decade, private infrastructure financing has maintained a stable debt-to-equity ratio, with debt financing comprising 78 percent of total Source: Authors’ analysis based on Realfin data. investment in 2023. Infrastructure Monitor 2024 Investment trends 39 In 2023, private investment in infrastructure projects in primary markets continue to rise post-pandemic. • In 2023, global private investment in Private investment in infrastructure projects in primary markets infrastructure projects in primary markets (US$ billion, and number of transactions, all countries) increased by 10 percent to US$380 billion. 1,600 500 Investment continues to sit well over pre-pandemic levels after an eight-year period 400 of stagnation prior to 2022, being 45 percent 1,200 No. of transactions higher in value than the past five-year average US$ billion (2018-2022). 300 800 • Post-pandemic, the data shows a second period 200 of significant growth, indicating a promising recovery, and suggesting an upward trend in 400 investment. However, there is still insufficient 100 years’ data to confirm a lasting shift in this trend. 0 0 • The number of transactions decreased slightly in 2023 by 5 percent to reach 1,100 transactions, 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 but the average transaction size increased to Private infrastructure investment (left-axis) No. of transactions (right-axis) approximately US$0.35 billion. Source: Authors’ analysis based on Realfin data. Note: Throughout this report, private investment in infrastructure projects refers to private sector investment in infrastructure projects in primary markets (financed by private and public financiers) including greenfield and brownfield infrastructure, as well as privatizations, unless otherwise specified. Investment values represent commitments made at the financial close of investment and not executed investment. Infrastructure Monitor 2024 Investment trends 40 However, infrastructure delivery costs have increased significantly in the meantime, necessitating a cautious interpretation of the trend, especially for greenfield projects. • Infrastructure delivery costs have gone up G20 infrastructure construction cost indexes significantly since mid 2021. They are now, on (cost index adjusted for broader inflation, G20 only) 130 average, 10 percent higher than pre-COVID levels, based on the infrastructure cost analysis 125 for G20 countries after adjustment for inflation. 120 • Global data and surveys also show that all areas 115 of infrastructure costs – material costs, labor 110 Cost index costs, shipping costs, and financial costs, spiked in 2022 with rapid global inflation. 105 • Furthermore, container costs exerted short- 100 term pressures in 2021 and 2022, and while 95 these pressures reduced in 2023, infrastructure 90 delivery costs continued to rise. Thus, container costs appear less likely to have had a 85 long-term impact. 80 • Financial costs remain the top factor elevating Jan-10 Aug-10 Mar-11 Oct-11 May-12 Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-17 Aug-17 Mar-18 Oct-18 May-19 Dec-19 Jul-20 Feb-21 Sep-21 Apr-22 Nov-22 Jun-23 Jan-24 Aug-24 infrastructure delivery costs, thus limiting construction activity. In 2024, the negative pressures of financial costs showed signs G20 average Inflation (GDP deflator=100) CPI of relief. Sources: Author’s estimates based on construction cost indices data from G20 members’ statistical units • Material costs and a shortage of labor or skills (infrastructure-specific or general construction when not available), CPI and GDP deflator from IMF. could also be key drivers of the long-term increase in infrastructure delivery costs. The G20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkiye, the U.K. and the U.S., as well as the European Union, represented by the rotating council presidency and the European Central Bank.   Infrastructure Monitor 2024 Investment trends 41 The secondary market for infrastructure declined in 2023, largely driven by a downturn in acquisitions amid rising interest rates. • In 2023, global private investment in Private investment in infrastructure projects in secondary markets infrastructure projects in secondary markets (US$ billion, all countries) decreased by 17 percent to US$960 billion. The 1,600 20% decline was largely driven by a decrease in 18% acquisitions, which saw a 43 percent decrease to US$320 billion. 16% 1,200 14% • Nevertheless, secondary private investment in US$ billion infrastructure projects remain well over pre- 12% pandemic levels (2019) and almost quadruple 800 10% the value recorded when data collection 8% began (2013). 6% 400 • The overall decline in secondary market activity 4% is likely reflective of the impact of higher interest 2% rates and investors moving away from secondary 0 0% markets, after having been drawn to their safe haven amid heightened global uncertainty 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 during the pandemic. Acquisitions Refinancing Additional Financing Other LMICs% • Meanwhile, additional financing saw a 21 percent Source: Authors’ analysis based on Realfin data. increase to US$407 billion, representing 42 Note: ‘Acquisitions’ includes corporate and asset acquisitions percent of total secondary private investment in infrastructure (the highest since 2013). Refinancing fell in 2023 by 10 percent. Infrastructure Monitor 2024 Investment trends 42 Although private infrastructure investment grew in high-income countries, low- and middle-income countries remain below 2019 levels, representing under a quarter of investment. • In 2023, private investment in infrastructure projects in primary markets increased by 16 percent in high-income countries (HICs), whereas investment in low- and middle-income countries (LMICs) fell marginally by 2 percent. As a result, private investment in LMICs remain below pre-pandemic levels (2019). • The gap between HICs and LMICs has notably widened since 2017, as LMICs account for only 22 percent of global primary investment in 2023. • On a GDP basis, this disparity is also evident. In 2023, the gap between HICs and LMICs further widened, with HICs having invested 0.4 percent of GDP in infrastructure projects in the private sector, whereas LMICs invested 0.2 percent of GDP. • LMICs are even further underrepresented in secondary markets, making up only 12 percent of global secondary investment, a value which has been gradually declining since 2013. Private investment in infrastructure projects in primary markets Private investment in infrastructure projects in by income group primary markets by income group (US$ billion, HICs and LMICs) (% total private investment, HICs and LMICs) High-income countries Low- and middle-income countries 100% High-income 300 300 Low- and middle-income % of toal private investment 80% 60% US$ billion US$ billion 200 200 40% 100 100 20% 0 0 0% 2021 2021 2021 2023 2019 2020 2019 2020 2019 2020 2013 2018 2023 2013 2018 2013 2018 2023 2017 2017 2017 2015 2022 2015 2015 2022 2022 2016 2016 2016 2014 2014 2014 Source: Authors’ analysis based on Realfin data. Note: As the PPI database only covers economic infrastructure sectors, the LMICs values presented here are slightly greater than PPI values as Monitor also covers social infrastructure. Infrastructure Monitor 2024 Investment trends 43 Private investment in infrastructure increased significantly in the Middle East and North Africa region, whilst investment in North America remained at a decade-high level. • 2023 saw an increase in private investment in infrastructure projects in primary markets across all regions, except in South Asia and North America (NA), with the latter region maintaining similar levels to 2022. • The increase in investment in infrastructure projects was largely driven by growth in East Asia and Pacific (EAP), and the Middle East and North Africa (MENA). The MENA region alone accounted for more than three-quarters of this growth, increasing by almost threefold in 2023. Detailed analysis and project data for primary • For a second year in a row, private investment in infrastructure projects has remained particularly strong market investment in in NA. This was underpinned by the successful financial closure of large-scale renewable project SunZia emerging economies is Wind Farm and Transmission Line. available in the World Bank • Europe and Central Asia (ECA), and Latin America and the Caribbean (LAC) recorded modest growth in PPI database and report. 2023, increasing by 6 percent and 16 percent, respectively. Private infrastructure investment grew by 33 percent in Sub- Saharan Africa (SSA), albeit from a low baseline. ppi.worldbank.org/en/ppi Private investment in infrastructure projects in primary markets by region (US$ billion, all countries) 150 100 US$ billion 50 0 2021 2021 2021 2021 2021 2021 2021 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2013 2018 2023 2013 2018 2023 2013 2018 2023 2013 2018 2023 2013 2018 2023 2013 2018 2023 2013 2018 2023 2017 2017 2017 2017 2017 2017 2017 2015 2022 2015 2022 2015 2022 2015 2022 2015 2022 2015 2022 2015 2022 2016 2016 2016 2016 2016 2016 2016 2014 2014 2014 2014 2014 2014 2014 North America Europe and Central Asia East Asia and Pacific Latin America and Middle East and Sub-Saharan Africa South Asia the Caribbean North Africa Source: Authors’ analysis based on Realfin data. Infrastructure Monitor 2024 Investment trends 44 Global infrastructure private investment continues to be dominated by renewables and transport, while digital infrastructure and energy transmission & storage had record growth over the last three years. • Transport and renewable energy continue to dominate private investment in infrastructure projects, with both sectors combined accounting for almost two-thirds of investment on average since 2013. • Although investment in transport overtook renewables in 2022, renewables has reclaimed its lead position and skyrocketed to more than double in 2023. This was accompanied by a drastic decline in transport investment, which fell by almost two-thirds, experiencing an all- time low since data collection commenced. Notably, SSA was the only region to lower its level of renewables investment in this period. Encouragingly, private investment in non-renewables is on its fourth consecutive year of decline and fell further by 19 percent in 2023. • Having experienced continuous growth for the last 5 years, and a considerable boost in 2022 underpinned by activity in North America, digital infrastructure has sustained its growth in 2023. The region alone contributes to 50 percent of digital private investment. • As observed in past years, social infrastructure, waste, and water attract the lowest levels of private investment. Private investment in infrastructure projects in primary markets by sector (US$ billion, all countries) 250 200 US$ billion 150 100 50 0 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2013 2023 2013 2023 2013 2023 2013 2023 2013 2023 2013 2023 2013 2023 2013 2023 2013 2023 2013 2023 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 Transport Renewable Non-Renewable Energy Storage, Gas Storage, Energy Digital Social Waste Water Energy Energy Transmission & Transmission & (General) Infrastructure Infrastructure Distribution Distribution Source: Authors’ analysis based on Realfin data. Infrastructure Monitor 2024 Investment trends 45 As a proportion of GDP, private infrastructure investment in primary markets has recovered post-pandemic. As digital connectivity accelerates worldwide, digital infrastructure emerges as a top performing sector in both primary and secondary markets. Private investment in infrastructure projects in primary and secondary markets by sector (% of GDP, all countries) 0.4% 1.4% Primary markets Secondary markets 1.2% 0.3% 1.0% 0.8% % of GDP % of GDP 0.2% 0.6% 0.4% 0.1% 0.2% 0.0% 0.0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Digital infrastructure Waste Water Social infrastructure Energy (General) Gas storage, transmission & distribution Energy storage, transmission & distribution Non-renewable energy Renewable energy Transport Source: Authors’ analysis based on Realfin data. Infrastructure Monitor 2024 Investment trends 46 In 2023, more than half of private investment in infrastructure projects was green investment* – mostly renewables but also incorporating other sectors. • Green investment encompasses investment in renewables, and other infrastructure projects for which green or sustainability-linked financing instruments have been used. In line with the transition towards net zero, green private investment has been rising for the past 10 years. The share of green investment has also increased over time, with the exception of a dip experienced during the pandemic. In 2023, green investment rose significantly by 131 percent to an all-time high, accounting for 62 percent of total private investment. • While green investment is comprised mostly of renewable energy generation projects, there was considerable green growth in sectors outside of renewables (‘other green’), particularly digital infrastructure. Investment in ‘other green’ projects has noticeably grown in the past four years, occupying an increasingly larger share in total investment (13 percent in 2023) – signaling that other infrastructure sectors are scaling up the transition of their infrastructure. • Overall, HICs represent 74 percent of green investment in infrastructure, although they also represent the majority (63 percent) of non-green investment. • On a regional basis, NA and ECA had the greatest share of total green investment in 2023, at 31 percent and 22 percent, respectively. However, the NA region’s share has decreased by more than 10 percentage points since 2022 (when the region accounted for 43 percent of green investment), making way for growth in other regions such as EAP and MENA. Green and non-green private investment in infrastructure Green private investment in infrastructure projects in projects in primary markets primary markets by region (% of total private investment, all countries) (% of total green investment, all countries, 2023) 100% 1% North America % of total private investment 9% Europe and Central Asia 80% 13% 31% East Asia and Pacific 60% Latin America and the Caribbean 40% 5% Middle East and North Africa 20% Sub-Saharan Africa 19% South Asia 22% 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Non-green Other green Renewables Source: Authors’ analysis based on Realfin data. *Other green includes projects for which green or sustainability-linked financing instruments were used. Infrastructure Monitor 2024 Investment trends 47 The share of renewables within energy generation continues to increase significantly. • In 2023, renewables represent 96 percent and 84 percent of private investment in energy generation projects, for HICs, and LMICs, respectively. Globally, this is equivalent to 93 percent of all private investment in energy generation being clean energy. • The trend away from non-renewables has continued, with renewables investment almost quintupling for HICs since 2013, when renewables represented 70 percent of energy generation. • Promisingly, LMICs continue to catch up, with renewables investment having grown by almost 250 percent since 2013, when renewables represented just more than half of energy generation investment (53 percent). • As a proportion of GDP, HICs and LMICs are investing comparably in renewable energy projects, at 0.23 percent and 0.16 percent of GDP. For LMICs, this is more than double the level invested in 2022. Private investment in renewable and non-renewable energy generation projects in primary markets by income group (% of total energy generation private investment, HICs and LMICs) High-income countries Low- and middle-income countries 100% 100% in energy generation projects in energy generation projects % of total private investment % of total private investment 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2021 2021 2019 2020 2019 2020 2013 2018 2023 2013 2018 2023 2017 2017 2015 2022 2015 2022 2016 2016 2014 Renewable energy Non-renewable energy 2014 Renewable energy Non-renewable energy Source: Authors’ analysis based on Realfin data. Infrastructure Monitor 2024 Investment trends 48 Hydrogen projects boomed in 2023, although more established technologies such as solar and wind are still the most prevalent. • In 2023, more than three-quarters of all private investment in energy generation is concentrated in solar and wind (42 Fuel production percent and 34 percent of total energy generation investment, respectively). However, in the last 3 years, solar has replaced wind Private investment in hydrogen projects jumped exponentially as the renewable with the largest share of investment, likely due to in 2023 (growing by over sixfold) representing 14 percent of total the falling cost of solar technology. energy generation investment. This boom was driven by projects in EAP and MENA, regions which had previously only invested • LMICs have a notably higher share of energy generation modestly (or not at all, in the case of MENA) in hydrogen. More investment in renewables such as hydrogen and hydropower. than a third of hydrogen investment (35 percent) is from LMICs . However, they also have a larger share of fossil fuel generation such as coal, gas and oil. In contrast, investment in alternative fuels such as biofuels and biomass have been rising steadily over time, making up for 3 Private investment in energy generation projects in percent of total energy generation investment, mostly from the primary markets by income group and subsector EAP region. (% of total energy generation private investment, HICs and LMICs, 2023) Private investment in alternative fuel projects in primary markets (US$ billion, all countries) Low- and middle-income 30 countries 25 20 US$ billion High-income countries 15 10 0% 20% 40% 60% 80% 100% % of total energy generation private investment 5 Solar (Land-based PV) Solar (Thermal) Wind (Onshore) 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Wind (Offshore) Hydrogen Hydro Biofuels/Biomass Hydrogen Tidal Geothermal Biofuels/Biomass Coal-fired power Gas-fired power Oil-fired power Cogeneration power Nuclear power Source: Authors’ analysis based on Realfin data. Infrastructure Monitor 2024 Investment drivers 49 Progress in improving the enabling environment has been steady but project preparation remains the area with more room for improvement. Appropriate and effective regulatory frameworks and institutional Preparation of PPPs by region and income group capacity remain crucial for ensuring that investments in (Average score 1-100, N=140) infrastructure are made strategically and efficiently. A supportive 60 54 53 53 52 regulatory framework also reduces the costs and risks of carrying out 45 49 46 42 individual projects. It provides the private sector and foreign investors 40 38 37 35 40 38 with a more predictable, stable, and safe environment to invest in infrastructure, which is particularly relevant for emerging markets 20 and developing economies. 0 The World Bank Benchmarking Infrastructure Development provides AFE EAP SAR OECD high-income High income Upper middle income Lower middle income LAC AFW Low income ECA MENA insights into the regulatory quality of preparing, procuring, and managing PPP infrastructure projects in 140 economies. Based on this data, countries have significantly strengthened their PPP regulatory frameworks, with 60 economies passing reforms between June 2019 and June 2022. Most changes have been seen in the MENA Region Income group Global average region. As such, PPP preparation remains an area with further room for improvement. Source: Benchmarking Infrastructure Development (BID), 2024. Public-Private Partnerships Data Lowest adoption of good international practices by score area (%, N=140) Preparation Detailed data (including 100+ indicators) on enabling Market sounding-technological alternatives and innovations 5% environment by country is available on the Benchmarking Procurement strategy 26% Infrastructure Development online tool and report. Assessment included in tender documents 26% Procurement Debriefing meeting regulated 11% Minimum time to submit the bids: at least 60 days 19% Specific procedure for sole proposal 20% Contract management Construction preformance info published online 15% Contract management team with required specific qualifications 18% Operation performance info published online 19% USP Minimum time to submit alternative bids: atleast 90 days 13% bpp.worldbank.org Source: Benchmarking Infrastructure Development (BID), 2024. Infrastructure Monitor 2024 Investment drivers 50 Private investment in infrastructure projects continues to be primarily debt-financed. Financing of private investment in infrastructure projects in primary markets by financing instrument (US$ billion and % of total private investment, all countries, 2023) • In 2023, debt remains the Financing of private investment in infrastructure projects lead financing instrument for Financing of private investment in infrastructure projects infrastructure projects in primary markets (78 percent debt), a proportion which has remained largely unchanged since data Debt Equity Grants collection began. Within debt US$ billion (78%) US$ billion (22%) US$ billion (0.2%) financing, the use of loans remains dominant. • The amount of debt provided by financiers in 2023 increased by Non-commercial Loans Bonds instruments 12 percent. In comparison, the US$ billion (92%) US$ billion (2%) amount of equity provided by US$ billion (6%) financiers in 2023 increased by 22 percent. Green loans Green bonds US$ billion (79%) US$ billion (42%) Non-green loans Non-green bonds US$ billion (21%) US$ billion (58%) Source: Authors’ analysis based on Realfin data. Note: Includes only transactions for which instrument details are available. In this analysis, sustainability-linked and blue bonds are included in the green bonds category. Infrastructure Monitor 2024 Investment drivers 51 Over the past 10 years, commercial banks have steadily ramped up their roles as financiers, having provided almost half of the financing for private infrastructure investment since 2020. • Financial service institutions – mostly commercial banks – continue to finance the majority of private investment in infrastructure projects in primary markets, across all income groups. In 2023, they accounted for 45 percent of total private investment, a share which has been gradually rising since 2013 (when they provided only 33 percent of financing). As a result, other financier types have experienced a marginal decline in their share of total financing over the past decade. • The public sector, together with SOEs and state banks, contributed 4 percent of total financing in 2023 – a 3 percent decrease from 2022. Understandably, governments of HICs have greater capacity to invest, something that is also reflected in the data at the national, sub- national and local levels. Financing of private investment in infrastructure projects in primary markets by financier type (US$ billion, all countries) 400 Unknown Private (Other) Other fund Pension fund 300 Insurance company Export Credit Agency (ECA) US$ billion DFI and blended funds 200 Multilateral Development Bank (MDB) National Development Bank State bank Public Sector and State-owned Enterprise (SOE) 100 Asset manager Infrastructure company Developer 0 Commercial bank, investment bank and 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 other financial services Source: Authors’ analysis based on Realfin data. Note: Includes only transactions for which financier details are available. Financier type data was only available for 80 percent of total private investment from 2013-2023. Infrastructure Monitor 2024 Investment drivers 52 Local currency financing represents only a third of financing in LMICs and is mainly limited to large markets which are increasingly occupying a larger share. • Local currency financing can protect against foreign exchange volatility, strengthen local markets, and attract local investors. In 2023 in LMICs, 37% of financing for private investment in infrastructure projects in primary markets is local currency financing — a 16 percentage point decrease from 2022 when more than half of financing was conducted in local currency and slightly below the 2019-2023 average of 43%. • In 2023, approximately 75% of local currency financing occurred in the top 6 LMIC markets. The top 6 LMICs have a much greater proportion of local financing when measured up against other LMICs, from both private and non-private financing sources — 61% of investment in the 2019-2023 period, compared to 21%. Other LMICs rely more heavily on financing from non-private sources, with 37% of their total investment coming from financiers like development institutions, who tend to provide finance in foreign currencies. Local currency financing of private investment in infrastructure Local currency financing of private investment in infrastructure projects in primary markets by financier source projects in primary markets (% of total private investment, 2019-2023 average, LMICs) (% of total private investment, LMICs) 100% 100% 11% Non-Private % of total private investment 34% % of total private investment 80% 20% 80% 3% 60% 60% 28% Private 40% 46% 40% 20% 42% 20% 17% 0% 0% Top 6 LMICs Other LMICs 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Non-private - Foreign currency Non-private - Local currency All LMICs Foreign currency LMICs Others Local Currency Private - Foreign currency Private - Local currency LMICs Top 6 Local Currency Source: Authors’ analysis based on Realfin data. Note: Includes only transactions for which transaction currency and financier details are available. Currency data was only available for 64 percent of private investment in LMICs - with 75 percent of the financier types known within these. The top 6 LMICs are Brazil, China, India, Indonesia, Mexico and Turkiye. Infrastructure Monitor 2024 Investment drivers 53 In emerging markets, development institutions continue to play a pivotal role in mobilizing private capital, by co-financing infrastructure projects alongside other private investors. • An infrastructure deal or transaction often draws financing from multiple sources, with a mix of financiers and financier types coming together to finance a single infrastructure project. • In 2023, whilst 63 percent of total private investment was solely financed by private investors in primary markets in LMICs , much of the remaining investment was underpinned by development institutions such as MDBs and DFIs. Development institutions formed part of the financier mix for 30 percent of total private investment, that is, they provided co-financing, in addition to other private investors. However, directly, development institutions only provided financing for 10 percent of total private investment in LMICs, highlighting their degree of involvement and pivotal role in mobilizing private capital into infrastructure markets, particularly in LMICs. • SOEs also formed part of the financier mix for 7 percent of total private investment in LMICs. Most notably, their involvement was heightened during the pandemic period, peaking in 2020. Financing of private investment in infrastructure projects in primary markets by financier mix (% of total private investment in infrastructure projects, LMICs) 100% Private with MDB % of total private investment in 80% Private with MDB and DFI infrastructure projects Private with Blended and DFI 60% Private with ECA or non-MDB DFI Private with state and DFI 40% Private with SOE 20% Private institutional Private only 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Authors’ analysis based on Realfin data. Note: Includes only transactions for which financier details are available. Financier type data was only available for 80 percent of total private investment from 2013-2023. ‘Development institutions’ for the purpose of this analysis includes MDBs, DFIs, and blended DFIs. Infrastructure funds Infrastructure Monitor 2024 Overview 55 Trends in new capital raising Annual capital raised by funds for the infrastructure asset class by region, 2010-2024 Annual capital raised by private infrastructure 200 funds increased from US$31.9 billion in 2010 to US$172.4 billion in 2022. An unprecedented 150 US$ billion decline occurred in 2023 when the annual capital 100 raised was US$94.9 billion, almost half of the OVERVIEW 2022 level. Investor surveys note rising interest 50 rates were the leading driver of this decline. In 0 2024, the fundraising remained subdued with 2011 2021 2010 2019 2020 2013 2018 2023 2017 2012 2015 2022 2016 2014 2024 Q1-Q3 US$70.5 billion raised by Q3 2024. North America and Europe dominate, capturing 82 percent North America Europe Asia Pacific Rest of World of capital raised during 2020-2024, driven by energy/climate transition initiatives and investor Source: Preqin (2025). preference for stable markets. Asia-Pacific, especially India, attracts private financing in emerging markets. Value of infrastructure assets managed by funds, 2010-2024 1800 45% Globally, the value of infrastructure assets being 42% 39% 42% 1600 38% 41% 40% 40% managed by private funds increased from 38% 40% US$180 billion in 2010 to nearly US$1400 billion 1400 34% 35% 35% 32% 30% in Q1 2024. Dry powder, that is, available but not 1200 33% 30% US$ billion 27% yet invested capital, was almost consistently 1000 25% increasing since 2010 from US$68 billion to 24% 800 20% US$374 billion in 2023. However, dry power as a share of the total value of infrastructure assets 600 15% under management abruptly declined from 400 10% around 40 percent during 2010-2017 to around 200 5% 34 percent during 2018-2020, influenced by 0 0% reduced fundraising and increased infrastructure 2011 2021 2024 Q1 2010 2019 2020 2013 2018 2023 2017 2012 2015 2022 2016 2014 investments in developed markets. Since the Covid-19 pandemic in 2020, there has Infrastructure assets under management (US$ billion) (LHS) been a secular decline in this dry powder share, which reached its lowest level of 24% in 2024Q1. Dry powder (available capital not invested) (US$ billion) (LHS) Dry powder as a share of infrastructure assets under management (%) (RHS) Source: Preqin (2025). Infrastructure Monitor 2024 Overview 56 Driving factors for investors Risk-return profile of private infrastructure funds launched during 2010-2020 by risk strategy • Private investors choose infrastructure for portfolio diversification and risk reduction, favoring lower-risk strategies. Higher-risk Median net Internal Standard Risk strategy Ratio strategies do not necessarily yield higher returns. Rate of Return deviation of  (low to high) (1) / (2) (IRR) (%) (1) IRRs (%) (2) OVERVIEW • Geopolitical conflicts and rising interest rates are key challenges for generating returns. Rising interest rates are expected to reduce returns for Debt 8% 7% 1.13 most funds except private debt funds. Core 12% 10% 1.19 • Renewable energy dominates private infrastructure fund investments, increasing its share in energy capital raised from 20 percent Core-Plus 10% 13% 0.76 in 2010 to 80 percent in 2023. For ESG metrics, private infrastructure funds have more stringent Value added 12% 15% 0.77 reporting requirements than other funds. Opportunistic 8% 15% 0.56 Blended and preparation funds • Blended finance funds: Nearly 90 percent of Source: Preqin (2024b). the blended finance infrastructure funds had a climate focus with more than half of the funds specifically focusing on renewable energy. • Project preparation funds: These are positively associated with increasing private capital mobilization. Challenges include scale, limited resources, increased costs due to new sustainability and technology requirements, and high coordination costs. Infrastructure Monitor 2024 Infrastructure funds: Definitions 57 Definitions In infrastructure financing, funds are a popular instrument for pooling capital from different investors In infrastructure financing, funds are becoming an increasingly popular investment product among both public and private investors. They are pooled investment vehicles that mobilize capital from public and What is a fund? private investors for a clearly defined purpose. A fund is an investment Infrastructure funds are used to channel public savings, a blend of public and private savings, and/or private product that accumulates savings to achieve scale to meet large financing needs of infrastructure projects, while offering due diligence savings from different and diversification to investors. They operate in a less stringent regulatory environment offering more investors and invests in flexibility in the use of capital. opportunities that align with the purpose defined For a comprehensive overview, the following types of infrastructure funds are assessed in this section: during its creation. Types Scope Downstream Benefits of funds for (Profit-oriented) Private Funds in which private investors pool money to invest in private investors: infrastructure funds infrastructure projects to achieve their risk-return targets • Due diligence and Blended finance Funds in which investors from public and private sectors screening of investment infrastructure funds pool money to partner and support infrastructure projects opportunities Upstream (Project development) Project preparation/ Funds created to identify and prepare a pipeline of • Diversification of development funds infrastructure projects investment • Achieve scale • Less stringent In addition, strategic government-led infrastructure funds are initiated by public sector entities with regulatory environment material financial support and active oversight to meet policy priorities. Over time, these funds may leverage larger shares of private capital or transfer management to an independent public authority or a dedicated private manager (Divakaran,S; Halland,H; Lorenzato,; Rose,G; Sarmiento-S, Sebastian P [2022]). Trends in new capital raising Infrastructure Monitor 2024 Capital raising 59 Dry powder (available but uninvested capital) had a secular declining trend in recent years, reaching its lowest level in 2024 Globally, the value of infrastructure assets being managed by private infrastructure assets under management abruptly declined from funds increased from US$180 billion in 2010 to nearly US$1400 billion around 40% during 2010-2017 to around 34% during 2018-2020. in Q1 2024. Since the Covid-19 pandemic in 2020, there has been a secular decline in this dry powder share, which reached its lowest level of 24% in The total value of assets being managed includes dry powder i.e., 2024Q1. This is partly due to the decline in annual fundraising levels available but not yet invested capital. The dry powder was almost and partly due to the renewed focus on infrastructure development consistently increasing since 2010 from US$ 68 billion to US$ 374 in North America and Europe. billion in 2023. However, dry power as a share of the total value of Value of infrastructure assets managed by funds, 2010-2024 1600 50% 1378 1392 1400 42% 42% 41% 39% 40% 40% 38% 38% 1243 40% 1200 35% 34% 1087 33% 32% 1000 30% US$ billion 913 30% 27% 839 800 24% 719 644 20% 600 519 401 374 400 351 351 372 322 335 289 286 10% 238 257 241 203 220 200 180 159 144 85 93 109 68 0 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024Q1 Infrastructure assets under management (US$ billion) (LHS) Dry powder (available capital not invested) (US$ billion) (LHS) Dry powder as a share of infrastructure assets under management (%) (RHS) Source: Preqin (2025). Infrastructure Monitor 2024 Capital raising 60 Annual capital raised by private infrastructure funds showed an increasing trend before falling sharply in 2023 and remained subdued in 2024. The dominant share of North America and Europe further increased. Annual capital raised by private infrastructure funds increased North America and Europe attract most of the private capital held by from US$31.9 billion in 2010 to US$172.4 billion in 2022. It increased infrastructure funds, and their share has been increasing over time. consistently in most years during this time. An unprecedented During the polycrisis period of 2020-2024, the share increased to decline occurred in 2023 when the annual capital raised was US$94.9 85 percent from 70 percent during 2010-2019. The renewed emphasis billion, almost half of the 2022 level. Investor surveys note that rising on infrastructure development, particularly to accelerate energy/ interest rates were the leading driver of this decline. In 2024, the climate transition in developed markets, coupled with the preference fundraising remained subdued with US$70.5 billion raised by Q3 2024. of investors for these markets, especially during the uncertainty of the polycrisis period, drove this trend. In emerging markets, the Asia Pacific region attracts infrastructure financing from private infrastructure funds, especially in India (Preqin, 2024). Annual capital raised by funds for the infrastructure Share of North America and Europe in private capital raised asset class by region, 2010-2024 (US$ billion) through infrastructure funds (%) 180 160 140 120 US$ billion 100 85% 80 70% 60 70% 40 20 0 2010-14 2015-19 2020-24 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Q1-Q3 North America Europe Asia Pacific Rest of World Source: Preqin (2025). Driving factors for funds investors Infrastructure Monitor 2024 Driving factors 62 Factors driving private investors by asset class Private investors choose to invest in (% of surveyed investors) infrastructure as an asset class to diversify and reduce risk of their investment portfolio Diversification Reliable income stream Lower risk through more reliable income stream of the infrastructure asset class is its most attractive feature for private Inflation hedge investors. The specific factors highly rated by private investors driving this feature are inflation hedge, low correlation to other asset classes, Low correlation to other asset classes and usefulness in reducing overall investment portfolio volatility. All asset classes enable diversification of investment portfolio for Reduce portfolio volatility private investors. Private investors allocate money to infrastructure funds to reduce the overall risk of their investments while diversifying High risk-adjusted returns their investment. An average global listed infrastructure equity provided higher dividend yield and lower volatility than an average High absolute returns global listed equity. Thus, the infrastructure asset class is more likely to attract risk-averse investors. 0% 10% 20% 30% 40% 50% 60% 70% Private investors rate high returns or risk-adjusted returns as the % of surveyed investors least attractive feature of the infrastructure asset class. Private Private equity Private debt Venture capital Infrastructure investors with high return targets go for venture capital or private equity, depending on their risk-taking appetite. Overall, private equity ranks the best for providing high risk-adjusted returns explaining Institutional investors: Target returns distribution by asset type (%) its overall popularity and highest share in the total value of private % of surveyed investors capital managed by funds. While data showed that historical returns 40% (over 25 years) were high for listed infrastructure equities, other listed 30% equities provided higher return in the preceding decade, except during the last three years preceding October 2024. 20% An institutional investor survey revealed that the recent interest rate 10% hikes have led to lower targets for return from infrastructure than 0% even private debt (Preqin, 2024). While infrastructure operates in Less 4-6% 6-8% 8-10% 10-12% 12-14% 14-16% 16-18% 18-20% 20% monopoly-like market structure that, in principle, can provide the than or 4% more highest profitability levels, social, political and regulatory factors Target returns keep a strong check on profitability levels through pricing regulation to enable lower prices for the essential infrastructure services. Private equity Private debt Venture capital Infrastructure The recent high inflation and affordability crisis generated pressure Source: Preqin (2024b, 2024c). for low prices, while higher interest rates increased financing costs, Note: Expectations vary by type of investor. Institutional investors may be more invested thereby reducing return targets. in infrastructure debt of developed markets for which returns declined. Infrastructure Monitor 2024 Driving factors 63 Lower risk strategies are preferred by private infrastructure funds, higher risk strategies do not necessarily provide higher returns Private infrastructure funds allocate most of their capital to investment strategies with lower risk. Over 60 percent of the capital was invested as equity targeting core and core plus strategies. Core strategies have no operational risk and core+ strategies are similar to core strategies, but are more correlated to economic cycle. While the share of debt strategy, the lowest risk strategy has grown from 3 percent in 2010 to 12 percent in 2023, the share of opportunistic strategy, the highest risk strategy focused on capital growth, has reduced from 10 percent in 2010 to 6 percent in 2023. The return earned by the funds does not grow if the fund adopts a higher risk investment strategy. In fact, the higher risk strategies had greater volatility in returns for similar or lower returns. Value of infrastructure assets managed by funds by risk strategy Risk-return profile of private infrastructure funds launched (% in total value) during 2010-2020 by risk strategy Low risk High risk 2023 Median net Internal Standard Risk strategy Ratio 2022 Rate of Return deviation of  (low to high) (1) / (2) (IRR) (%) (1) IRRs (%) (2) 2021 2020 2019 Debt 8% 7% 1.13 2018 2017 Core 12% 10% 1.19 2016 2015 2014 Core-Plus 10% 13% 0.76 2013 2012 Value added 12% 15% 0.77 2011 2010 Opportunistic 8% 15% 0.56 0% 20% 40% 60% 80% 100% Debt Core Core plus Value added Opportunistic Source: Preqin (2024b). Source: Preqin (2024b). Infrastructure Monitor 2024 Driving factors 64 Rising interest rates and geopolitical conflicts are currently the top challenges for generating returns through infrastructure investment Infrastructure projects have been financed through a large share of Top challenges for return generation for the infrastructure asset class debt financing (60-80 percent), which helped in increasing returns (% of surveyed investors, 2019 and 2023) during the low-interest rate environment. In 2023, rising interest rates was the top challenge in generating attractive returns through Rising interest rates 21% 65% investment in infrastructure, selected by 65 percent of the investors 35% surveyed by Preqin, up from being the fifth most concerning Geopolitical landscape 32% challenge in 2019. The other top five challenges in 2019 as well as 2023 49% were geopolitical landscapes, asset valuations, competition for assets, Asset valuations 30% and regulation. 40% Competition for assets 29% Rising geopolitical conflicts and policy uncertainty are increasing the demand for political risk guarantees while making them more Regulation 23% 28% expensive. The market structure and competition in infrastructure 15% business, and revenue or pricing of infrastructure services depend on Exit environment 26% the rules chosen by sector and pricing regulations. As infrastructure 17% assets are not frequently traded and its financial statements are not Deal flow 20% easy to constantly monitor, the accuracy and recency of infrastructure 3% asset valuations are compromised. The competition for assets is a Currency market volatility 10% key challenge because some infrastructure assets are characterized 2% by extremely low risk due to their critical nature, strong government Commodity market volatility 9% support, revenue resilience and low transition risk. 4% Stock market volatility 7% With the high uncertainty in economic environment driven by inflation and price fluctuations, the challenges of exit environment, 0% 10% 20% 30% 40% 50% 60% 70% and volatility in currency, commodity and stock markets have also intensified. 2019 2023 Source: Preqin (2024a). Infrastructure Monitor 2024 Driving factors 65 High-interest rate regime is indeed expected to reduce returns earned by all types of funds except private debt funds. Infrastructure is relatively less impacted, but private equity and venture capital still provide more competitive returns. Private investors dedicate their pooled savings through funds to Funds targeting private equity and venture capital earned the different asset classes in view of the expected returns. In global funds’ highest returns during 2016-2022, which explains why private equity market, the funds targeting private equity held the largest share held the largest share in the total value of private capital managed by estimated at 30 percent in 2024. Venture capital grew the fastest at funds, and venture capital experienced the highest growth. Following 17 percent. The infrastructure asset class also witnessed fast annual the sharp interest rate hikes in 2022, returns are forecasted to fall for average growth rates in the value of private capital accumulated by all asset class, except private debt, which is providing higher returns. funds at 16 percent compared to 11 percent growth across all asset Infrastructure is expected to experience relatively limited decline in classes during 2010-2024. The share of the infrastructure asset class returns during 2022-2028 compared to 2016-2022, that is, 11.3 percent in total value of private capital managed by funds increased from to 10.9 percent, compared to private equity (16 percent to 12.6 percent) 4 percent in 2010 to an estimated 6 percent in 2024. and venture capital (16.9 percent to 14.3 percent). It improves relative competitiveness of infrastructure in attracting private capital through funds. Notwithstanding, private equity and venture capital are still expected to provide higher returns to private investors than infrastructure. Annual return (Internal Rate of Return (IRR)) earned by funds by asset class (% 2016-2022 and 2022-2028F) 18% 16.90% 16.00% 16% 14.30% 14% 13.40% 12.60% 12% 11.50% 11.30% 10.90% 11.00% 9.80% 10% 9.10% 8.60% 8.20% 8% 6.90% 6% 4% 2% 0% Private debt Private equity Venture capital Natural resources Secondaries Real estate Infrastructure IRR 2016-2022 IRR 2022-2028F Source: Preqin (2024a). Infrastructure Monitor 2024 Driving factors 66 Energy transition is driving the fundraising of private infrastructure funds The share of renewable energy sector in the aggregate capital In 2020s, the exposure to energy storage saw a massive jump. raised by private infrastructure funds for the energy sector increased The capital raised with exposure to energy storage in 2021 and 2022 from nearly 20 percent in 2010 to about 70 percent to 80 percent in was over US$28 billion, while it was mostly US$1-2 billion in the recent years. decade preceding 2020. Aggregate capital raised by private infrastructure funds Aggregate capital raised by private infrastructure funds with for the energy generation sector by subsector (%) exposure to energy storage (US$ billion) 100% 30 28.5 28 80% 25 60% 20 US$ billion 40% 15 12.5 20% 10 8 5 4.5 0% 2.7 1.3 1.9 1.7 0.4 0.1 0.7 2011 2021 2019 2020 2013 2018 2023 2017 2012 2015 2022 2016 2014 2024 Q1-Q3 0 2021 2011 2019 2020 2018 Q1-Q3 2023 2013 2017 2015 2022 2012 2016 2014 Conventional Renewable Mixed Source: Preqin (2025). Infrastructure Monitor 2024 Driving factors 67 Private funds for infrastructure also have the strongest reporting requirements on ESG metrics Among private funds, the funds with a mandate to invest in Infrastructure fund managers note that the lack of quality/consistent infrastructure are the most stringent in their ESG reporting ESG data and confusion over industry terminology are the most requirements: 63 percent of private infrastructure funds require their pertinent challenges in implementing ESG policy. Nearly one-third portfolio companies to report on ESG metrics, compared to about of the fund managers note that political or regulatory uncertainty 40 percent of private debt or equity funds, 30 percent of venture and shortage of knowledge or expertise as a challenge. In contrast, capital and real estate funds, and less than 10 percent of hedge funds. only 19 percent of the managers identify excessive cost as the main challenge and only 11 percent identify difficulty in delivering both financing and non-financial returns as the main challenge. ESG reporting requirements by type of private fund Infrastructure funds: Main challenges in implementing ESG policy (% of infrastructure fund managers) Infrastructure 63% 26% 11% Lack of quality/consistent ESG data 63% Private equity 42% 31% 27% Confusion over industry terminology 48% Political or regulatory uncertainty 37% Private debt 40% 12% 48% Shortage of knowledge or expertise 33% Venture capital 31% 25% 44% Excessive costs 19% Difficulty in delivering both financial Real estate 28% 34% 38% 11% and nonfinancial returns Fiduciary concerns 7% Hedge funds 8% 10% 82% Not relevant to our strategy or mandate 7% 0% 20% 40% 60% 80% 100% Lack of quality investment opportunities 7% Yes, required Yes, optional No Source: Preqin (2024b). 0% 10% 20% 30% 40% 50% 60% 70% Primary driver of private capital investment in infrastructure over the next 10 years Transitioning to decarbonized energy generation – 82 percent of the surveyed investors Blended and preparation funds Infrastructure Monitor 2024 Blended funds 69 Most blended finance infrastructure funds provide debt or equity financing and focus on renewable energy and other climate-aligned infrastructure projects Blended finance infrastructure funds mainly provide debt or Nearly 90 percent of the blended finance infrastructure funds had a equity financing for infrastructure projects. Of the blended finance climate focus with more than half of the funds specifically focusing infrastructure funds analyzed, 46 percent financed infrastructure on renewable energy. Other specific priority focus areas are energy projects through equity and 40 percent provided debt. Some efficiency, water security or resilience, Green House Gas (GHG) are also providing grants (14 percent), guarantees (11 percent) or emissions reduction, low-carbon technologies, and circular economy. other non-traditional forms of financing (12 percent) including mezzanine, venture capital, government subsidy or capital markets development schemes. Blended finance infrastructure funds: type of finance offered Blended finance infrastructure funds: focus areas (% of funds) (% of funds) Equity 46% Renewable energy 52% Energy efficiency 17% Debt 40% Water 11% Grants 14% GHG reduction 6% Others 12% Low-carbon technologies 5% Guarantees 11% Circular economy 5% General climate focus 12% 0% 10% 20% 30% 40% 50% No specific focus 11% Others include mezzanine, government schemes, capital markets development schemes, venture capital. 0% 10% 20% 30% 40% 50% 60% Source: Authors’ analysis based on Convergence historical deals database. Note: The analysis is based on 81 blended finance infrastructure funds/facilities for which data was available. Infrastructure Monitor 2024 Blended funds 70 Creation of blended finance infrastructure funds calls for guarantees and heavily relies on debt especially in low-income countries. Funds targeting multiple countries rely more on equity financing Blended finance infrastructure funds often target multiple countries, While these global funds are mainly focused on providing equity, especially when pooling capital from international investors for country-specific funds are formed through a higher share of debt. infrastructure projects in Emerging Markets and Developing The share of debt and the need for guarantees are significantly higher Economies (EMDEs). for countries with lower income. Blended finance infrastructure funds: Geographical focus Financing used for creation of blended finance infrastructure funds (% of funds) by financing type and geographical focus (% of total financing) 22% Low-income 90% 10% 38% Country-specific fund Lower-middle 65% 29% 6% 20% 14% Multi-region income Upper-middle 60% 33% 7% 11% Global income 49% Country-specific 68% 26% 7% 21% 15% Multiple countries in a region focus 4% Multi-region 44% 48% 18% 4% Global 13% 80% 7% 4% Multiple countries 20% 74% 6% 8% in a region 0% 20% 40% 60% 80% 100% 120% 140% Debt Equity Mezzanine Grant Guarantee Source: Authors’ analysis based on Convergence historical deals database. Note: The analysis is based on 81 blended finance infrastructure funds/facilities for which data was available. Infrastructure Monitor 2024 Project Development Funds 71 Project Development Funds (PDFs) can be critical to create pipelines Recent Benchmarking Infrastructure Development data shows that Private investment with and without the availability of Project Development Funds is positively associated Project Development Fund (PDF) (% of GDP, 2020-2022) with private capital mobilization. By country income groups, PDFs are less impactful in low-income countries where the pre-conditions for mobilizing private investment are not sufficient. High income Upper middle income Lower middle income Low income 0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% Without PDF With PDF Source: World Bank (2024). Note: The sample size for Low income and With PDF is too small to be representative. Infrastructure Monitor 2024 Project Preparation Funds 72 Project Preparation Funds (PPFs) provide technical and financial support to develop a pipeline of infrastructure projects Infrastructure project preparation costs up to 10 percent of the total project costs. Project preparation costs can average Project preparation funds are created to provide technical and financial support. Majority of up to 10 percent of the project cost these funds provide support in the form of grants. Some funds also offer technical support (% of total project cost) for successfully completing different stages of the process. The technical and financial resources are currently spread across these funds, thereby $ Developed countries 3-5% increasing coordination costs. Interviews with infrastructure project preparation facilities reveal that new requirements related to sustainability, regulation, inclusion and technology, among others, have increased the project preparation costs in recent years. Developing countries 5-10% The limited technical and financial resources for project preparation translates into limited availability of bankable and investment-ready projects. Source: PPIAF-GIH (2021). preparation (% of total) Scope of PPF support for project Technical support by type Technical and financial support Financial support by type (% of PPFs providing technical support) Only financial support (% of PPFs providing financial support) Project 27% Grants* 52% feasibility Project 24% identification Loans 18% Project 20% structuring 41% 59% Guarantees 14% Transaction 19% support Equity 11% Undefined 15% Concessional 7% Others* 13% loans 0% 5% 10% 15% 20% 25% 30% 0% 10% 20% 30% 40% 50% 60% * Capacity building, networking arrangements, legal support. * Very few grants include some contingencies. Source: PPIAF-GI Hub calculations based on information published by the sample PPFs. | Note: Results add over 100% because PPFs provide more than one type of technical and financial support Financial performance of infrastructure investment Based on EDHECInfra, GEMs, FTW GLIO, Moody’s, MSCI, and S&P data Infrastructure Monitor 2024 Overview 74 Decoding investment drivers: Financial performance metrics Chapter structure The role of debt and equity in infrastructure finance This section dives deeper into the financial performance of investments in infrastructure to analyze attractiveness of the Infrastructure investments have high debt-to-equity ratio (~80:20). investments for private investors and present benchmarks for Backed by large physical assets and stable revenue streams, developing a bankable pipeline of infrastructure projects to mobilize infrastructure investments mobilize high share of debt to finance private capital. infrastructure projects. The investments with higher risk have relatively higher share of equity by sector and region, for example, An in-depth analysis of the financial performance of infrastructure waste sector projects and Sub-Saharan Africa’s projects. Higher risk investment by type of financial product – debt and equity – is covered infrastructure projects seek support from guarantees to increase in this section: the share of debt because debt is cheaper than equity. • Infrastructure equity performance analyzes financial Equity investors seek to maximize return within the limits of their performance metrics for infrastructure equity investments in listed risk-taking appetite. Hence, the attractiveness of any investment and unlisted equity markets based on leading market data and opportunity depends on its risk-return profile. As debt instruments benchmarks published by EDHECInfra, Global Listed Infrastructure have pre-determined return, debt investors seek timely repayment Organization (GLIO), and MSCI. The section includes a deep-dive on of debt without default and strong likelihood of recovering Listed Infrastructure Equities performance. investment in case of default, measured through default and • Infrastructure debt performance analyzes financial performance recovery rates. metrics for infrastructure debt investments based on leading Private investment in infrastructure projects by financial product market data and benchmarks. In particular, the performance of loans given by private financial institutions is presented based 100% Scope of analysis on Moody’s and S&P datasets, and the loans given by Multilateral 24% 24% 20% 26% 25% 25% 22% 25% 25% 23% 23% 90% % of total private investment Development Banks and Development Finance Institutions 80% Return/profit (MDBs/DFIs) is presented through the Global Emerging Markets 70% levels & volatility Risk database (GEMs). This section also draws from EDHECInfra 60% data on the performance of senior debt securities issued by global 50% Risk: Debt default infrastructure corporates and project companies 80% 74% 78% 76% 76% 77% 77% 40% 75% 75% 75% 75% and Recovery 30% Return The financial performance of infrastructure funds and cross-border 20% guarantees are covered in Sections 2 and 5 of the report, respectively. 10% By country groups, 0% sectors, and other features 2021 2019 2020 2013 2018 2023 2017 2015 2022 2016 2014 Debt Equity Source: Authors analysis based on Realfin and PPI data. Infrastructure Monitor 2024 Overview 75 Overview of key findings Loans default rates (DR): Infrastructure vs non-infrastructure Leading financial performance data Global (20-year cumulative DR) on infrastructure debt points to its superior performance, on average, than non-  infrastructure debt in the long run. LMICs OVERVIEW Globally, credit risk metrics – average long-term (20-year cumulative DR) default, recovery upon default rates, expected LMICs loss, and credit ratings - were more attractive for MDB/DFI with private infrastructure loans than non-financial corporate counterparts (Average annual loans. This was true across country income DR 1994-2022) groups. The presence of MDBs/DFIs materially 0% 2% 4% 6% 8% 10% 12% strengthened the performance in low- and middle- Loan default rates income countries (LMICs). When infrastructure debt was rated, 80 percent had investment-grade Non-infrastructure Infrastructure Green infrastructure rating, double relative to 40 percent for the rated Source: Moody’s and GEMs. non-financial corporate debt, but it remains Note: Metrics from Moody’s and GEMS differ slightly and cannot be compared directly. challenging for infrastructure projects to secure This graph illustrates the materially lower DR for infrastructure than non-infrastructure ratings in the first place due to their complex across leading data sources (Moody’s, S&P, and GEMs). For further details on these data structuring. sources, see the Appendix. Infrastructure debt performance can be enhanced through contractual or regulatory provisions that strengthen revenue-resilience. Between 1995 and 2023, revenue-resilient infrastructure loans had a five-year cumulative default rate (CDR) of just 0.7 percent, compared to 5.4 percent for non-revenue-resilient infrastructure debt. Revenue-resilient infrastructure is defined to include availability-based payments Public Private Partnership (PPPs) and regulated corporate infrastructure including regulated electric and gas industry, and regulated water utilities, according to Moody’s. Availability-based PPPs and regulated utilities exhibited particularly low default rates, reinforcing the importance of well-structured financing models. Infrastructure Monitor 2024 Overview 76 Low volatility in returns is the most attractive Equity risk-return: Infrastructure vs non-infrastructure feature of infrastructure investments for private Total return Risk: Volatility in returns investors. As infrastructure assets provide essential services like electricity, water, transport and 6% 16% Benchmark: communication connectivity, revenue streams are All listed equities 12% 17% 10% 15% more stable than that for non-infrastructure assets. This enables infrastructure equities to deliver OVERVIEW Listed 4% 17% positive returns with lower volatility in the long run. infrastructure equities 6% 17% (Economic infrastructure) 7% 14% Multiple crises during 2020-2024 affected all equities including infrastructure equities. Sharp 12% 12% interest rate hikes and high equity risk premia Unlisted 8% 10% were the key explanatory factors for the decline infrastructure equities 10% 11% in net value of infrastructure equities. These factors adversely impacted all equities. Unlisted 0% 2% 4% 6% 8% 10% 12% 0% 3% 6% 9% 12% 15% 18% infrastructure equities provided higher returns 3-year 5-year 10-year (12 percent) at lower volatility (12 percent) than other equities. The complex nature of infrastructure Source: MSCI, GLIO and EDHECInfra. development allows private investors to earn a Note: By definition, the data represents markets with significant infrastructure activity premium from infrastructure equity investments and availability of data. For further details on these data sources, see the Appendix. in unlisted markets. Provision and scaling of infrastructure equities in listed markets is limited by factors including the illiquid nature and the lack of complete, accurate and timely disclosure of financial data for infrastructure assets. Returns on non-infrastructure listed equities are driven by growth sectors such as technology and digital companies. Infrastructure equity performance Infrastructure Monitor 2024 Equity performance trends 78 Sharp interest rate hikes and high equity risk premia were the key explanatory factors for the decline in value of global infrastructure equities over 2019-2024. The negative pressures from both factors seem to have concluded in 2024 The net value of an infrastructure equity can be estimated using the discounted dividend model widely used in equity markets, in which (i) increase in dividend forecasts positively impact the value, and (ii) increase in discount factor – a combination of risk premia and interest rates – negatively impacts valuations. Over the five years preceding October 2024, sharp increases in interest rate and increase in risk premia were the key factors driving the decline of 3.4 percent in value. Over the last three years, the sharp increases in interest rate was the key explanatory factor for the decline in the value. The relative role of risk premia in negatively impacting the value reduced with recovery from the Covid-19 pandemic, while the relative role of interest rate increased due to sharp hikes in developed markets that account for majority of the global infrastructure equity investments. The negative impact of these factors was countered by increases in dividend forecasts. However, dividend forecasts played a subdued role last year likely due to the pressures on profitability due to higher costs of delivering infrastructure. In the last year, some reduction in interest rates was the main factor contributing to slight improvement in the value. Average increase in net asset value of global infrastructure equities by factor and time period 2.8% Last quarter 0.2% 2.1% 0.5% 3.8% Last one-year average -0.1% 3.6% 0.2% 10.1% Last three-year average 21.5% -12.3% 2.6% -3.4% Last five-year average 19.8% -15.3% -8.5% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% Overall change due to increase in: Dividend forecast Interest rates Equity risk premium Source: EDHECInfra (2024). Data as of 31 October 2024. Note: The estimates were derived using the discounted dividend model equation which defines net asset value as the ratio of dividend forecasts and discount factor (combination of interest rates and risk premium). EDHECInfra data is based on a representative sample of 27 countries that exhibit sizable level of activity that could be measured including Australia, Austria, Belgium, Canada, Denmark, Germany, Spain, Finland, France, United Kingdom, Hungary, Ireland, Italy, Netherlands, Norway, New Zealand, Poland, Portugal, Russia, Singapore, Slovakia, Sweden, United States of America, Brazil, Chile, Malaysia, Philippines. Infrastructure Monitor 2024 Equity performance trends 79 Both risk premia and cost of debt spiked in recent years, which increased the cost of equity and overall financing costs Since the onset of crisis period in 2020 with the Covid-19 pandemic, Risk premium of unlisted infrastructure equities (%) the risk premia for infrastructure equities has been above 7 percent. 9% 7.9% 7.9% In 2023 and 2024, the average risk premium was 7.9 percent which 8% 7.7% 7.4% was last observed in 2011. The risk premium reached its lowest level 7% 6.1% 6.7% Inflation, wars, conflicts in 2015 at 6.1 percent. The multiple shocks since 2022 including 6% geopolitical conflicts, rapid inflation, and sharp interest rate hikes, and 5% Covid-19 pandemic other post-Covid effects, have contributed to elevated risk premia. 4% 3% Historically, spikes in risk premia for infrastructure equities has 2% coincided with crisis-like situations. For instance, the risk premia 1% spiked to 11.6 percent in 2001 during the dot-com bubble crisis and 0% again to 9.6 percent in 2008-2009 during the global financial crisis. 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 The weighted average cost of capital (WACC) depends on the cost of Cost of Capital by market and year: debt, cost of equity, and the ratio of debt to equity. For infrastructure, it doubled from nearly 4 percent in 2019 to 8 percent in 2024 in Weighted average cost of capital Cost of debt 10% developed markets, and from nearly 9 percent to 12 percent in emerging markets. 12% 5% This was driven by the increase in debt cost in developed markets 10% from 1.9 percent in 2019 and 1.6 percent in 2021 to 5.0 percent in 2024, 0% much sharper than that in emerging markets from 6.1 percent in 2019 2019 2020 2021 2022 2023 2024 8% to 7.4 percent in 2024. The cost of equity depends on cost of debt and Cost of equity risk premia. Risk premia increased more for emerging markets while 6% 15% cost of debt increased more for developed markets. Thus, the cost of equity increased from 7.2 percent in 2019 to 10.9 percent in 2024 in 4% 10% developed markets, and it increased from 11.3 percent to 14.2 percent in emerging markets during the same time period. In emerging 2% 5% markets, more equity than debt was likely used due to their higher risk, further contributing to increase in cost of capital as equity is 0% 0% more costly. 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 Developed markets Emerging markets Source: EDHECInfra (2024). Data as of 31 October 2024. Note: EDHECInfra data is based on a representative sample of 27 countries that exhibit sizable level of activity that could be measured including Australia, Austria, Belgium, Canada, Denmark, Germany, Spain, Finland, France, United Kingdom, Hungary, Ireland, Italy, Netherlands, Norway, New Zealand, Poland, Portugal, Russia, Singapore, Slovakia, Sweden, United States of America, Brazil, Chile, Malaysia, Philippines. Infrastructure Monitor 2024 Equity performance trends 80 In recent years, emerging markets provided more attractive returns to risk ratio on infrastructure equities than developed markets During the high-interest rate regime in developed markets during the three years preceding October 2024, the return on unlisted infrastructure equities across markets also increased. The global annual total return on unlisted infrastructure equities increased from 10.8 percent over the past ten years to 13.6 percent over the past three years. While the increasing trend was seen in both developed and emerging markets, the increased in return was 10.1 percent to 12.3 percent in developed markets, and 15.5 percent to 24.4 percent in emerging markets, during the same time period, as of 31 October 2024. The volatility in returns provided by unlisted infrastructure equities remained the same globally and in developed markets, while it reduced in emerging markets. With the high interest-rate regime in developed markets, investors are able to secure higher and safer returns in developed markets. It seems that investors are willing to take less risk and require higher returns in emerging markets than they did previously. It is more evident through an analysis of trends in the ratio of total return to volatility. The ratio increased from 1.0 over the last ten years to 1.2 over last three years in developed markets, while it increased from 1.1 to 2.0 during the same time period in emerging markets. As affordability remains a global challenge due to elevated inflation, constrained government finances, and subdued economic growth prospects, this indicates that it was more challenging to ensure competitive returns for new infrastructure projects to attract global private capital. Unlisted infrastructure equities: Return and risk by market and investment time horizon Total return (%) Risk: Volatility in returns (%) Ratio: Total return-to-risk 25% 16% 2% 2% 24.4% 14% 14.4% 20% 12% 13% 12.2% 10% 10.6% 15% 10.5% 1.3% 10.2% 10.2% 15.5% 1.2% 9.2% 9.2% 8% 1% 13.6% 13.7% 1.1% 1.1% 1.1% 12.3% 1% 10% 0.9% 0.9% 6% 10.8% 10.1% 8.6% 8.0% 4% 5% 2% 0% 0% 0% 3-year 5-year 10-year 3-year 5-year 10-year 3-year 5-year 10-year Global Developed markets Emerging markets Source: EDHECInfra (2024). Data as of 31 October 2024. Note: EDHECInfra data is based on a representative sample of 27 countries that exhibit sizable level of activity that could be measured including Australia, Austria, Belgium, Canada, Denmark, Germany, Spain, Finland, France, United Kingdom, Hungary, Ireland, Italy, Netherlands, Norway, New Zealand, Poland, Portugal, Russia, Singapore, Slovakia, Sweden, United States of America, Brazil, Chile, Malaysia, Philippines. Infrastructure Monitor 2024 Equity performance trends 81 Over the previous decade, the return and volatility in return on green unlisted infrastructure equities were similar to all infrastructure equities but worsened in recent years The average return on green unlisted infrastructure equities was Green unlisted infrastructure equities: attractive at 10.0 percent over the decade preceding October Return and risk by investment time horizon (%) 2024, similar to that for all infrastructure equities at 9.8 percent. The volatility was also similar at 10.9 percent and 10.8 percent Total return 14% respectively over the decade. Note: the green unlisted infrastructure 12.2% 12% equities mainly illustrate the performance of renewable energy 10.1% 10% 9.8% 10.0% infrastructure, which attracts the largest share of private investment 7.8% in infrastructure. 8% 6% 5.4% Over the five years preceding October 2024 plagued by multiple 4% crisis, the 5-year return on green unlisted infrastructure equities reduced to 5.4 percent from its 10-year return level of 10.0 percent: a 2% much sharper decline than the decline for all infrastructure equities 0% to 7.8 percent from the 10-year return level of 9.8 percent. The returns 3-year 5-year 10-year declined due to multiple crisis that hit the economy in the last five Volatility years. Market consultations suggest that the sharper decline for 14% 13.0% green infrastructure equities was driven by transition risk to green 12% 11.9% 10.4% 10.6% 10.8% 10.9% economy and resulting competition for the limited renewable assets. 10% Over the three years preceding October 2024, the return on green 8% unlisted infrastructure equities nearly doubled to 10.1 percent 6% from the 5-year return of 5.4 percent. The return on all unlisted 4% infrastructure equities also increased from 7.8 percent to 12.2 percent. 2% However, green unlisted infrastructure equities witnessed an increase in volatility in returns to 13.0 percent from the 5-year level of 0% 3-year 5-year 10-year 10.6 percent, higher than the increase in volatility to 11.9 percent from the 5-year level of 10.4 percent for all unlisted infrastructure equities. Benchmark: All unlisted infrastructure equities Green unlisted infrastructure equities Source: EDHECInfra (2024). Data as of 31 October 2024. Note: Green unlisted infrastructure equities is measured by the EDHECInfra InfraGreen Index that reflects the performance of unlisted companies in the renewable energy sector. EDHECInfra data is based on a representative sample of 27 countries that exhibit sizable level of activity that could be measured including Australia, Austria, Belgium, Canada, Denmark, Germany, Spain, Finland, France, United Kingdom, Hungary, Ireland, Italy, Netherlands, Norway, New Zealand, Poland, Portugal, Russia, Singapore, Slovakia, Sweden, United States of America, Brazil, Chile, Malaysia, Philippines. Infrastructure Monitor 2024 Equity performance trends 82 In transport sector, return on capital only for roads exceeded pre-pandemic levels. Return on capital for airports was most negatively affected by the pandemic but also showed strong recovery. Transport sector experienced decline in traffic during the lockdowns introduced in 2020 to prevent the spread of Covid-19 virus but have been recovering from the setback in the following years. As expected, airports were the worst affected and registered nearly zero or even negative returns in 2020 and 2021. As multiple other crisis hit the world following the Covid-19 pandemic, capital investments faced significantly higher cost of capital due to sharp interest rate hikes and higher uncertainty related to material costs and inflation (see chapter 1 for more details on delivery cost trend over time), weakened availability of labor following the pandemic, and high credit spreads due to elevated risk. However, the pent-up travel demand outweighed affordability risks for most transportation assets, which fueled increase in return on capital every year (S&P, 2024b). Only the roads sector reached returns on capital levels above the pre-pandemic level by 2022. Roads benefitted from inflation-linked tariffs and recovery in traffic growth. Ports also registered a strong recovery for return on capital employed to the pre-pandemic level, but trade tensions and geopolitical conflicts have been putting downward pressures on volume. However, the strong pricing power supported the recovery for return on capital employed. Rail and mass transit had relatively lower recovery for the return on capital employed due to modest passenger growth, increase in operating costs, and price controls to support user affordability. Global return on capital employed by transport subsectors (%, 2009-2023) Airports Roads Ports Rail and mass transit 7 7 7 7 6 6 6 6 5 5 5 5 4 4 4 4 3 3 3 3 2 2 2 2 1 1 1 1 0 0 0 0 -1 -0.5 2011 2021 2011 2021 2011 2021 2011 2021 2009 2010 2019 2020 2009 2010 2019 2020 2009 2010 2019 2020 2009 2010 2019 2020 2013 2018 2023 2013 2018 2023 2013 2018 2023 2013 2018 2023 2017 2017 2017 2017 2012 2015 2022 2012 2015 2022 2012 2015 2022 2012 2015 2022 2016 2016 2016 2016 2014 2014 2014 2014 Source: S&P (2024c). Infrastructure Monitor 2024 Equity Performance: Deep-dive on listed equities 83 Globally, listed equity markets can potentially play a significant role in closing infrastructure financing gap. The current potential widely varies by country. The global stock exchanges where listed equities are traded were estimated to reach a market capitalization of about US$110-150 trillion in 2023: a sizeable size relative to the infrastructure investment gap of US$20 trillion estimated for the time period 2016-2040. Investors prefer to trade in listed equities markets for their liquidity and transparency depending on the scale and depth of the national stock exchange and the quality of national regulators, which widely varies by country. According to the World Bank’s Global Finance Development Database, the stock market traded value to GDP was greater than 1 percent for only 46 countries (names outlined in the bar graph below). By developing listed equity markets for infrastructure, the liquidity risk inherent in infrastructure investment can be mitigated. The large size of infrastructure investment make the concentration risk of investing in infrastructure a major concern for private investors. Listed equity markets have high standards of transparency and require frequent and consistent reporting to ensure reliability of stock price valuations and fully disclose information to a wide range of investors. Well-developed listed equity markets for the infrastructure asset class can make it more amenable for private investors by enabling creation of diversified infrastructure investment products. However, the scaling of listed infrastructure equities is limited not only by the maturity of national listed equity markets but also by key barriers unique to infrastructure as an asset class including the lack of complete, accurate and timely disclosure of financial data needed by the investors, lack of standard taxonomy and data metrics, the lack of data collection by national regulators and supervisors, difficult access to credit ratings, long-term illiquidity, complex contracts and risk mitigation. Global listed equity markets: Stock market traded value (% of GDP, 2019) Financing scale in context of For 46 countries with a value of greater than 1% LMICs (23 countries) infrastructure needs 600 500 Global infrastructure Listed (public) 400 investment needs equities market 300 and gap, 2016-2040 capitalization 200 (US$, 2023 prices) (2023) 100 0 Switzerland Thailand Brazil Israel Poland New Zealand Hong Kong SAR, China China Japan Canada South Africa Australia India Spain Malaysia Saudi Arabia Russian Federation Indonesia Vietnam Austria Jamaica Colombia Jordan Bangladesh Bahrain Oman West Bank and Gaza Sri Lanka Korea, Rep. Iran, Islamic Rep. Egypt, Arab Rep. Singapore Chile Greece Mexico Morocco Qatar United States Philippines United Arab Emirates Mauritius Kuwait Turkiye Germany Norway Hungary Needs: US$125 trillion Stock exchanges market capitalization Gap: ~ US$110-150 trillion US$20 trillion Source: GI Hub (2017), Mobilist (2024), OECD (2024), Statista (2024). Source: World Bank (2022a). Global Financial Development Database, September 2022 Version. Infrastructure Monitor 2024 Equity Performance: Deep-dive on listed equities 84 While listed economic infrastructure equities have historically offered strong long-term returns, other equities outperformed them over the past decade, significantly reversing the previous performance gap. Globally, listed equities of economic infrastructure (energy, transport, telecommunications and water) companies provided higher average annual return over the past 25 years of 10-11 percent than the return of 7-8 percent provided by all listed equities across markets. In the 3-years preceding October 2024, the return dropped to 4 percent in developed markets coinciding with their high-interest rate regime. Before 2020, the strong macroeconomic environment in developed markets enabled high returns in equity markets. Emerging markets consistently provided positive return of 4-5 percent for economic infrastructure companies across varying time periods in the preceding decade. While historically economic infrastructure sectors provided higher returns than social infrastructure sectors, the return on social infrastructure listed equities become equally or more competitive across markets during the recent 5-years mostly representing the multiple crisis period since the onset of Covid-19 pandemic. In 2024, all infrastructure sectors show strong signs of recovery. In both developed and emerging markets, listed equities including infrastructure equities registered more than 20 percent annual average growth rate during the 1-year preceding October 2024. Listed equity markets: Gross annual average returns by investment time horizon (US$ %, as of October-end 2024) Global Developed markets Emerging markets 33% 34% 26% 1-year 34% 1-year 36% 1-year 21% 27% 27% 28% 6% 7% -1% 3-year 8% 3-year 9% 3-year 5% 4% 4% 5% 12% 13% 4% 5-year 6% 5-year 7% 5-year 1% 6% 6% 5% 10% 10% 4% 10-year 5% 10-year 6% 10-year 0% 7% 7% 4% 7% 7% 8% Historical 6% Historical 6% Historical 7% 10% 10% 11% 0% 5% 10% 15% 20% 25% 30% 35% 0% 5% 10% 15% 20% 25% 30% 35% 40% -5% 0% 5% 10% 15% 20% 25% 30% Benchmark: All listed equities Listed infrastructure equities (Economic & social infrastructure Listed infrastructure equities (Economic infrastructure) (All listed companies) (energy, transport, telecom, water, health, education companies) (energy, transport, telecom, water companies) Source: FTW GLIO (2024a), MSCI (2024a, 2024b, 2024c). Data as of 31 October 2024. Benchmark: All listed equities is measured by the MSCI All Country World Index. Listed infrastructure equities (economic & social infrastructure) is measured by the MSCI ACWI Infrastructure Capped Index. Historical data starts from 31 December 1998. Listed infrastructure equities (Economic infrastructure) is measured by the FTW GLIO Infrastructure Index which excludes social infrastructure, oil and gas storage and transportation and other companies. Historical data starts from 31 December 1999. Note: MSCI data is based on 47 countries: 23 Developed Markets (DM) and 24 Emerging Markets (EM). DM countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US. EM countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkiye and United Arab Emirates. FTW GLIO data is based on 38 countries including Australia, Austria, Belgium, Brazil, Canada, Chile, China, Columbia, Czech Rep, Denmark, France, Germany, Greece, Hong Kong, India, Indonesia, Israel, Italy, Japan, Korea, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Philippines, Poland, Portugal, Saudi Arabia, Singapore, Spain, Switzerland, Taiwan, Thailand, Turkiye, UAE, United Kingdom, United States. Infrastructure Monitor 2024 Equity Performance: Deep-dive on listed equities 85 Listed infrastructure equities mostly had lower volatility than other listed equities. In recent years, listed infrastructure equities in emerging markets had lower volatility than developed markets unlike the preceding decade Across different investment time horizons, listed infrastructure equities had lower volatility in returns than an average listed equity. The volatility for all listed equities including listed infrastructure equities was lower over the last three years than the last five years preceding October 2024, suggesting that volatility declined with global recovery from the Covid-19 pandemic. In the last three years, the volatility for listed infrastructure equities in emerging markets reached lower levels (13.6 percent to 15.4 percent) than the levels in developed markets (15.6 percent to 17.1 percent). Prior to that, the volatility in emerging markets had been higher than developed markets. In particular, the volatility levels over ten years in developed markets (13.7 percent to 13.8 percent) were much lower than emerging markets (15.2 percent to 17.0 percent). The volatility of returns for listed infrastructure equities in social infrastructure sectors appear to be lower than that for economic infrastructure sectors across markets and investment time horizons. Listed equity markets: Volatility in returns by investment time horizon (US$ %, as of October-end 2024) Measured by annualized standard deviation of monthly gross returns Global Developed markets Emerging markets 16.5% 16.8% 17.8% 3-year 14.8% 3-year 15.6% 3-year 13.6% 16.8% 17.1% 15.4% 17.4% 17.8% 18.7% 5-year 15.9% 5-year 16.6% 5-year 16.3% 16.9% 17.1% 19.0% 14.8% 15.0% 17.2% 10-year 13.2% 10-year 13.7% 10-year 15.2% 13.7% 13.8% 17.0% 0% 5% 10% 15% 20% 0% 5% 10% 15% 20% 0% 5% 10% 15% 20% Benchmark: All listed equities Listed infrastructure equities (Economic & social infrastructure) Listed infrastructure equities (Economic infrastructure) Source: FTW GLIO (2024a), MSCI (2024a, 2024b, 2024c). Data as of 31 October 2024. Benchmark: All listed equities is measured by the MSCI All Country World Index. Listed infrastructure equities (economic & social infrastructure) is measured by the MSCI ACWI Infrastructure Capped Index. Historical data starts from 31 December 1998. Listed infrastructure equities (Economic infrastructure) is measured by the FTW GLIO Infrastructure Index which excludes social infrastructure, oil and gas storage and transportation and other companies. Historical data starts from 31 December 1999. Note: MSCI data is based on 47 countries: 23 Developed Markets (DM) and 24 Emerging Markets (EM). DM countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US. EM countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkiye and United Arab Emirates. FTW GLIO data is based on 38 countries including Australia, Austria, Belgium, Brazil, Canada, Chile, China, Columbia, Czech Rep, Denmark, France, Germany, Greece, Hong Kong, India, Indonesia, Israel, Italy, Japan, Korea, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Philippines, Poland, Portugal, Saudi Arabia, Singapore, Spain, Switzerland, Taiwan, Thailand, Turkiye, UAE, United Kingdom, United States. Infrastructure Monitor 2024 Equity Performance: Deep-dive on listed equities 86 For listed infrastructure equities, low volatility is the most attractive feature across markets MSCI’s factor analysis of the competitive advantage of listed infrastructure equities for investors relative to an average listed equity revealed low volatility is the key driver for attractiveness of returns. In developed markets, dividend yield was the second most important factor increasing return for listed infrastructure equities. Globally, the average dividend yield for listed infrastructure equities (including both economic and social infrastructure) was 3.6 percent, nearly double the yield of 1.9 percent provided by an average listed equity. This was primarily driven by high dividend yield in developed markets: 3.8 percent for listed infrastructure equities and 1.8 percent for an average listed equity. In emerging markets, the quality of balance sheet was the second most important factor increasing return for listed infrastructure equities. Top two factors that drive return for listed infrastructure equities by market (as of October-end 2024) Low volatility Global Dividend yield Low volatility Developed markets Dividend yield Low volatility Emerging markets Quality of balance sheet Source: MSCI (2024a, 2024b, 2024c). Data as of 31 October 2024. Note: The factors were selected through a factor exposure estimation relative to MSCI Investable Market Index that covers all global listed equities. A cross-section regression in the MSCI Barra Global Equity Factor Model which has identified six factors as key drivers of risk and return selected based on rigorous research. The factors are estimated through 16 metrics and standardized values from the regression are derived. MSCI’s estimates of Price to Earnings (P/E) ratio indicate that, relative to an average listed equity, listed infrastructure equities are valued more in emerging markets and less in developed markets. In developed markets, the P/E ratio of 17 for listed infrastructure equities was lower than 22 for an average listed equity. In emerging markets, the P/E ratio of 20 for listed infrastructure equities was higher than 16 for an average listed equity. Infrastructure debt performance Based on EDHECInfra, GEMs, Moody’s, and S&P data Infrastructure Monitor 2024 Debt Performance Trends 88 Infrastructure debt exhibit lower default rates than non-financial corporate debt particularly when the debt falls in non-investment grade rating categories Infrastructure debt rated as investment grade had low cumulative default rates of less than 2 percent even for 10 years loan duration. In contrast, infrastructure debt rated as non-investment grade that is, credit rating lower than BBB-/Baa3, exhibit relatively higher default rates, but still lower than that for non-investment grade debt of non-financial corporates, across varying loan durations. According to the credit risk data of leading credit rating agencies (Moody’s and S&P), when the rating was non-investment grade, the average cumulative default rates for non-financial corporate debt were at least one and a half times that of infrastructure debt, based on the default rates of debt that originated between 1983 and 2023, across varying loan duration. Cumulative default rates of rated debt by asset class, rating category, and loan duration (%, 1983-2023) By year 1 By year 5 By year 10 0.0% 2.0% 4.0% 0.0% 10.0% 20.0% 0.0% 10.0% 20.0% 30.0% Infrastructure 0.1% 0.7-0.8% 1.3-1.7% Investment grade ratings Non-Infrastructure 0.1% 0.8% 1.9% Corporates Infrastructure 1.8-2.9% 6.5-12.7% 8.4-19.7% Non-Investment grade ratings Non-Infrastructure 14.8-20.9% Corporates 3.8-4.5% 20.7-32.7% Source: Moody’s (2023a), S&P (2024a). Note: Shaded blue bar presents the range of estimates for cumulative default rates. Estimates represent global rated corporate infrastructure and project finance debt securities including nearly 2,600 debt securities rated by Moody’s and S&P from 1983 to 2023. LMICs accounted for over 10 percent of the sample. Infrastructure Monitor 2024 Debt Performance Trends 89 When infrastructure debt is rated, it is more likely to receive an investment-grade rating. However, it is more challenging for infrastructure projects to obtain a rating in the first place. Infrastructure projects are carefully structured through rigorous Share of investment-grade rated debt securities in total rated project preparation phases to clearly establish commercial and debt securities by asset class (%, 1983-2023) financial viability. This makes them more likely to receive investment- 90% grade rating that is, a credit rating of BBB-/Baa3 or better, which is the threshold at which market participants perceive an investment as low risk. The available data indicates that of the debt that was rated 80% by Moody’s and S&P, around 80 percent of infrastructure debt had investment-grade rating, while only about 40 percent of non-financial 70% corporate debt had investment-grade rating. 60% Private investors actively seek investment opportunities with investment-grade rating. Leveraging this strength of higher Share (%) 50% likelihood of receiving investment-grade rating is challenging for the infrastructure asset class due to several barrier in obtaining a credit rating. Market participants note that it is costly, time consuming, 40% and difficult to obtain rating for an infrastructure project due to its complex structuring coupled with limited transparency and data 30% reporting. Infrastructure projects have complex structuring because responsibilities and obligations of multiple stakeholders are defined 20% through detailed contracts with conditionalities and contingencies spanning over a long-time horizon. The data and information 10% required to assign a rating are not easily accessible because it is not publicly published or confidential in nature. This makes it difficult 0% for credit rating agencies to assign ratings and costly for projects to obtain ratings. Majority of the rated infrastructure debt is domiciled in Infrastructure Non-financial corporates North America. Source: Moody’s (2023a), S&P (2024a). Note: Estimates represent global rated corporate infrastructure and project finance debt securities including nearly 2,600 debt securities rated by Moody’s and S&P from 1983 to 2023. LMICs accounted for over 10 percent of the sample. Shaded blue bar presents the range of estimates for cumulative default rates. Infrastructure Monitor 2024 Debt Performance Trends 90 Infrastructure debt also had higher recovery rates upon default than non-financial corporates Infrastructure debt had higher trading price recovery rates and Average trading price recovery rates ultimate recovery rates upon default than non-financial corporates. for rated infrastructure corporate and project finance debt Average trading price recovery rates estimate the recovery of trading securities by debt seniority and asset class (%, 1983-2023) prices on an issuer’s bonds 30 days after its initial missed payment or bankruptcy filing. Data on trading prices is more readily available and Senior Secured 70 55 have been shown to be good predictors of ultimate recovery rates. 61 Based on Moody’s estimates for average trading price recovery rates Senior Unsecured 38 on defaulted rated infrastructure corporate and debt securities, senior secured and senior unsecured infrastructure debt securities had Subordinated 38 32 average trading price recovery rates of 70 percent and 61 percent respectively: higher than the 55 percent and 38 percent recovery 0 10 20 40 60 80 rates for senior secured and senior unsecured debt securities of non-financial corporates, respectively. Even when infrastructure Infrastructure Non-financial corporates debt is unsecured, it benefits from implied security intrinsic in the nature of infrastructure business. The average trading price recovery Average ultimate recovery rate for unrated infrastructure rates on subordinated debt was lower as this tranche is most likely project finance loans by income group and to suffer losses upon default. Average ultimate recovery rates were asset class (%, 1983-2021) at least 10 percentage points higher than the trading price recovery rates. The recovery rates for infrastructure debt in low- and middle- 84 income countries (LMICs) were close to the levels in high-income High-income 66 countries (HICs). Moody’s estimated ultimate recovery rate was 84 percent for unrated infrastructure project finance loans that originated between 1983 and 2021 for HICs as well as LMICs, sizably Low-and 84 higher than 66 percent and 71 percent ultimate recovery rate for middle-income 71 unrated non-infrastructure project finance loans for HICs and LMICs, respectively. As infrastructure projects are large in size, a default on 0 10 20 40 60 80 100 infrastructure debt puts material pressure on bank balance sheets. As influential stakeholders including governments, large commercial Infrastructure Non-Infrastructure banks, are involved in the project, and the project typically serves Source: Moody’s (2023a), Moody’s (2023b). critical needs of citizens through essential infrastructure services Note: Estimates for trading price recovery rates are based on 1,146 rated corporate like electricity, transport, water, waste, telecommunications, that infrastructure and project finance debt securities that originated from 1983-2023. require uninterrupted provision, it is more likely that an infrastructure Estimates for average ultimate recovery rate are based on 8,340 infrastructure loans and 1,714 non-infrastructure loans that originated from 1983-2021. The sample size for project will undergo restructuring and negotiations for recovery upon high-income loans was 7,302 and for low- and middle-income loans was 1,038. debt default. Infrastructure Monitor 2024 Project Preparation Funds: Funds Key drivers 91 Revenue-resilience – both in emerging and developed economies - is a key determinant of default on infrastructure debt Globally, infrastructure debt for projects supported by a resilient revenue stream had substantially lower default rates than those for which revenue streams were not resilient, including in LMICs. Moody’s mapped rated global infrastructure debt securities that originated between 1995 and 2023 to revenue resilience. The average cumulative default rate over five-year loan duration for revenue-resilient infrastructure debt was 0.7 percent, while the default rate was eight times higher for non-revenue resilient infrastructure debt at 5.4 percent. Even in LMICs, revenue resilience’ halved the default rates, as the average default rate for revenue-resilient infrastructure debt was 5.6 percent compared to 10.3 percent for non-revenue resilient infrastructure debt. Logically, revenue resilience is a key ingredient for establishing bankability and private capital mobilization for infrastructure projects. A clear line of sight on future revenue streams and profits is essential to attract private capital. Ring-fencing revenue streams for infrastructure projects can accelerate development of a bankable pipeline of infrastructure projects. Through payment guarantees, governments can further enhance the perception of revenue resilience. As revenue resilience seem to reduce credit risk, it can improve financing terms and lower expected returns to enhance bankability and affordability of infrastructure projects. Cumulative Default Rates (5-year) for rated infrastructure debt by revenue resilience (%, 1995-2023) Global Low- and middle-income countries Revenue-Resilient Revenue-Resilient 0.7% 5.6% Infrastructure Infrastructure Non-Revenue-Resilient Non-Revenue-Resilient 5.4% 10.3% Infrastructure Infrastructure 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Source: Moody’s (2023a). Note: Revenue-resilient infrastructure includes availability-based payments Public Private Partnership (PPPs) and regulated corporate infrastructure including regulated electric and gas industry, and regulated water utilities. Non-revenue-resilient infrastructure includes unregulated corporate infrastructure that is, unregulated electric and gas and unregulated water and waste utilities, transportation infrastructure corporates, and project finance other than availability-based PPPs Global data sample of 923 rated infrastructure debt securities was mapped to 521 revenue-resilient and 421 non-revenue-resilient infrastructure. The sample included 100 low- and middle-income debt securities of which 35 were for revenue-resilient infrastructure and 65 were for non-revenue-resilient infrastructure. Infrastructure Monitor 2024 Project Preparation Funds: Funds Key drivers 92 Infrastructure PPPs with availability-based payments had the lowest average default rate Globally, average cumulative default rate was the lowest at 0.6 percent Credit risk metrics for infrastructure debt by project type and for infrastructure debt for a PPP with availability-based payment payment mechanism (%, 1983-2020) mechanisms, based on Moody’s data analysis of infrastructure debt originating between 1983 and 2020. However, as seen previously, the Cumulative default rates (10-year) resilience of revenue, in this case the resilience of availability-based payment, plays an important role in reducing default. While PPP Global Low- and middle- structure had lower default rates in LMICs, the use of availability-based income countries payment mechanism did not necessarily lead to lower default rates in Availability-based 0.6% 4.9% LMICs, which could be driven by higher payment risk when revenue Non-PPPs PPPs source is concentrated with one payer from public sector who could Non-availability-based 4.1% 2.3% be less resilient if the government is not creditworthy. Availability-based 2.4% 6.4% When infrastructure debt defaults, ultimate recovery rates were Non-availability-based 3.9% 5.4% higher when availability-based payment mechanisms were not used. Payment default in the presence of availability-based payment 0.0% 4.0% 0.0% 4.0% 8.0% 8.0% 6.0% 6.0% 2.0% 2.0% 1.0% 1.0% mechanisms means that governments did not pay likely because the project was not delivered up to their expectations. This decision of governments is likely more difficult to challenge, reducing the Average ultimate recovery rates likelihood of recovering capital for other project participants (debt and equity providers). Global Low- and middle- income countries Non-PPPs PPPs Availability-based 55% 52% Non-availability-based 88% 87% Availability-based 78% 71% Non-availability-based 82% 82% 0% 60% 0% 60% 100% 100% 80% 80% 40% 40% 20% 20% Source: Moody’s (2023c). Note: 8,468 global projects included 1,754 with availability-based payments and 6,714 with non-availability-based payments. 2182 were PPP projects. In this global projects sample, 1470 projects were in LMICs with 178 having availability-based payments and 1,292 had non-availability-based payments. PPPs were 234 projects. Infrastructure Monitor 2024 Project Preparation Funds: Funds Key drivers 93 Infrastructure debt with green tag had lower default rates but also lower recovery rates than the projects without green tag Globally, infrastructure project finance loans which had a green tag Credit risk metrics for infrastructure project finance loans that is, the use of proceeds earmarked to only finance green projects, by green tag (%, 1983-2020) had a lower cumulative default rate over ten years at 2.5 percent than the 5.2 percent rate for the loans without the green tag. Also, for Cumulative default rates (10-year) LMICs, the default rate was lower at 3.4 percent with green tag than 2.5% Green tag 5.9 percent without green tag. It could be driven by rapidly expanding 3.4% government support for green investments and the resulting market 5.2% transition to a green economy. Also, across all regions of the world, Non-green tag 5.9% the default rates were lower for infrastructure loans with a green tag. Both renewable power and clean transportation had lower shares 0.0% 1.0% 2.0% 4.0% 6.0% 8.0% of defaults in total projects than non-renewable power and general transport sector, respectively. Average ultimate recovery rates However, the global average ultimate recovery rates were lower for 74% Green tag infrastructure project finance loans with a green tag at 74 percent 70% than the 86 percent rate for the loans without a green tag. In LMICs, 86% the gap was wider with the recovery rate at 70 percent with a green Non-green tag 88% tag and 88 percent without a green tag. This holds true in all regions except Europe. It could be because of more mature restructuring 0% 20% 40% 60% 80% 100% and negotiation processes in place and/or the availability and use of Global Low- and middle-income countries more insurance and guarantee products to support traditional non- green sectors. Source: Moody’s (2023c). Note: Data sample of 8,468 unrated infrastructure project finance loans (including 1,470 in LMICs) originating between 1983 and 2020 was mapped. Globally, 3483 loans were mapped to green tag and 3801 were mapped to non-green tag. In LMICs, 430 loans were mapped to green tag and 983 loans were mapped to non-green tag. Infrastructure Monitor 2024 Project Preparation Funds: Funds Emerging markets 94 The average default rates in low- and middle-income countries were higher than the global average, but the gap varied by the type of project Globally, rated infrastructure debt that originated between 1995 and 2023 had an average cumulative default rate of 4.3 percent by year 10, while it was almost three times higher in LMICs at 13.6 percent. Data indicates that defaults on infrastructure debt in LMICs declined over time, especially for energy, transport and telecommunications sectors. Efforts to replicate best international practices in emerging markets strengthened the enabling environment, increased market activity, and improved maturity in developing infrastructure projects. Globally, unrated project finance infrastructure loans given by private sector that originated between 1983 and 2021 had an average cumulative default rate of 4.3 percent. The default rate for LMICs was 5.9 percent. This narrower gap in default rates relative to rated infrastructure debt could be due to the reluctance of private sector and higher risk-aversion in providing debt to unrated project finance structures of infrastructure projects in lower income countries. Our Infrastructure Monitor Report 2023 showed how the levels of default rates in 2010s were significantly lower than the levels in 1990s in LMICs, especially for economic infrastructure sectors – telecommunications, transport, energy, water. An analysis over decades by region showed that the spikes in defaults seem to correlate with macroeconomic crises such as sudden foreign capital withdrawal, debt crisis, banking crisis, or low capacity in infrastructure markets to prudently structure deals and high risk-aversion among investors. Cumulative default rate for infrastructure debt by country income group (%) Rated infrastructure corporate and project finance debt securities Unrated infrastructure project finance loans (1995-2023) (1983-2021) 15.0% 15.0% 10.0% 10.0% 5.0% 5.0% 0.0% 0.0% 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 Global Low- and middle-income countries Global Low- and middle-income countries Years since debt origination Years since debt origination Source: Moody’s (2023a). Source: Moody’s (2023b). Note: Data sample for rated corporate infrastructure and project finance debt securities was nearly 1,000 securities including 100 in LMICs. Data sample for unrated infrastructure project finance loans was 8,340 loans with 7,302 in HICs and 1,038 in LMICs. Infrastructure Monitor 2024 Project Preparation: Emerging markets 95 For MDB/DFIs lending to private counterparts, infrastructure exhibit lower default rates than non-financial corporates. The recovery rates were high in low-income countries. According to the Global Emerging Markets Risk (GEMs) database that is the largest credit risk data hub for emerging markets and developing economies operations of Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs), the average annual default rate for infrastructure lending contracts with private counterparts was 3.0 percent during 1994-2022. It has mostly remained below the annual default rates for exposures to non-financial corporates which averaged to 4.7 percent during 1994-2022. For MDB/DFI operations in infrastructure, the levels of default rates seem to be on par with other global benchmarks for infrastructure default rates, despite the larger share of lower income countries in MDB/DFI operations. According to GEM analysis, the correlation coefficient between GEMs default rates and those for S&P B-rated firms and for Moody’s B3-rated firms is also relatively low, suggesting that the MDB/DFI infrastructure lending can add to diversification of risk- return for an investor’s portfolio. The recovery rates seem to be higher particularly for MDB/DFI infrastructure lending operations in low-income countries relative to global benchmarks for recovery rates. For global MDB/DFI infrastructure lending operations, the GEMS database estimates 79 percent recovery rate upon default and it was even higher at 93 percent for low-income countries. The GEMs steering committee plans to incorporate data analytics required to inform the development of infrastructure as an asset class with more disaggregation in future annual publications of the GEMs reports. Credit risk metrics for MDB/DFI contracts with private counterparts by asset class (%, 1994-2022) Annual default rates Recovery rates 10.0% 79% Global average 74% 8.0% 80% Upper-middle income 75% 6.0% 78% 4.7% Lower-middle income 4.0% 73% 3.0% 2.0% 93% Low income 80% 0% 0% 20% 40% 60% 80% 100% 2001 2011 2021 1999 2000 2009 2010 2019 2020 1998 2003 2008 2013 2018 1997 2007 2017 1995 2002 2005 2012 2015 2022 1996 2006 2016 1994 2004 2014 Infrastructure Non-financial corporates Infrastructure Non-financial corporates Source: GEMs (2023). Note: Estimates for default rates are based on 1,697 infrastructure loans and 4,476 non-financial corporate loans. Recovery rates are based on 1,625 infrastructure loans and 4,729 non-financial corporate loans. Infrastructure Monitor 2024 Project Preparation: Emerging markets 96 With MDB/DFI lending, the default rates in low- and middle-income countries were lower in the utilities and energy sector, especially when the lending was to public counterparts. According to GEMs database for MDBs and DFIs operations between 1994 and 2023, MDB/DFI lending to private counterparts for energy sector in LMICs had an average annual default rate of 3.3 percent, and the default rate was only 1.0 percent with public counterparts, lower than the market benchmarks for all sectors. Higher default rates in Middle East & North Africa and Sub-Saharan Africa increased the overall default rate of private counterparts. Private counterparts had one of the lowest default rates for utilities. However, utilities also had lower default rates with public counterparts (2.3 percent) than private counterparts (3.0 percent) Upon default, the average recovery rates for the lending to private counterparts was inconsistently higher or lower than that for all sectors. Across sectors, real estate asset class had the best recovery rates which were over 50 percent even at 10th percentile: the stable cash flows and asset- backed collateral benefits recovery of defaulted real estate lending. While the infrastructure asset class also has these characteristics, they are not formally recognized in financial regulations and markets which is a major roadblock in improving attractiveness of the infrastructure asset class. Credit risk metrics for MDB/DFI contracts for energy sector in low- and middle-income countries by type of counterpart (%, 1994-2023) Average annual default rate Average recovery rate Private lending Public lending Private lending Public lending 90% 86% 3.6% 3.3% 73% 72% 3.0% 2.6% 58% 2.3% 1.0% Energy Utilities All Sectors Energy Utilities All Sectors Energy Utilities All Sectors Energy Utilities All Sectors Source: GEMs (2024). Estimates are derived from pooled data supplied by 21 member institutions. For private lending, the sample has 235 contracts in energy sector, 1359 in utilities, and 9929 for all sectors. For public lending, the sample has 24 contracts in energy, 171 in utilities and 943 in all sectors. Infrastructure Monitor 2024 Debt Performance: Sectors 97 In the power sector, regulated power had lower default rates than unregulated power. Strong regulatory frameworks seem to help in improving investment performance. Cumulative default rates for infrastructure debt in power sector by country income group (%) Rated infrastructure corporate and project finance debt securities (1995-2023) Regulated power Unregulated power 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 Global Low- and middle-income countries Global Low- and middle-income countries Source: Moody’s (2023a). Note: Regulated power encompasses electric and gas utility companies and networks that are influenced to a large degree by regulation. They are monopoly providers of essential services, and their activities and rates/tariffs are supervised by a regulator. Global data sample for regulated power included 434 debt securities and unregulated power included 113 debt securities. Nealy 12 percent of the sample was in LMICs. The energy sector accounts for the largest share of private investment in infrastructure projects: 70 percent globally, 67 percent in HICs and 72 percent in LMICs in 2023. In the regulated power sector (electric and gas utilities and networks), global rated infrastructure debt securities that originated between 1995 and 2023 demonstrated an average cumulative default rate of 1.4 percent over 10 years: one of the lowest across sectors, and significantly lower than the default rate of 14.2 percent for unregulated power sector, indicating that regulatory environment helps in reducing default rates and improving investment performance. In LMICs, the default rate even for regulated power sector was much higher at 10.6 percent, still lower than 17.2 percent for unregulated power sector, but suggesting scope for strengthening the regulatory environment. The World Bank’s Global Electricity Regulatory Index which benchmarks a country’s existing regulatory system against theoretical best practices, estimated a score of 59 percent for 82 non-OECD countries in 2021, suggesting scope to improve regulatory environment in LMICs. For example, the tariff methodologies poorly specify essential features such as automatic tariff adjustments and schedules for major tariff reviews, which were missing in more than 80 percent of the cases. This negatively impacts revenue resilience (Rana, A., Ngulube, M., Foster, V., 2022). Infrastructure Monitor 2024 Debt Performance: Deep-dive on unlisted debt 98 Emerging markets provided better returns to unlisted debt investors in the infrastructure asset class. The gap was wider in recent years Globally, return on infrastructure debt securities reduced globally from 3.6 percent over ten years to 0.5 percent over three years. In developed markets, return reduced from 3.2 percent over ten years to -0.1 percent over three years. In emerging markets, the return reduced relatively less from 8.9 percent to 7.7 percent during the same time period, as of 31 October 2024. Infrastructure investors being in the long-term financing business have been more sensitive to interest rate risks and proactive in hedging interest rate risks using fixed-rate contracts. Over a 10-year period, the volatility in return on infrastructure debt securities was higher in emerging markets at 5.1 percent than that in developed markets at 4.6 percent. Over the 3-year period, it was higher in developed markets at 6.8 percent than emerging markets at 4.7 percent. The volatility in central bank policy interest rates was very high in developed markets over the last three years. While the return to volatility ratio in emerging markets was similar over three years (1.6) and over ten years (1.7), It drastically dropped in developed markets from 0.7 over ten years to nearly zero over three years due to nearly zero returns. Unlisted infrastructure debt: Return and risk by market and investment time horizon Total return (%) Risk: Volatility in returns (%) Ratio: Total return-to-risk 10% 10% 1.8 1.7 8.9% 1.6 9% 9% 1.6 8% 7.7% 8% 1.4 6.8% 1.2 7% 7% 6.5% 1.2 6.1% 6% 6% 5.3% 5.5% 5.3% 5.1% 1 5% 5% 4.7% 4.4% 4.6% 0.8 0.8 0.7 4% 3.6% 4% 3.2% 0.6 3% 3% 2% 2% 0.4 1.2% 0.2 1% 0.8% 1% 0.2 0.1 0.1 0.5% 0% 0% 0 -0.1% -1% 3-year 5-year 10-year 3-year 5-year 10-year 3-year 5-year 10-year Global Developed markets Emerging markets Source: EDHECInfra (2024). Data as of 31 October 2024. Note: EDHECInfra data is based on a representative sample of 27 countries that exhibit sizable level of activity that could be measured including Australia, Austria, Belgium, Canada, Denmark, Germany, Spain, Finland, France, United Kingdom, Hungary, Ireland, Italy, Netherlands, Norway, New Zealand, Poland, Portugal, Russia, Singapore, Slovakia, Sweden, United States of America, Brazil, Chile, Malaysia, Philippines. Infrastructure Monitor 2024 Debt Performance: Deep-dive on unlisted debt 99 Unlike green unlisted infrastructure equities, green unlisted infrastructure debt provided higher returns and lower volatility in returns over all investment time horizons For infrastructure debt, as seen previously, the return decreased and Green unlisted infrastructure debt: the volatility in returns increased over the preceding decade. These Return and risk by investment time horizon metrics for green unlisted infrastructure debt also followed a similar Total return (%) 4% trend but the decline was less dramatic, thereby increasing their 3.5% 3.5% 3.3% relative attractiveness. 3% 2.5% Over the 10-year period, green unlisted infrastructure equities 2.0% 2% provided an average return of 3.5 percent, slightly higher than 1.6% 1.5% 3.3 percent for all unlisted infrastructure equities. Over the last 1% 0.8% five years, the return declined to 1.6 percent for green unlisted 0.5% infrastructure equities and 0.8 percent for all unlisted infrastructure 0% equities. In the last three years, the return on green unlisted -0.5% -0.1% infrastructure equities registered an increase to 2.0 percent while 3-year 5-year 10-year the return for all unlisted infrastructure equities declined even further 7% Risk: Volatility in return (%) to nearly zero. 6.5% 6% 5.4% 5.0% The volatility in returns on green unlisted infrastructure equities 5% 4.2% 4.5% was 3.5 percent over the last ten years, lower than 4.5 percent for 4% 3.5% all unlisted infrastructure equities. Over time, the volatility levels for 3% both increased, but they increased at a slower pace for green unlisted 2% 1% infrastructure equities. In the last three years, the volatility in returns 0% for green unlisted infrastructure equities was 5.0 percent while that 3-year 5-year 10-year for all unlisted infrastructure equities was 6.5 percent. Benchmark: All unlisted infrastructure equities In effect, the return to volatility ratio for green unlisted infrastructure Green unlisted infrastructure equities equities improved over the past three years. Source: EDHECInfra (2024). Data as of 31 October 2024. Note: InfraGreen debt index tracks the performance of the outstanding senior debt of the constituents of the infraGreen Equity index which tracks over 100 investments in solar and wind projects worldwide and provides a unique view of the renewable energy sector’s performance. EDHECInfra data is based on a representative sample of 27 countries that exhibit sizable level of activity that could be measured including Australia, Austria, Belgium, Canada, Denmark, Germany, Spain, Finland, France, United Kingdom, Hungary, Ireland, Italy, Netherlands, Norway, New Zealand, Poland, Portugal, Russia, Singapore, Slovakia, Sweden, United States of America, Brazil, Chile, Malaysia, Philippines. Environmental, Social, and Governance (ESG) factors in infrastructure Infrastructure Monitor 2024 Overview 101 Infrastructure assets continue to improve their ESG scores and are increasingly identifying and assessing climate risks, though many still lack net zero targets In 2024, infrastructure assets continued GRESB ESG Score for infrastructure assets OVERVIEW to improve their ESG policies, practices (where 0 is the worst score and 100 is the best score, 2018-2024) and disclosure, as measured by GRESB’s ESG leaders (top 20%) 100 ESG Score in its annual Infrastructure All assets Asset Assessment. ESG scores for 80 72.4 79.3 Avrage ESG Score 82.8 85.8 infrastructure assets improved across all three pillars (Environmental, Social and 60 61.5 Governance), with the Environmental ESG laggards (bottom 20%) pillar showing the most progress, 40 47.6 45.5 particularly in Biodiversity & Habitat. 20 The increasing integration of 0 sustainability considerations into 2018 2019 2020 2021 2022 2023 2024 investment decisions is also evident, as a growing number of infrastructure Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. assets now have systematic processes in The assessment covers 720 assets across 81 countries. place to identify and assess the financial impact of both physical climate risks and Identification and assessment of climate risks by type transition risks. (% of reporting assets, 2023 vs. 2024) Compared with 2023, more Identify physical climate risk infrastructure assets have also reported Assess material financial that they have a net zero target set. impact of physical climate risk However, almost one-third of assets still Identify transition risk do not have a net zero target and for those that do, over 40 percent do not Assess material financial impact of transition risk have interim targets or are not aligned to a target-setting framework. 0% 20% 40% 60% 80% 100% % of assets 2024 2023 Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. Infrastructure Monitor 2024 ESG trends 102 Infrastructure assets have continued to improve their ESG policies, practices, and disclosure over time • Data that can support the development of resilient, sustainable and inclusive infrastructure is critical in tracking progress on net zero and other climate outcomes. In this chapter, data from the GRESB Infrastructure Asset Assessment has been adopted as a proxy to illustrate change and movement in this area. It is important to note that data from the assessment is provided and self-reported on a voluntary, opt-in basis. Resultingly, the analysis may not be totally representative of the state of ESG for infrastructure assets across the world, particularly in emerging markets; In 2024, 88 percent of the participating assets in the assessment came from high-income countries. • GRESB is currently the market leading source of ESG (Environmental, Social, and Governance) data for infrastructure assets, collecting data via its annual Infrastructure Asset & Fund Assessments and calculating an ESG Score using a bespoke methodology and framework. This ESG Score reflects the extent to which assets have ESG policies in place, manage ESG risk, report transparently on their most material ESG issues, and have current and future ESG targets. • According to GRESB’s Infrastructure Asset Assessment, the average ESG Score for infrastructure assets has been increasing steadily since 2019 and continued to do so in 2024, rising from 82.8 in 2023 to 85.8 in 2024. GRESB ESG Score for infrastructure assets (where 0 is the worst score and 100 is the best score, 2018-2024) ESG leaders (top 20%) 100 All assets 82.8 79.3 80 85.8 72.4 Avrage ESG Score 60 61.5 ESG laggards (bottom 20%) 45.5 47.6 40 20 0 2018 2019 2020 2021 2022 2023 2024 Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. The assessment covers 720 assets across 81 countries. Notes: While ESG Scores have been subject to some methodological changes and changing component weights over time, they are still comparable across years. Infrastructure Monitor 2024 ESG trends 103 In 2024, ESG Scores for infrastructure assets improved in all three pillars of ESG • In 2024, the ESG Scores of infrastructure assets improved across all three pillars of ESG, with the Environmental pillar seeing the most improvement. This improvement was largely driven by significant progress in the Biodiversity & Habitat aspect. • Notably, Governance saw similar levels of improvement to Environmental, although the Governance pillar continues to lag overall. • In 2024, Energy has reclaimed its position as the highest scoring individual aspect, surpassing Health and Safety (the extent to which the entity reports on health and safety of employees and contractors, users, and the local community) and Employees (reflecting employee engagement and extent of reporting on diversity and inclusion). ESG Scores for infrastructure assets by ESG pillar (where 0 is the worst score and 100 is the best score, 2023 vs. 2024) Environmental Social Governance 100 2024 average = 88.5 2024 average = 88.3 100 100 2024 average = 73.5 2023 average = 85.0 2023 average = 86.8 90 90 90 2023 average = 70.1 80 80 80 70 70 70 Average Score Average Score Average Score 60 60 60 50 50 50 40 40 40 30 30 30 20 20 20 10 10 10 0 0 0 Reporting Stakeholder Engagement Customers Employees Waste Leadership Air Pollution Water GHG Emissions Certification & Awards Policies* Health & Safety Risk Management* Energy Biodiversity & Habitat 2023 2024 2023 2024 2023 2024 Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. *The Policies and Risk Management aspects contribute to three pillars but have been included in the Governance pillar for the purpose of this chart. Infrastructure Monitor 2024 Climate targets 104 Almost one third of infrastructure assets still have no net zero target. Moreover, over 40 percent of these targets do not have interim targets or target-setting frameworks Infrastructure assets that have a GHG emissions target Aligned with a net zero target-setting Science-based aligned with net zero (% of reporting assets) framework (% of targets) (% of targets) 42% 46% 58% 54% 32% 68 percent of assets have a net zero target, of which: Publicly communicated Includes interim target 68% (% of targets) (% of targets) 28% 42% 58% Yes No 72% Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. • GRESB’s 2024 Infrastructure Asset Assessment reveals an improvement in net-zero target-setting, with 68 percent of reporting assets having a GHG emissions reduction target aligned with net zero. This metric was first captured by GRESB in 2023, when only 60% of assets reported a target. On the flipside, there is still significant progress to be made as this means almost one-third of reporting assets have no GHG emissions target aligned with net zero. • The data also suggests that organizations are now setting more transparent targets for their infrastructure assets. This year’s results saw a general uptick in the proportion of reporting assets that are setting targets aligned with a target-setting framework, are science-based, validated by a third party, publicly communicated, or that include an interim target. Additionally, a greater proportion of reporting assets in 2024 have established timelines for their targets (i.e. they have specified baseline and end years). • Despite this improvement, only 58 percent of the targets set by the organizations assessed have target-setting frameworks and interim targets. These two attributes form an integral part of setting overarching net zero targets, as targets that lack defined pathways, milestones, and substantive detail on how they will be implemented will be difficult to monitor, evaluate and possibly, achieve. Going forward, targets have the potential to be more ambitious. Infrastructure Monitor 2024 Climate targets 105 Net zero targets tend to focus on Scope 1+2 emissions and be location-based over market-based. Out of all infrastructure sectors, environmental services assets lead the way in net zero targeting • Amongst all emissions scopes reported by entities that Net zero targeting by type and region have a net zero target, location-based targets tend to be (% of emissions scopes covered by targets) more common than market-based targets. Generally, 100% Scope 1+2 emissions targets are also more common than Scope 3 emissions targets. 80% • Europe continues to dominate market-based targeting, 60% and is also the region with the greatest proportion of 40% Scope 3 emissions targeting (50 percent) – with Scope 1+2 targeting being equally as prevalent (50 percent). Asia 20% remains the region with the lowest proportion of net zero 0% targets capturing Scope 3 emissions, albeit the region Has a net Scope 1+2 Scope 1+2 Scope 1+2 Scope 1+2 saw a 11 percent increase from last year to 20 percent zero target location-based location-based market-based market-based in 2024. + Scope 3 + Scope 3 • However, infrastructure assets in Asia are most likely All Americas Asia Europe Oceania to have a net zero target overall (84 percent), followed by Europe (75 percent), Oceania (62 percent), and then Net zero targeting by type and sector the Americas (56 percent). Overall, and compared to (% of emissions scopes covered by targets) last year’s values, 2024 saw an improvement in net zero 80% targeting across all regions. 60% • There was also an improvement in net zero targeting 40% across all infrastructure sectors, except for network utilities. 20% • Remarkably, environmental services infrastructure 0% was most likely to have a net zero target, with the Has a net Scope 1+2 Scope 1+2 Scope 1+2 Scope 1+2 sector observing a 30 percent increase upon last year’s zero target location-based location-based market-based market-based + Scope 3 + Scope 3 assessment, where it ranked the lowest across all infrastructure sectors. Overall, the renewable power Data infrastructure Energy and Environmental Network sector had the lowest proportion of targets, although Water resources services utilities perhaps because the sector itself is inherently, already Power generation x Renewable power Social infrastructure Transport Renewables net zero aligned. Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. Note: Entities can select more than one type of scope for their net zero targets. Infrastructure Monitor 2024 Climate considerations 106 An increasing number of organizations are implementing a systematic process for identifying and assessing the impacts of physical climate risks on their infrastructure assets • Most infrastructure assets assessed by GRESB have a systematic process for identifying physical risks (94percent of reporting assets) and for assessing their material financial impact (87 percent). • These values have improved since 2023 by 6 and 9 percentage points respectively, suggesting that the organizations assessed are becoming more adept at identifying physical risks and their potential financial impact on their organization’s business and financial plans. Assets in the social infrastructure sector appear to be leading the way for both these metrics. • The most commonly identified risks continue to be flash flooding (acute) and heat stress (chronic), with approximately half of respondents indicating that their infrastructure assets are exposed to these risks. The most assessed financial risks were increased capital costs (direct) and increased operating costs (indirect). Physical risk identified by risk type Material financial impacts identified by impact type (% of reporting assets that identify physical risk) (% of reporting assets that assess impact of financial risk) Direct Flash flood 51% Increased capital costs 53% Acute hazards River flood 45% Storm surge 39% Increased operating costs 42% Extratropical storm 31% Increased insurance premiums and Tropical cyclone 28% potential for reduced availability of 28% insurance on assets in “high-risk” locations Hail 21% Reduced revenue from decreased Indirect 21% Heat stress 46% production capacity Chronic stressors Rising mean 41% Reduced revenues from temperatures 18% lower sales/output Drought stress 37% Reduced revenue and higher costs Precipitation stress 37% 16% from negative impacts on workforce Fire weather stress 30% Write-offs and early retirement 13% Rising sea levels 31% of existing assets 0% 20% 40% 60% 0% 20% 40% 60% % of assets % of assets Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. Infrastructure Monitor 2024 Climate considerations 107 Transition risks are also widely identified and assessed for infrastructure assets, with policy and legal risks being the most common, and the most likely to have a material financial impact • The majority of infrastructure assets assessed by GRESB also have Transition risk identified by risk type a systematic process for identifying transition risks (90 percent (% of reporting assets that identify transition risk) of reporting assets), a considerable improvement from last year’s Any policy and legal risk 83% value of 77 percent. In addition, 85 percent of reporting assets have Policy and legal a systematic process to assess the material financial impact for the Enhancing emissions 55% reporting obligations transition risks identified – up from 77% in 2023. This improvement Mandates on and regulation of 50% was exhibited across all risk types — policy and legal, market, existing products and services technology, and reputation. Increasing price of 46% GHG emissions • Overall, policy and legal risks were the most commonly identified Exposure to litigation 28% transition risks and also, the most likely to have a material financial impact on infrastructure assets. Any market risk 77% • Amongst assets that have a process for identifying transition Changing customer behavior 56% Market risks, 83 percent identified a policy and legal risk, most commonly relating to enhanced emissions reporting obligations. Market, Increased cost of raw materials 46% reputation, and technology risks were also widely identified by Uncertainty in market signals 37% infrastructure assets, particularly the risk of changing customer behaviour (56 percent), increased stakeholder concerns Any reputation risk 64% (51 percent), and the costs of transitioning to lower emissions Reputation Increased stakeholder concern or 51% technology (51 percent). negative stakeholder feedback • Similar to the physical risk assessment, social infrastructure is Shifts in consumer preferences 36% the sector which had the greatest proportion of reporting assets Stigmatization of sector 30% identifying transition risks and their material financial impact (91 percent). Any technology risk 68% Technology Costs to transition to 51% lower emissions technology Substitution of existing products and 48% services with lower emissions options Unsuccessful investment 26% in new technologies 0% 20% 40% 60% 80% 100% % of assets Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. Infrastructure Monitor 2024 Inclusivity considerations 108 Almost all infrastructure assets have an individual responsible for Diversity, Equity, and Inclusion (DEI) issues with senior decision-maker accountability • GRESB’s Infrastructure Assessment includes a range of metrics to evaluate infrastructure assets’ Diversity, Equity, and Inclusion (DEI) commitments and objectives, and how responsibilities for making decisions relating to DEI are assigned. • Overall, there was an improvement across all DEI metrics in 2024 in comparison to last year’s assessment, when the DEI indicators were first collected and implemented by GRESB. • In 2024, 76 percent of reporting infrastructure assets have a DEI objective. However, most assets (96 percent) still have an individual responsible for DEI issues, even in the absence of a specific DEI objective. • Although there isn’t significant variability amongst regions when it comes to assets having DEI objectives and an individual responsible for implementing DEI, Asia is comparatively lower. For the same metrics, reporting assets in the environmental services sector had the greatest commitment to DEI. Commitment to DEI Commitment by sector to Diversity, Equity, and Inclusion (DEI) by sector to DEI by region Commitment (% of reporting assets) (% of reporting assets) (% of reporting assets) All All Environmental services Network utilities Oceania Transport Data infrastructure Europe Social infrastructure Energy and Americas Water resources Power generation x Renewables Asia Renewable power 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% % of reporting assets % of reporting assets Have an individual responsible for implementing DEI objectives Have a DEI objective Source: Authors’ analysis based on 2024 GRESB Infrastructure Asset Assessment. Note: Sectors with fewer than 25 reporting assets have been excluded (that is, Other and Diversified), but are included in the calculation of “All”. Blended finance and guarantees in infrastructure This section has been developed in partnership with Convergence, drawing on data from Convergence’s historical deals database. It also draws from data in the Berne Union reports. Infrastructure Monitor 2024 Overview 110 Blended finance and guarantees in infrastructure Maximizing private capital mobilization leveraging constrained public resources has become central to strategies aimed at closing the infrastructure deficit. Blended finance refers to the various approaches to use limited public or philanthropic finance to increase private investment including the use of guarantees. This section examines blended finance approaches in infrastructure deals, particularly their use in financial structuring and mobilizing private capital. Noting the key role played by OVERVIEW guarantees in private capital mobilization, it also evaluates recent trends in the availability and performance of cross-border guarantees for infrastructure and longer-tenor business. The success in mobilizing private capital varies considerably across infrastructure deals. Over half of the blended finance infrastructure deals mobilized less than a dollar of private capital for a dollar worth of blended finance approaches. Encouragingly, about one-fifth of the infrastructure deals mobilized more than $2. A sizable share of this variation can be explained by country-specific factors like per capita income, sector of operations, operating structure, macroeconomic conditions, and financial structuring. Notwithstanding, the more successful deals had some strategies in common including the use of blended finance for early-stage support, future market creation and addressing payment risk, meeting the requirements of financial regulations, enhancing market tradability, and supporting a pathway to commercial viability. Blended finance infrastructure deals (2000-2024): Private capital mobilization ratio by range of values Share in total number of deals Share in total value of deals Share in the total number/ 40 36% 35% value of deals (%) Over $2 of private capital mobilized 30 by a $1 of blended finance 21% 20 18% 17% 16% 15% 13% 10 7% 6% 8% 8% 0.0 0-0.49 0.50-0.99 1.00-1.49 1.50-1.99 2.00-4.99 5.0 and above Private capital mobilization ratio: range of values Sample size: 146 85 60 29 54 33 Total: 407 Source: Authors analysis based on Convergence database. Note: The analysis is based on 407 blended finance infrastructure deals for which the required data was available. The guarantees had both commercial and concessional terms. To control for deal size, the shares of instruments in total deal size were used. Infrastructure Monitor 2024 Overview 111 Blended finance was most often used for infrastructure project finance structure, with majority of the support to lower-income countries in Sub-Saharan Africa, and to scale renewable energy generation. Higher income countries are more conducive to mobilizing more private capital. Lower income countries often require blended finance particularly guarantees to attract private capital. By region, Sub-Saharan Africa accounted for majority of the blended finance infrastructure projects, with over 90 percent in low-income countries. By sector, renewable energy generation has increasingly dominated blended finance infrastructure projects. MDBs and DFIs financed a large share of blended finance infrastructure projects, especially in large deals in low-income countries. OVERVIEW Guarantees played a key role in mobilizing private capital mainly by increasing the share of debt. Guarantees by creditworthy entities like MDBs/DFIs reduced punitive risk weights and capital charges applicable in banking regulations on low-income countries due to their sub-investment grade sovereign ratings. Holding the support through concessional capital and grants constant at $1 to estimate the impact of guarantees on private capital mobilization, $4.7 private commercial debt was mobilized for every $4.4 of guarantees cover. This may reduce the overall financing cost on an all-in basis if the guarantees are priced at subsidized levels e.g., much below sovereign borrowing costs for a country. Since the onset of crisis period in 2020, the global share of deals (both by number and value) supported by guarantees seem to have reduced, but the coverage of deal value increased. Sample size: Impact of guarantees on private commercial debt mobilization Total: 407 157 Private Non-private debt commercial debt (including concessional) With guarantee 250 Private Non-private debt commercial debt (including concessional) No Guarantee 0.0 20% 40% 60% 80% 100% Source: Authors analysis based on Convergence database. Note: The analysis is based on 407 blended finance infrastructure deals for which the required data was available. The guarantees had both commercial and concessional terms. To control for deal size, the shares of instruments in total deal size were used. Infrastructure Monitor 2024 Overview 112 Cross-border guarantees: Recent trends and performance Within infrastructure, energy transition drove new commitments for cross-border guarantees. In 2023, the guarantees for renewables surpassed non-renewables for the first time. New commitments for cross-border guarantees supporting infrastructure increase in 2023 to US$59.1 billion driven primarily by renewable energy and other non-energy infrastructure sectors. In 2020, new commitments for non-renewable energy sector were similar to that for renewable OVERVIEW energy sector, and by 2023, they were half that for renewable energy sector. In 2023, renewable energy sector registered US$20.4 billion new commitments of cross-border guarantees across 68 countries. Other innovating guarantees like green guarantees were used to support ambitious climate goals. Other infrastructure sector also noted a record US$27.7 billion in new commitments of cross-border guarantees driven by recovery of the high-volume transportation sector. Public sector provided around 80 percent of the guarantees supporting longer-tenor business. Lower income countries allocated a higher share of these guarantees to infrastructure sector. The infrastructure sector constitutes 18 percent of these guarantees in high-income countries (HICs), and 30-40 percent in low- and middle-income countries (LMICs). Global cross-border guarantees by type: New commitments value for infrastructure sector by subsector (US$ billion) For infrastructure sector 20.8 27.7 US$ billion 19 20.9 16.9 11 18 16.8 23.9 20.4 12.8 8 2020 2021 2022 2023 Renewable energy Non-renewable energy Other infrastructure Source: Berne Union (2021, 2022, 2023, 2024). Infrastructure Monitor 2024 Overview 113 While the new commitments for political risk Global political risk guarantees: guarantees slightly declined, they absorbed New commitments value (US$ billion) more risk due to heightened geopolitical Political risk guarantees conflicts and political risk globally. The value of new commitments for political risk guarantees 80% US$ billion has been on a long-term declining trend even 64 before the Covid-19 pandemic, falling from US$64 OVERVIEW 60% billion in 2017 to US$47 billion in 2019 to US$39 47 47 billion in 2020 and further to US$34 billion in 2021. 39 42 41 While still below the pre-pandemic levels, the 40% 34 new commitments for political risk guarantees increased to US$42 billion in 2022 and maintained 20% similar level at US$41 billion in 2023. The share of political risk related claims paid for non- 0.0 performing loans was 55 percent in 2023 in South 2017 2018 2019 2020 2021 2022 2023 Asia and Sub-Saharan Africa, and this share was nearly 40 percent in the Middle East and North Africa, and Russia and the Commonwealth of Global cross-border guarantees performance by sector (%, average 2021-2023) Independent. Besides the Russian invasion of Claims ratio Recoveries relative to Ukraine, this was due to the political instability 3-years' claims paid driven by difficult economic times. Non-infrastructure 0.79% 22.4% By sector, renewable energy had the strongest performing cross-border guarantees, with the lowest claims ratio of 0.34 percent and high Infrastructure 0.62% 17.4% recoveries relative to 3-years’ claims paid. Renewable energy 0.34% 21.0% Non-renewable energy 0.41% 14.7% Other infrastructure 0.84% 11.7% 0% 5% 10% 15% 20% 25% Source: Berne Union (2021, 2022, 2023, 2024). Infrastructure Monitor 2024 Blended finance in infrastructure 114 Blended finance in infrastructure This section presents currently available evidence on the success of mobilizing private capital for infrastructure through blended finance approaches in low- and middle-income countries (LMICs) and attempts to identify approaches that seem more effective and scalable. Blended finance is the use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development. - Convergence P ​ rivate capital mobilization ratio indicates how much private capital was mobilized for infrastructure deals in which blended finance were used. It represents the ratio of capital provided by private investors (debt, equity or mezzanine finance on commercial terms) to the capital provided by non-private (public and philanthropic) investors in a deal (commercial or concessional debt, equity or mezzanine finance, grants, and guarantees). Blended finance infrastructure deals: Infrastructure deals in which both public and private stakeholders financed the deal were included in this analysis on blended finance. Data analysis sample: The analysis is based on 407 blended finance infrastructure deals in the Convergence historical deals database for the time period 2000-2024 for which the detailed data required for this analysis was available for LMICs. Through intensive data collection efforts, the analysis sample increased to 407 deals (US$104.3 billion total deal value) from 162 deals (US$34 billion total deal value) in the blended finance analysis of Infrastructure Monitor 2023. This allowed for a more detailed and disaggregated data analysis and insights in this year’s report. Estimates are presented only when sample size had at least five deals. While the database is not exhaustive, it is the best accessible data to study the use of blended finance in infrastructure. The data availability for recent deals especially those launched after 2010 is better, except limited data was available for deals that closed in 2024. Scope of participants: The deals represent infrastructure financing by all the main types of public, private and philanthropic investors including national, state, or local government entities or government-owned banks, enterprises and companies; international or regional Multilateral Development Banks (MDBs), Development Finance Institutions (DFIs), Export Credit Agencies (ECAs); foundations and NGOs; commercial investors including commercial banks, developers, insurance companies, pension funds, infrastructure funds, sovereign funds, and impact investors. Capital provided by private investors – commercial investors or impact investors – is considered private capital mobilized. Note: The sample aims to represent the universe of blended finance infrastructure deals. It is not representative of the World Bank Group deals. Scope and definition of the types of deal structures: • Projects deal structure include greenfield and brownfield projects, and programs funded through a combination of market-rate and below market-rate capital • Bonds/notes deal structure include privately placed issuances, listed instruments on public exchanges • Funds deal structure include limited partnership private equity and debt funds, as well as funds-of-funds • Facilities deal structure include earmarked allocation of public development resources with private capital at the vehicle level, for deployment towards a specific recipient or intervention • Companies deal structure include direct private equity and debt financing of businesses on both market-rate and below market-rate terms Infrastructure Monitor 2024 Blended finance in infrastructure 115 Maximizing private capital mobilization leveraging constrained public resources has become central to strategies aimed at closing the infrastructure deficit. The year 2015 marked the adoption of global sustainable Blended finance infrastructure deals development goals and climate change goals through the legally Private capital mobilisation ratio by time period binding Paris Agreement, as well as the Sendai framework for disaster risk reduction, that call for a significant transformation in foundational 12% 2015 marked the adoption of: structures, that is, infrastructure, required to support the economic 11.1 -Sustainable Development Goals -Paris Climate Agreement transition. United Nations studies estimated that infrastructure will -Addis Ababa Action Agenda affect the achievement of 92 percent of SDG targets and accounted 10% -Sendai disaster risk framework for 79 percent of global greenhouse gas (GHG) emissions and 88 percent of climate adaptation costs (United Nations, 2022; UNOPS, 8% 2021; UNDDR, 2015). Recognizing the large financing gap to meet the ambitious targets, the Addis Ababa Action Agenda in 2015 called for scaling all sources of financing including domestic public resources, 6% international private finance, and international development finance (United Nations, 2015; OECD, 2023). While government budget 4.2 deficits and debt stress peaked in controlling the Covid-19 pandemic- 4% induced crisis, the unprecedented spikes in inflation and interest 3.4 rates have dramatically increased infrastructure development costs and financing gap. In this context, blended finance approaches 2% 1.9 that can maximize private investments with the use of limited 1.2 0.9 1.0 0.8 0.7 0.7 public budgets have taken the centerstage in finding solutions for the global infrastructure financing gap in LMICs. 0% 2000-2024 2000-09 2010-14 2015-19 2020-24 The overall average ratio was 4.2 while the median was 0.8 indicating wide variations. The median is not affected by extreme values. The Sample size median ratio was the highest in 2020-24 time period at 1.0 despite the : by time 407 24 81 154 148 polycrisis era since the onset of Covid-19 pandemic in 2020. Note: The period: very high average ratio of 11.1 in 2010-14 and 2020-2024 is driven by a Average Median ratio of more than 11 for six out of 81 deals in 2010-14 including deals involving monopoly-like players in commercially viable sectors like Source: Authors analysis based on Convergence database. telecommunications, airports, water and renewables. Note: The analysis is based on 407 blended finance infrastructure deals for which data was available. Infrastructure Monitor 2024 Blended finance in infrastructure 116 More than half of the blended finance infrastructure deals mobilized less than a dollar of private capital for a dollar worth of blended finance approaches. Over half of the infrastructure deals (by total number or total value) mobilized less than a dollar of private capital for a dollar worth of blended finance approaches. Over one-third of the infrastructure deals mobilized less than half a dollar. This was true across varying time periods during 2000-2024. Encouragingly, about one-fifth of the infrastructure deals mobilized more than $2 private capital for a dollar worth of blended finance approaches. This also was true across varying time periods during 2000-2024. After 2010, about 7 percent to 10 percent of the deals reported extreme success in mobilizing private capital by mobilizing more than $5 for every dollar worth of blended finance approaches. These highly successful deals had all types of operating structures – projects, bond/note, fund/facility, and company. This suggests potential scope to learn from these highly successful deals for enhancing blended finance approaches in the infrastructure space. The more successful deals had some strategies in common including the use of blended finance for early-stage support, future market creation and addressing payment risk, meeting the requirements of financial regulations, enhancing market tradability, and supporting a pathway to commercial viability. Blended finance infrastructure deals: Private capital mobilization ratio by range of values (2000-2024, %) 40 Over $2 of private capital mobilized Share in the total number/ 36% 35% by a $1 of blended finance value of deals (%) 30 21% 20 18% 17% 16% 15% 13% 10 8% 8% 7% 6% 0.0 0-0.49 0.50-0.99 1.00-1.49 1.50-1.99 2.00-4.99 5.0 and above Sample size: 146 85 60 29 54 33 Total: 407 Private capital mobilization ratio: range of values Share in total number of deals Share in total value of deals Source: Authors analysis based on Convergence database. Note: The analysis is based on 407 blended finance infrastructure deals for which data was available. Infrastructure Monitor 2024 Blended finance in infrastructure 117 Holding concessional capital and grants constant at $1, guarantees had a significant impact on increasing private investment through commercial debt. The effectiveness of guarantees in mobilizing greater amount of private capital stems from the additional layer of protection provided for repayment of commercial debt. Holding the support through concessional capital and grants constant at $1 to estimate the impact of guarantees on private capital mobilization, $4.7 private commercial debt was mobilized for every $4.4 of guarantees cover. Without guarantees, $0.9 of private commercial debt was mobilized. Additionally, guarantees had a small positive impact on increasing the mobilization of private commercial equity from $1.2 to $1.4. The increasing popularity of guarantees in the infrastructure community is likely being driven by this effect. By enabling access to more private capital through debt instruments, the financing costs are reduced because debt is cheaper than equity. The benefit is higher for lower-income countries with non-investment grade ratings. However, the nearly one-to-one transfer of risk from debt providers to guarantee/insurance providers needs to be examined in more detail to estimate the effective net benefit in terms of reduced financing costs. Guarantees are effective in mobilizing private debt investors as they can dramatically reduce the punitive risk weights and capital charges applicable in banking regulations (Basel III) on sub-investment grade debt when guarantees are provided by creditworthy entities like the MDBs/DFIs. This may reduce the overall financing cost on an all-in basis if the guarantees are priced at subsidized levels e.g., much below sovereign borrowing costs for a country. Guarantees were provided by public and private sectors on both commercial and concessional terms. Blended finance infrastructure deals by use of guarantee (2000-2024) Sample size: Impact of guarantees on private commercial Mobilization of private equity and private commercial debt by use Total: 407 debt mobilization of guarantees holding concessional capital and grants constant at $1 Non-private $4.4 157 Private debt $1.4 With guarantee commercial debt (including With guarantee $4.7 concessional) $1.0 250 $1.2 No guarantee Private Non-private debt No guarantee commercial debt (including concessional) $0.9 $1.0 0% 20% 40% 60% 80% 100% $0 $1 $2 $3 $4 $5 Guarantee Private equity Private commercial debt Concessional capital and grants constant at $1 Source: Authors analysis based on Convergence database. Note: The analysis is based on 407 blended finance infrastructure deals for which data was available. The guarantees had both commercial and concessional terms. The total 2000- 2024 sample was divided into two sub-samples: 157 deals with guarantees and 250 deals without guarantees. To control for deal size, the shares of instruments in total deal size were estimated. The shares of guarantees, private equity, private commercial debt were divided by the sum of shares of concessional capital and grants to show the value of the former instruments holding concessional capital and grants constant at $1. Infrastructure Monitor 2024 Blended finance in infrastructure 118 Since the onset of the polycrisis era in 2020, the global share of deals (both by number and value) supported by guarantees reduced, but the coverage of deal value was high. Since 2020, multiple crisis have increased the general business risk increasing the demand for guarantees but also the cost of providing guarantees. As a share of total number of deals, the deals with guarantees reduced from 45 percent during 2015-19 to 27 percent during 2020-24. The decline was even more as a share of total value of deals which was also seen through decline in the average deal value covered by guarantees. However, the deals for which guarantees were provided in 2020-24 covered an average deal value of 61 percent, significantly higher than the average cover of 38 percent during 2015-19, and higher than the average coverage provided in 2010-14 and 2000-09, which could be a result of intentional targeting on deals that require more support but can lead to greater development impact. Higher guarantee cover increased the average share of commercial debt to 75 percent from 42 percent. Although for deals with guarantees, concessional debt also decreased from 10 percent in 2015-19 to 4 percent in 2020-24, the increase in guaranteed cover was higher. This increased the debt-to-equity ratio from 3.6:1 in 2015-19 to 4.2:1 in 2020-24. In 2020-2024, the deals with guarantees had a debt-to-equity ratio of 4.2:1 much higher than 1.5:1 for deals without guarantees. While debt is cheaper than equity, the impact on profitability depends on the cost of guarantees with an average cover of 61 percent. Blended finance infrastructure deals by use of guarantee and time period (2010-2024): Blended finance infrastructure deals by Shares of financial instruments in deal value (%) use of guarantee and time period 100% (2010-2024) Sample size: Debt-to- Total: 407 equity ratio Deal characteristics With guarantee 75% 4% 18% 61% Number of deals (shares %) 2020-24 40 4.2 148 43% 45% 27% 108 1.5 Without guarantee 42% 13% 32% 4% 6% 73% 57% 55% With guarantee 66% 10% 20% 38% Value of deals (shares %) 2015-19 70 3.6 154 1.3 29% 84 Without guarantee 65% 56% 40% 13% 34% 7% 5% 44% 71% 35% With guarantee 73% 17% 5% 54% Average deal value (US$ million) 2010-14 35 4.4 81 1.3 $464 46 Without guarantee $500 $364 40% 11% 31% 7% 10% $242 $250 $191 $142 $155 0 25 50 75 100 125 150 175 $0 Commercial debt Concessional debt Commercial equity Concessional equity 2010-14 2015-19 2020-24 Mezzanine Grant Guarantee Without guarantee With guarantee Source: Authors analysis based on Convergence database. Note: The analysis is based on 407 blended finance infrastructure deals for which data was available. Infrastructure Monitor 2024 Blended finance in infrastructure 119 Projects structures were most often used in blended finance infrastructure deals and had a higher average deal value. Their success in mobilizing private capital widely varied. • Blended finance strategy is deployed for the infrastructure asset class through different operating structures - project, funds or facilities, bonds or notes, company, to mobilize private capital for infrastructure investments. • During 2000-2024, projects constituted majority (52 percent) of the blended finance infrastructure deals accounting for 62 percent of total deals value. Funds/facilities constituted one-fifth of the deals accounting for 26 percent of the total deals value. An average blended finance deal value for projects or funds/facilities exceeded US$300 million. Companies also constitutes about one-fifth of the deal but had lower average deal value of US$99 million that drove down its share in total value of deals to 7 percent. About 11 percent of blended finance infrastructure deals accounting for 6 percent of the total deals value were structured as bond/note. The average value was also lower at US$142 million for bonds. • The success of projects and funds/facilities in mobilizing private capital widely varied. They recorded higher average private capital mobilization ratios of 5.4 and 3.8 respectively than the average ratios of 2.9 and 2.3 for bond/note and company structure, respectively. However, projects and funds/facilities also recorded the lowest median value. For projects and funds/facilities, the private capital mobilization ratio for half of the deals was less than 0.6. • For bonds, the median value for private capital mobilization ratios was 1.3, and for companies, it was 1.0, which means at least half of the deals with bond or company structure mobilized at least a dollar for a dollar worth of blended finance approaches. Blended finance infrastructure deals by operating structure (2000-2024) Deals’ characteristics Private capital mobilization ratios Sample size: Number of deals Value of deals Average deal value Median Average Total: 407 (Shares, %) (Shares, %) (US$ million) 70 17% 7% 6% 99 1.0 2.3 11% 43 26% 20% 142 1.3 2.9 81 328 0.6 3.8 62% 52% 304 0.6 5.4 213 0 100 200 300 400 0.0 0.5 1.0 1.5 0 2 4 6 Project Fund/Facility Bond/note Company* Source: Authors analysis based on Convergence database. Note: The analysis is based on 407 blended finance infrastructure deals for which data was available. Infrastructure Monitor 2024 Blended finance in infrastructure 120 Project and bond structures were deployed in infrastructure deals within a country. Fund/facilities and company structures were more prevalent for the deals with multiple countries. • Blended finance strategy for an infrastructure investment with Blended finance infrastructure deals: project structure was mostly pursued at a country level (96 percent Geographical use by operating structure (2000-2024) of the deals sample) and in multiple countries within a region (Shares in total number of deals, %) (4 percent of the remaining sample). 100% • For blended finance infrastructure bonds/note, about 90 percent were used in a specific country, and the remaining 12 percent were 90% 21% used in multiple countries within a region. 23% 80% • In contrast, the scope was multiple countries in a region for 48 percent of the blended finance infrastructure funds/facilities 70% and 30 percent of the blended finance infrastructure companies. 60% Only about one-fifth of the blended finance infrastructure funds/ 88% 48% facilities had a country-specific focus, and only around a quarter of 96% 50% blended finance infrastructure companies had a country-specific 30% focus. 40% • For a global scope, funds/facilities structure or companies were 30% used to pursue blended finance strategy for mobilizing private 15% capital for the infrastructure asset class. Also, for the scope 20% covering multiple regions, fund/facilities and company structures 4% 10% were used for the blended finance strategy. 12% 16% 7% 4% • Within blended finance infrastructure funds/facilities, 16 percent 0% had a global scope and 15 percent had a multi-region scope. Within Projects Bond/Note Fund/Facility Company blended finance infrastructure companies, 7 percent had a global scope and 4 percent had a multi-region scope. Sample size: 213 43 81 70 Total: 407 • Broadly, blended finance strategy was mostly deployed through a project or bonds/note structure when the geographical scope was Gobal Multi-region Multiple countries in a region Country-specific a specific country. The funds/facilities and company structure was mostly used for blended finance infrastructure deals with scope Source: Authors analysis based on Convergence database. involving multiple countries. Note: The analysis is based on 407 blended finance infrastructure deals for which data was available. Project finance structure Infrastructure Monitor 2024 Blended finance in infrastructure Project finance structure 122 For infrastructure projects by country income groups, higher income countries are more conducive to mobilizing more private capital. Lower income countries often require blended finance especially guarantees to attract private capital. Simple maximization of private capital mobilization will prove to be an imperfect measure for achieving development outcomes in the short-term, but its trend over time by country income can present improvement in potential to mobilize private capital. Countries with more development challenges are less likely to mobilize more private capital. • For blended finance infrastructure projects by country income group, higher private capital mobilization ratios were seen for blended finance infrastructure projects in higher income countries. The average ratio was 12.3, 2.8, and 1.9 in upper-middle income, lower-middle income, and low-income country groups, respectively, suggesting that it was more difficult to attain higher private capital mobilization ratios for infrastructure projects in lower income countries, and more scope to scale private investment in higher income countries. • Guarantees were more often needed in lower income countries to financially close infrastructure projects. Considering all blended finance infrastructure projects with or without guarantees, in upper-middle income countries, guarantees covered 9 percent of the project value, on average, whereas in lower-middle income countries and low-income countries, guarantees covered 20 percent and 24 percent of the project value, respectively. • Considering only blended finance infrastructure projects with guarantees, guarantees covered a higher share between 39 percent and 43 percent of project value across country income groups. • The median private capital mobilization ratio in low-income countries of 0.5 was close to the median of 0.6 for all blended finance infrastructure projects. Blended finance infrastructure projects by country income groups (2000-2024) Private capital mobilization ratios Shares in total project value by financial instruments For projects with or For projects with 100% without guarantees guarantees: All projects 5.4 56% 13% 25% 5% 16% When guarantees 0.6 were present and Sample size: By country covered, on average, Total: 213 income groups 39-43% of project value, the average Upper-middle 12.3 share of commercial 63 0.6 income 3% 63% 12% 21% 9% debt increased to Lower-middle 2.8 53% from 27% 84 0.8 3% income 56% 10% 27% 20% without guarantees. 1.9 46 Low-income 0.5 44% 16% 29% 11% 24% Others*: 20 0 4 8 12 0 20 40 60 80 100 120 140 Average Median Commercial debt Concessional debt Commercial equity Concessional equity Mezzanine Grant Guarantee Source: Authors analysis based on Convergence database. Note: The analysis is based on 213 blended finance infrastructure projects for which data was available. Other include global, multi-region or multiple countries’ deals. Infrastructure Monitor 2024 Blended finance in infrastructure Project finance structure 123 Illustration: Impact of political risk insurance for a single representative energy project in three differently rated countries. With guarantees, a country with B sovereign debt rating (mostly low-income) could lower its country premium by three to four times a country with BB or BBB sovereign debt rating. Infrastructure projects are highly susceptible to political and social Impact of political risk insurance on financing costs interference due to their public good nature. Political risks due by country’s credit rating to high government interference over long lives of infrastructure projects pose more serious concerns for countries that are perceived Decrease in country risk premium Lowers financing cost (percentage points) less creditworthy, that is, countries with lower sovereign debt ratings. which are typically also low-income countries. Investors demand higher premium as a compensation for taking higher country risk. 5% Guarantees/insurance especially help in reducing the financing costs of projects in countries with sovereign debt rating below 4.1% investment grade. 4% Lower the sovereign debt rating, higher is the benefit of political risk insurance, but more expensive it is to provide cover for the projects. 3% According to S&P Global (2021), the net benefit is generally positive for countries with sovereign debt rating below investment grade, especially when premiums are tax deductible. The benefit stems from the use of lower discount rate during estimation of project value and 2% rate of return, enabling financing of infrastructure projects at more 1.5% favorable terms and costs. For a single representative energy project and a standard political risk insurance policy covering 21 country 1% 0.8% risk events, the country risk premium was estimated to reduce by 4.1 percentage points for a B- rated (Ghana), three to four times higher than the reduction of 1.5 percentage points for a BB rated 0% (Brazil) and a BBB rated (Indonesia) country. B- (Ghana) BB (Brazil) BBB (Indonesia) However, political risk insurance is not recognized in key international Source: S&P Global (2021) financial regulations such as the Basel III banking regulation, Note: Results are based on S&P Global Country Risk Investment Model for a power creating a regulatory roadblock in benefits provided by political risk purchase agreement (PPA) with a termination payment. The standard political risk insurance policy. insurance policy covered for 21 country risk events. Infrastructure Monitor 2024 Blended finance in infrastructure Project finance structure 124 MDBs and DFIs financed about half of a typical blended finance infrastructure project value, even more in low-income countries. • MDBs and DFIs provided around half of the investment for a typical blended finance infrastructure project: MDBs’ average share was 33 percent and DFIs average share was 19 percent. • Private investors and other leading international development finance providers like export credit agencies provided relatively more investment for infrastructure projects of larger size. However, in low-income countries, MDBs led the financing for projects of large size with private investors. MDBs and DFIs played a crucial role in catalyzing private capital for blended finance infrastructure deals in low-income countries which have less conducive environment for attracting private capital. Intense international focus on maximizing private capital mobilization ratios can conflict with MDBs and DFIs’ development objectives of reducing poverty by creating unintended incentives to reallocate some capital away from low-income countries to higher income countries with more conducive environment for mobilizing more private capital. While tracking private capital mobilization at a country level may create pressures to accelerate economic growth and income that can support higher private capital mobilization ratios, it may also conflict with the development objective of reducing global poverty and even inequality within countries as it is likely to be easier to maximize private capital mobilization in rich neighborhoods. In this context, it is best to use private capital mobilization metrics as secondary outcomes to retain core development metrics as primary outcomes in the international development arena. Blended finance infrastructure projects by country income groups (2000-2024) Private capital mobilization ratios Investors' shares in a typical project 5.4 All projects 43% 33% 19% 4% 2% 0.6 Sample size: By country Total: 213 income groups 3% 2% Upper-middle 12.3 63 0.6 41% 41% 13% income Lower-middle 2.8 84 0.8 45% 26% 20% 6% 2% income 1% 1.9 46 Low-income 0.5 40% 33% 24% 2% Others*: 20 0 2 4 6 8 10 12 14 0 20 40 60 80 100 Average Median Private investors MDBs DFIs ECAs Others Source: Authors analysis based on Convergence database. Note: The analysis is based on 213 blended finance infrastructure projects for which data was available. Financing by public investors like MDBs, DFIs, on commercial terms is not considered as private capital mobilized. ‘Other’ investors includes pension/sovereign funds, central government, state/national banks, state-owned enterprises, foundations and NGOs. Infrastructure Monitor 2024 Blended finance in infrastructure Project finance structure 125 By region, Sub-Saharan Africa accounted for majority of the blended finance infrastructure projects, with over 90 percent in low-income countries where it is more challenging to mobilize private capital. By region, Sub-Saharan Africa had the highest share in total blended finance infrastructure projects of 38 percent in total number of projects and 44 percent in total value of projects. It also had the highest average value of projects supported at US$358 million, which suggests that larger projects were supported through blended finance approaches in Sub-Saharan Africa. However, it had one of the lowest private capital mobilization ratio in terms of median value of 0.5, but the average was higher at 2.9 suggesting that some projects were successful in mobilizing private capital. It is important to note that Sub-Saharan Africa accounted for over 90 percent of the blended finance infrastructure deals in low-income countries and country income level is a key determinant of success in private capital mobilization. Middle East & North Africa, East Asia & Pacific, and South Asia had higher average private capital mobilization ratios of 21.2, 11.1, and 5.3, respectively. These regions also had the highest median private capital mobilization ratios. Hence, these regions were more successful in mobilizing private investment in infrastructure. Blended finance infrastructure projects by region (2000-2024) Projects characteristics Private capital mobilization ratios Sample size: Total: 213 Number of deals Value of deals Average deal value Median Average (Shares, %) (Shares, %) (US$ million) 10 5% 4% 7% 6% $277.4 0.5 2.5 9% 5% 14 16% $298.8 0.8 21.2 17% 19 $162.8 0.9 5.3 20% 22% $283.2 0.7 11.1 37 $278.1 0.6 1.2 46 44% 38% $358.2 0.5 2.9 80 $0 $100 $200 $300 $400 0.0 0.2 0.4 0.6 0.8 1.0 0.0 5 10 15 20 25 Sub-Saharan Africa Latin America & Caribbean East Asia & Pacific South Asia Middle East & North Africa Europe & Central Asia Source: Authors analysis based on Convergence database. Note: The analysis is based on 213 blended finance infrastructure projects for which data was available. Infrastructure Monitor 2024 Blended finance in infrastructure Project finance structure 126 By sector, renewable energy generation dominated the blended finance infrastructure projects. Renewable energy generation accounted for nearly 60 percent of all the blended finance infrastructure projects over 2000-2024, followed by non-renewable energy generation and transport sectors with 9 percent and 8 percent shares, respectively. The sizably large average size of a non-renewable energy generation project of US$825 million relative to the size of an average non-renewable energy generation project of US$253 million changed their respective shares in the total value of blended finance infrastructure projects to 49 percent and 26 percent respectively: still renewable energy generation dominated the blended finance infrastructure projects even as a share of total value of the projects. The high-end spectrum of private capital mobilization ratios of more than $2 were dominated by communications, renewable energy generation, and water sectors which had the highest average ratio at 6.0, 5.0, and 29.7, respectively. Transport sector had the highest median value for private capital mobilization ratios at 1.7 which was close to its average ratio at 1.8, which suggests more symmetry in success in mobilizing private capital. Renewable energy generation sector recorded the lowest median ratio of 0.5, but an analysis by country income group shows that the sector may be using blended finance approaches to support deals for which it was more challenging to attract private capital at the outset. The sample size for other sectors is not large enough to allow a similar analysis. Blended finance infrastructure projects by sector (2000-2024) Projects characteristics Private capital mobilization ratios Sample size: Total: 213 Number of deals Value of deals Average deal value Median Average (Shares, %) (Shares, %) (US$ million) 6 3% 1% 1% 5% 7% 0.8 29.7 7% 10 11% 8% $94 1.2 6.0 9% 15 26% $308 1.7 1.8 17 $420 0.7 1.0 20 59% 0.5 $825 5.0 49% 126 $253 0.6 5.4 Total: 213 $0 $200 $400 $600 $800 $1000 0.0 0.5 1.0 1.5 2.0 0.0 5 10 15 20 25 30 All projects Renewable energy generation Non-renewable energy generation Transport Communications Water Social Source: Authors analysis based on Convergence database. Note: The analysis is based on 213 blended finance infrastructure projects for which data was available. Social includes education, health and social care, housing, tourism, arts and culture infrastructure. Infrastructure Monitor 2024 Blended finance in infrastructure Project finance structure 127 The use of performance grants seemed to be virtually non-existent in the infrastructure sector but was prevalent in other sectors. The DFI Working Group on Blended Concessional Finance for Private Sector Projects compiles annual data on the use of concessional finance i.e., financing below market rates (or with maturity, grace period, security or rank offered on soft terms) including grants for infrastructure, climate finance, finance/banking and other sectors. The data showed the use of performance grants in climate finance, finance/banking, and other non-infrastructure non-finance/banking sectors, but not in the infrastructure sector in LMICs. Performance grants were used in the U.S. Bipartisan Infrastructure law which used two types of performance grants: matching grants and regulatory improvement grants. Matching grants encouraged similar levels of investment by state government. The regulatory improvement grants stipulated specific improvements to standards, procedures, and programs, that were necessary to receive the grants (U.S. Department of the Interior). MDBs, DFIs, and other international development actors should enhance the use of performance grants for infrastructure sector to strengthen the enabling environment for mobilizing private capital which has been recommended by several leading studies. For example, the World Bank’s Benchmarking Infrastructure Development outlines a detailed and exhaustive list of internationally recognized good practices by country that LMICs can incorporate to improve the quality of regulatory frameworks to develop infrastructure projects with private sector (World Bank, 2024). Blended Concessional Finance and Grants for Private Sector Projects Shares by financial instruments, sector and year (%, 2019-2021) 100% Non-infrastructure non-finance/banking 2019 Infrastructure Non-infrastructure non-finance/banking 2020 Infrastructure Non-infrastructure non-finance/banking 2021 Infrastructure Commercial debt Commercial equity Concessional debt Guarantee Grant Performance grant Source: Annual reports of DFI Working Group on Blended Concessional Finance for Private Sector Projects Structures other than project finance Infrastructure Monitor 2024 Blended finance in infrastructure Structures other than project finance 129 For blended finance infrastructure companies, guarantees significantly increased the share of commercial debt. When guarantees were used, the use of other types of blended finance instruments was negligible. Private capital mobilization ratio: As seen previously, blended finance infrastructure deals in companies had a higher median private capital mobilization ratio (1.0) than the median for all deals (0.8). For blended finance infrastructure companies, median private capital mobilization ratio was higher at 1.3 when guarantees were used than 0.7 when guarantees were not used. As seen in other blended finance deals, guarantees reduce punitive risk weights and capital charges applicable in banking regulations (Basel III) on companies with sub-investment grade rating, thereby allowing them to mobilize more commercial debt at favorable terms. The banking regulations are more well-defined and differentiated for companies relative to projects, enabling more effective use of guarantees for improving financing terms. Note: The higher average private capital mobilization ratio of 2.6 without guarantees than 1.5 with guarantees is driven by outlier companies with investment- grade ratings that do not significantly benefit from guarantees. Financial structuring: Blended finance deals of infrastructure companies without guarantees had a higher share of commercial equity and other types of blended finance instruments like concessional debt and equity, mezzanine finance and grants, which collectively financed 70 percent of the deals, while commercial debt financed 30 percent of the deal. When infrastructure companies used guarantees in blended finance deals, the share of commercial debt more than doubled to 78 percent relative to 30 percent share in the deals without guarantees. On average, guarantees provided 56 percent coverage of the deal value. The share of commercial equity reduced to 20 percent relative 30 percent share in the deals without guarantees. The use of other blended finance instruments was nearly non-existent when guarantees were used. Blended finance infrastructure companies by use of guarantee (2000-2024) Private capital mobilization ratios Shares in a company's deal value by financial instruments 100% 2.6 Without guarantee 30% 13% 30% 7% 8% 12% 1.5 1.3 0.7 With guarantee 78% 20% 56% Average Median Without guarantee With guarantee Sample size: Commercial debt Concessional debt Commercial equity Concessional equity 51 19 Total: 70 Mezzanine Grant Guarantee Source: Authors analysis based on Convergence database. Note: The analysis is based on 70 blended finance infrastructure companies for which data was available. Infrastructure Monitor 2024 Blended finance in infrastructure Structures other than project finance 130 Blended finance infrastructure bonds being a debt instrument significantly benefit from guarantees in attracting private capital, as most low- and middle- income countries have sub-investment grade ratings. Private capital mobilization ratio: As seen previously, blended finance infrastructure deals in bonds had the highest median private capital mobilization ratio (1.3) across all deal structures. For blended finance infrastructure bonds, the average and median private capital mobilization ratios were higher without guarantees at 3.8 and 1.7 respectively, than the ratios of 2.6 and 1.3 respectively for bonds with guarantee. Financial structuring: The bonds with guarantees mobilized 99 percent commercial debt with an average 68 percent cover provided by guarantees. The bonds without guarantees mobilized 85 percent commercial debt with 12 percent support through blended finance instruments of concessional debt and grants. The remaining 3 percent was mezzanine finance (hybrid of debt and equity financing). The bonds with guarantees had a lower average value of US$109 million, less than half the average value of US$230 for the bonds without guarantees. The sample size is not large enough to do an analysis by country income groups, but data suggests that lower income countries with non-investment grade sovereign debt ratings required and received these guarantees. In other words, guarantees were used when it may have been more difficult to mobilize private capital at the outset, in line with the recommended blended finance principles. As guarantees are most effective in mobilizing commercial debt, they are likely to be preferred over other blended finance strategies in improving attractiveness of high-risk debt instruments like bonds for private investors. They reduce debt repayment risk through a guaranteed coverage. Blended finance infrastructure bonds by use of guarantee (2000-2024) Private capital mobilization ratios Shares in total bond value by financial instruments (%) 3.8 100% 2.6 Without guarantee 99% 68% 1.7 1.3 With guarantee 85% 8% Average Median Without guarantee With guarantee Sample size: Commercial debt Concessional debt Commercial equity Concessional equity 12 31 Total: 43 Mezzanine Grant Guarantee Source: Authors analysis based on Convergence database. Note: The analysis is based on 70 blended finance infrastructure companies for which data was available. An analysis of blended finance infrastructure funds/facilities is included in the infrastructure funds section of this report. As blended finance national infrastructure funds/facilities operate in a less stringent regulatory environment, a lower guaranteed coverage seem to enable higher commercial debt mobilization, relative to other structures. The international funds/facilities seem to have a high share of equity notwithstanding the presence of guarantees to ensure multiple investor who pooled the capital remain active shareholders. Cross-border guarantees: Recent trends and performance Based on Berne Union reports Infrastructure Monitor 2024 Cross-border guarantees: Recent trends and performance 132 Within infrastructure, energy transition drove new commitments for cross-border guarantees. In 2023, the guarantees for renewables surpassed non-renewables for the first time. The growth in political risk guarantees was subdued by heightened political risk. New commitments for cross-border guarantees supporting longer-tenor business were declining prior to 2020 but suffered a sharper decline in 2020 with the onset of the Covid-19 pandemic. In 2023, new commitments for medium/long term credit guarantees reached a peak of US$165.6 billion, along with other cross-border support guarantees that peaked at US$50 billion in 2023. The value of new commitments for political risk guarantees has been on a long-term declining trend even before the Covid-19 pandemic, falling from US$64 billion in 2017 to US$47 billion in 2019 to US$39 billion in 2020 and further to US$34 billion in 2021. While still below the pre-pandemic levels, the new commitments for political risk guarantees increased to US$42 billion in 2022 and maintained similar level at US$41 billion in 2023. While the new commitments for political risk guarantees slightly declined, they absorbed more risk due to heightened geopolitical conflicts and political risk globally. Global cross-border guarantees by guarantee type: New commitments value (US$ billion, 2017-2023) For longer-tenor business: 300 250 14 50 17 200 64 35 47 40.9 39 47 150 31 24 41.9 34 39 100 164 170 165.6 138 117 50 90 101 0 2017 2018 2019 2020 2021 2022 2023 Medium/long term credit Political risk Other cross-border support Source: Berne Union (2021, 2022, 2023, 2024). Note: The International Union of Credit and Investment Insurance industry (Berne Union) reports estimate new commitments for four types of guarantees – short-term credit, medium/long term credit, political risk, and other cross-border support. Excluding short-term credit, these types of guarantees are indicative of longer-tenor instruments typically associated with infrastructure projects. Data by sector includes medium and long-term, political risk, and other cross-border guarantees. Other Cross-Border guarantees are included in the estimates because of their strategic shift towards long-term solutions and the overall greater support through non-traditional products. Infrastructure Monitor 2024 Cross-border guarantees: Recent trends and performance 133 Infrastructure sector received the strongest support from medium/long-term and political risk cross-border guarantees in 2020 accounting for US$65.6 billion of the US$129 billion, that is, over 50 percent of the new commitments for these guarantees. In 2021, the new commitments for infrastructure fell to a low of US$42 billion driven mainly by the 11 percent decline in new commitments for political risk guarantees. The increase in 2023 to US$59.1 billion was driven primarily by renewable energy and other non-energy infrastructure sectors, while the new commitments for non-renewable energy declined. In 2020, new commitments for non-renewable energy sector were similar to that for renewable energy sector, and by 2023, they were half that for renewable energy sector. In 2023, renewable energy sector registered US$20.4 billion new commitments of cross-border guarantees across 68 countries. Other innovating guarantees like green guarantees were used to support ambitious climate goals. The support for energy transition from renewables to non-renewables is greater in higher income countries. While higher-income countries have a low overall share for the infrastructure sector in new commitments for these guarantees, they have the highest share for the renewable energy sector. Other infrastructure sector also noted a record US$27.7 billion in new commitments of cross-border guarantees driven by recovery of the high-volume transportation sector. Global cross-border guarantees by guarantee type: New commitments value (US$ billion, 2020-2023) For infrastructure sector: 80 65.6 59.1 60 20.8 49.8 41.7 27.7 40 19 20.9 16.9 11 18 20 16.8 23.9 8 12.8 20.4 0 2020 2021 2022 2023 Renewable energy Non-renewable energy Other infrastructure Source: Berne Union (2021, 2022, 2023, 2024). Note: The International Union of Credit and Investment Insurance industry (Berne Union) reports estimate new commitments for four types of guarantees – short-term credit, medium/long term credit, political risk, and other cross-border support. Excluding short-term credit, these types of guarantees are indicative of longer-tenor instruments typically associated with infrastructure projects. Data by sector includes medium and long-term, political risk, and other cross-border guarantees. Other Cross-Border guarantees are included in the estimates because of their strategic shift towards long-term solutions and the overall greater support through non-traditional products. Infrastructure Monitor 2024 Cross-border guarantees: Performance 134 Commitments for political risk guarantees are declining, but they remain crucial in mitigating risks in EMDEs. The World Bank Finance and Prosperity Report 2024 noted that Share of risk type by region in total claims paid to deteriorating sovereign debt rating, and fragility and conflicts, are the non-performing loans (%, 2023) risk categories with the highest risk levels for emerging markets and 100% developing economies. According to the International Union of Credit 50% and Investment Insurance, the share of political risk related claims paid for non-performing loans was 55% in 2023 in South Asia and Sub-Saharan 0% Africa, and this share was nearly 40% in the Middle East and North Africa, GLOBAL EUROPE East Asia Pacific North America LATAM & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa Russia and the Commonwealth of Independent States (CIS) and Russia and the Commonwealth of Independent. Besides the Russian invasion of Ukraine, this was due to the political instability driven by difficult economic times. Commercial Political Source: Berne Union (2024) Public sector provided most of the guarantees supporting longer-tenor business. In 2023, public sector entities provided US$215 billion, that is, more than Global cross-border guarantees for longer-tenor business by 80 percent of the new commitments to support longer-tenor business provider type: New commitments value (US$ billion, 2017-2023) through cross-border guarantees, increased sharply from US$155 billion 300 in 2022 reaching a record high level. Public sector provided most of these guarantees historically as well. Sub-Saharan Africa was the largest 250 42 recipient of the guarantees. While private sector has mostly provided less 37 39 than 20 percent of the annual new commitments for these guarantees 200 37 at around US$40 billion annually, it provided over half of the new 43 150 21 commitments for short-term export credit business exceeding US$1,000 30 billion annually. 100 205 194 183 139 130 155 215 Generally, the availability of cross-border guarantees support for short- 50 term export credit business is sizably stronger than that for longer-tenor business due to greater complexity in estimating pricing for guarantees 0 covering long time periods. Even public sector provided over US$1,000 2017 2018 2019 2020 2021 2022 2023 billion new commitments annually to support the short-term business. In Public Private 2023, public sector provided US$1,259 billion and private sector provided US$1,522 billion of new commitments for short-term export credit business. Source: Berne Union (2021, 2022, 2023, 2024). Infrastructure Monitor 2024 Cross-border guarantees: Commitments 135 Low- and middle-income countries attracted a higher share of these guarantees for infrastructure projects. It is more expensive to provide guarantees in these countries. In low-income countries, the share of medium/long-term and political risk guarantees in total cross-border guarantees was 45 percent, while it was only 5 percent in high-income countries. Evidently, there is a greater need for such guarantees in low-income countries which have more macroeconomic and political uncertainty over longer time horizons. Lower income countries allocated a higher share of these guarantees to infrastructure sector. The infrastructure sector constitutes 18 percent of these guarantees in HICs, and 30-40 percent in LMICs. Given the larger infrastructure deficits in the lower income countries coupled with greater long-term uncertainty, there is a higher demand for guarantees to reduce risk, but it is also more expensive to provide guarantees. In 2024, the average country risk premium in low-income countries at 13.8 percent was more than five times that for high-income countries at 2.5 percent. Even for upper-middle income countries, it was 7.9 percent, three times the level for high-income countries. The sovereign rating was mostly below the minimum cutoff threshold for investment used by most leading global private investors. During 2010-2020, more than 60 percent of private investment in infrastructure projects in middle-income countries was concentrated in only five countries – Brazil, India, China, Turkiye, and Mexico, while the share of low-income countries was barely one percent, according to the World Bank PPI Database. Global cross-border guarantees by guarantee type and country income group Average country risk premium by country income group (%, 2024) (% of new commitments value, 2020) 5% Low-income 13.8% 100% 15% 25% 45% Lower-middle income 10.3% 80% Upper-middle income 7.9% 60% 95% 85% 75% 55% High-income 2.5% 20% 0% 0.0% 5% 10% 15% 20% 25% High income Upper middle Lower middle Low income Sovereign debt rating level: Share by country income group (%, 2024) income income Short-term Medium/long-term and political risk Low-income Share of infrastructure in medium/long-term and political risk cross-border guarantees by country income group (%, 2020) Lower-middle income 50% 41% Upper-middle income 30% 33% 25% 18% High-income 0% High income Upper middle Lower middle Low income 0% 20% 40% 60% 80% 100% income income Investment-grade and above Below investment-grade Not rated Source: Berne Union (2021). Source: Damodaran, A. (2024). Infrastructure Monitor 2024 Cross-border guarantees: Performance 136 By sector, renewable energy had the strongest financial performance metrics for cross-border guarantees. Infrastructure sector had a lower claims ratio (0.62 percent) than non-infrastructure sector (0.79 percent), on average during 2021-2023. This was primarily driven by transport related non-infrastructure activities which suffered a setback in demand following the Covid-19 pandemic. Energy sector particularly the renewable energy sector had nearly half the claims ratio (0.34 percent) during the same time. The average claims ratio for non-energy infrastructure (0.84 percent) was similar to non-infrastructure sectors, which was also driven by the setbacks suffered by transport infrastructure due to the Covid-19 pandemic. Recoveries relative to 3-years’ claims paid were also the strong for the renewable energy sector at 21 percent and weaker for other infrastructure sectors at 11.7 percent, on average during 2021-2023. The latter drove the average recoveries relative to 3-years’ claims paid for infrastructure to an average of 17.4 percent during 2021-2023, while it was 22.4 percent for non-infrastructure sectors. The strong performance of renewable energy relative to other sectors is partly driving the supply of longer-tenor and political risk guarantees or insurance products to meet the growing demand and commitment towards scaling renewable energy to meet the climate goals. Global cross-border guarantees: Medium/long-term and political risk Claims ratio by sector Recoveries relative to 3-years' claims paid by sector (%, average 2021-2023) (%, average 2021-2023) Non-infrastructure 0.79% Non-infrastructure 22.4% Infrastructure 0.62% Infrastructure 17.4% Renewable energy 0.34% Renewable energy 21.0% Non-renewable energy 0.41% Non-renewable energy 14.7% Other infrastructure 0.84% Other infrastructure 11.7% 0.0% 0.20% 0.40% 0.60% 0.80% 0.100% 0.0% 5% 10% 15% 20% 25% Source: Berne Union (2021, 2022, 2023, 2024). Appendix 138 References Infrastructure Monitor 2024 References 139 References: Infrastructure funds Convergence (2024). Convergence Historical Deals Database. November 2024. Divakaran, S.; Halland, H; Lorenzato; Rose, G.; Sarmiento-S, Sebastian P. (2022). Strategic Investment Funds: Establishment and Operations (English). Washington, D.C.: World Bank Group. Accessible at Link. PPIAF-GIH (2021), Global Infrastructure Monitor 2021. Accessible at Link. Preqin (2024a). Preqin Asset Allocation: Outlook 2024, Insights+. Preqin (2024b). Preqin Global Infrastructure Report, 2024. Preqin (2024c). Preqin Investor Survey, Global Infrastructure Report, 2024. Preqin (2025). Preqin Global Infrastructure Report, 2025. World Bank (2024). Benchmarking Infrastructure Development 2023. Accessible at Link. References: Financial performance of infrastructure investment Damodaran, A. (2024). Country default spreads and risk premiums. January 5, 024 update. Access at Link EDHECInfra (2024). InfraMetrics. Data as of 31 October 2024. FTW GLIO (2024a). FTW GLIO Global Index Stocks & Index Values (Old format). 31 October 2024. FTW GLIO (2024b). FTW GLIO Global Infra Index Monthly. 31 October 2024. FTW GLIO (2024b). FTW GLIO Index Actual Dividend Yield (E010). 31 October 2024. FTW GLIO (2024d). FTW GLIO Index – Trailing Net Debt/EBITDA (E002). 31 October 2024. FTW GLIO (2024e). FTW GLIO Index – Trailing EV/EBITDA (E001). 31 October 2024. Freightos Container cost index. Infrastructure Monitor 2024 References 140 GEMs (2023). Default Statistics, Private and Sub-Sovereign Lending 1994-2022 Volume 1. Multilateral Development Banks and Development Finance Institutions Default Statistics © European Investment Bank, as host and administrator for, and on behalf of, Global Emerging Markets Risk Database (GEMs) Consortium, 2023. GEMs (2024). Default and Recovery Statistics, Private and Public Lending 1994-2023. Multilateral Development Banks and Development Finance Institutions Default Statistics © European Investment Bank, as host and administrator for, and on behalf of, Global Emerging Markets Risk Database (GEMs) Consortium, 2024. GI Hub (2017). Infrastructure Outlook. https://outlook.gihub.org/ MSCI (2024a). Factsheets for MSCI ACWI (US$) and MSCI ACWI Infrastructure Capped Index (US$), 31 October 2024. MSCI (2024b). Factsheets for MSCI World Infrastructure Capped Index (US$), 31 October 2024. MSCI (2024c). Factsheets for MSCI Emerging Markets Infrastructure Capped Index (US$), 31 October 2024. Mobilist (2024). Financing Sustainable Development and International Climate Commitments through public markets. March 2024. Access at https://www.mobilistglobal.com/wp-content/uploads/2024/04/MOBILIST_Research-Report_Brazil.pdf. Moody’s (2023a). Infrastructure & Project Finance – Infrastructure default and recovery rates, 1983-2022. Data Report. 12 December 2023. Moody’s (2023b). Kelhoffer, K., Examining Infrastructure as an Asset Class, Moody’s Analytics, September 2023. Moody’s (2023c). Infrastructure & Project Finance – Global. Default and recovery rates for sustainable project finance bank loans, 1983-2020. Data  Report. 23 February 2023. OECD (2024). Capital Markets. © Organisation for Economic Co-operation and Developmen. Access at Link. Rana, A., Ngulube, M., Foster, V. (2022). GERI 2022: Global Electricity Regulatory Index - ESMAP Report. © Washington, DC: World Bank. http://hdl.handle.net/10986/38383 License: CC BY 3.0 IGO.” Access at Link. RICS(2024). Global Construction Monitor. S&P (2024a). Default, Transition, and Recovery: 2023 Annual Infrastructure Default and Rating Transition Study. 11 September 2024. The material is reproduced with permission of S&P Global Market Intelligence LLC and Standard & Poor’s Financial Services LLC​ . S&P (2024b). Industry Report Card: Global Transportation Infrastructure demonstrates strength in 2024. 7 August 2024. The material is reproduced with permission of S&P Global Market Intelligence LLC and Standard & Poor’s Financial Services LLC​. S&P (2024c). Industry Credit Outlook 2024: Transportation infrastructure. 9 January 2024. The material is reproduced with permission of S&P Global Market Intelligence LLC and Standard & Poor’s Financial Services LLC​ . Infrastructure Monitor 2024 References 141 Statista (2024). Total market capitalizations of companies listed on stock exchanges worldwide from 2013 to 2023. https://www.statista.com/ statistics/274490/global-value-of-share-holdings-since-2000/. World Bank (2022a). Global Financial Development Database. September 2022 Version. https://www.worldbank.org/en/publication/gfdr/data/ global-financial-development-database. World Bank (2022b). The Multilateral Investment Guarantee Agency’s Experience with Non-Honoring of Sovereign, Sub-Sovereign, and State-Owned Enterprise Financial Obligation Guarantees. Meso-Evaluation. Independent Evaluation Group. Washington DC: World Bank. References: Blended finance and guarantees in infrastructure Adarov, A., Panizza, U. (2024). Public Investment Quality and Its Implications for Sovereign Risk and Debt Sustainability. Policy Research Working Paper; 10877. © Washington, DC: World Bank. http://hdl.handle.net/10986/42078 License: CC BY 3.0 IGO. Berne Union (2021). Export Credit & Investment Insurance Industry Report 2020. Annual report of the export credit and investment business of Berne Union Members. August 2021. Berne Union (2022). Export Credit & Investment Insurance Industry Report 2021. Annual report of the export credit and investment business of Berne Union Members. August 2022. Berne Union (2023). Export Credit & Investment Insurance Industry Report 2022. Annual report of the export credit and investment business of Berne Union Members. August 2023. Berne Union (2024). Export Credit & Investment Insurance Industry Report 2023. Annual report of the export credit and investment business of Berne Union Members. June 2024. Convergence (2024). Convergence Historical Deals Database. November 2024. Cull et. Al (2024). Mobilizing private capital for the sustainable development goals. Development Economics. 21 May 2024. DFI Working Group on Blended Concessional Finance for Private Sector Projects : Joint Report December 2021 Update (English). Washington, D.C. : World Bank Group. https://www.ifc.org/content/dam/ifc/doc/mgrt/202112-dfi-bcf-joint-report.pdf. DFI Working Group on Blended Concessional Finance for Private Sector Projects : Joint Report 2020 (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/221851613400323474/Joint-Report-2020. DFI Working Group on Blended Concessional Finance for Private Sector Projects: Joint Report 2019 (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/143391613402799293/Joint-Report-2019. Infrastructure Monitor 2024 References 142 DFI Working Group on Blended Concessional Finance for Private Sector Projects: Summary Report 2017 (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/846061613401587724/Summary-Report-2017. OECD (2023), Private finance mobilised by official development finance interventions, Development Co-operation Directorate, OECD Publishing, Paris. OECD (2021) “The OECD DAC Blended Finance Guidance”, OECD Development Co-operation Directorate, Paris. S&P Global (2021). Proof of Concept. Using Country Risk Investment Model to Analyze Benefits of Political Risk Insurance. August 2021. The material is reproduced with permission of S&P Global Market Intelligence LLC and Standard & Poor’s Financial Services LLC​ . UNDDR (2015). Sendai Framework for Dissaster Risk Reduction 2015-2030. Access at Link. United Nations (2015). Addis Ababa Action Agenda of the Third International Conference on Financing for Development. 27 July 2015. Addis Ababa. Ethiopia. Access at Link. United Nations (2022), Resolution adopted by the United Nations Environment Assembly on 2 March 2022, Published on 7 March 2022. Access at Link. UNOPS (2021), Infrastructure for Climate Action. Access at Link. U.S. Department of the Interior. Performance Grants. Washington, D.C. Access at Link. World Bank (2024). Benchmarking Infrastructure Development 2023. Access at Link. Definitions, data sources and methodology Infrastructure Monitor 2024 Private investment in infrastructure 144 Private investment in infrastructure - Definition and classifications Transaction stage where all financing documentation has been signed, all conditions precedent have been Financial close satisfied or waived, and initial drawdown is contractually possible. Primary market transactions include investment in greenfield and brownfield infrastructure, as well as in Primary market projects involving privatization of public sector assets. Investment made by the private sector in infrastructure projects in primary markets (financed by private and Private infrastructure public financiers). Investment values represent commitments made at the financial close of investment and not investment executed investment. It includes both debt and equity transactions.  Refinancing The replacement of an existing debt obligation with a debt obligation bearing new and different terms. Secondary market transactions include acquisitions, refinancing, securitisations, and financing for general Secondary market corporate operations. Securitisation Transaction in which a pool of assets is collateralised into one vehicle of loan products for sale. Infrastructure Monitor 2024 Private investment in infrastructure 145 Private investment in infrastructure - Definition and classifications Income group classifications Antigua & Barbuda, Aruba, Australia, Austria, Bahamas, Bahrain, Barbados, Belgium, Bermuda, British Virgin Islands, Brunei, Canada, Cayman Islands, Chile, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Guam, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, High-income countries Kuwait, Latvia, Lithuania, Luxembourg, Malta, Mauritius, Monaco, Nauru, Netherlands, New Zealand, Norway, Oman, Panama, Poland, Portugal, Puerto Rico, Qatar, Romania, Saint Martin, Saudi Arabia, Seychelles, Singapore, Slovakia, Slovenia, South Korea, Spain, St. Kitts and Nevis, Sweden, Switzerland, Taiwan, Trinidad and Tobago, United Arab Emirates, United Kingdom, United States, Uruguay, US Virgin Islands Afghanistan, Albania, Algeria, Angola, Argentina, Armenia, Azerbaijan, Bangladesh, Belarus, Belize, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Burundi, Cabo Verde, Cambodia, Cameroon, Chad, China, Colombia, Comoros, Congo, Dem. Rep., Congo, Rep., Costa Rica, Côte d'Ivoire, Cuba, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, Arab Rep., El Salvador, Equatorial Guinea, Ethiopia, Fiji, Gabon, Gambia, The, Georgia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, CR, Haiti, Honduras, India, Indonesia, Iran, Islamic Rep., Iraq, Jamaica, Jordan, Kazakhstan, Kenya, Korea, Low- and middle-income Democratic People's Rep, Kosovo, Kyrgyz Republic, Lao PDR, Lebanon, Lesotho, Liberia, Libya, Macedonia, countries FYR, Madagascar, Malawi, Malaysia, Maldives, Mali, Marshall Islands, Mauritania, Mexico, Micronesia, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nepal, Nicaragua, Niger, Nigeria, Pakistan, Papua New Guinea, Paraguay, Peru, Philippines, Russian Federation, Rwanda, Samoa, São Tomé and Principe, Senegal, Serbia, Sierra Leone, Solomon Islands, Somalia, South Africa, South Sudan, Sri Lanka, St. Lucia, St. Vincent and the Grenadines, Sudan, Suriname, Swaziland, Syrian Arab Republic, Tajikistan, Tanzania, Thailand, Timor-Leste, Togo, Tonga, Tunisia, Turkiye, Turkmenistan, Uganda, Ukraine, Uzbekistan, Vanuatu, Venezuela, RB, Vietnam, West Bank and Gaza, Yemen, Rep., Zambia, Zimbabwe Infrastructure Monitor 2024 Private investment in infrastructure 146 Private investment in infrastructure - Definition and classifications Sector classifications Non-renewable energy Investment in coal-, gas- and oil-fired power plants, nuclear power, and co-generation power. Investment in biofuels/biomass, geothermal, hydro, hydrogen, solar (land-based PV and thermal), tidal, and Renewable energy wind (onshore and offshore) energy generation. Energy storage, transmission and Investment in electricity storage, transmission, and heat networks. distribution Gas storage, transmission Investment in gas storage, transmission and distribution networks. and distribution Social infrastructure Investment in defence, education, healthcare, justice, municipal buildings and social housing. Digital infrastructure Investment in data centres, and mobile and internet infrastructure. Investment in airports, bridges, heavy rail, light rail, ports, roads, tunnels and Zero Emissions Vehicles (ZEV) Transport infrastructure. Investment in waste management and treatment facilities, waste-to-energy plants, and recycling and waste Waste minimisation solutions. Water Investment in water distribution, treatment, and desalination facilities. Infrastructure Monitor 2024 Private investment in infrastructure 147 Private investment in infrastructure - Definition and classifications Region classifications North America Bermuda, Canada, United States Albania, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Kazakhstan, Kosovo, Kyrgyz Republic, Latvia, Lithuania, Luxembourg, Macedonia, FYR, Malta, Europe and Central Asia Moldova, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Turkiye, Turkmenistan, Ukraine, United Kingdom, Uzbekistan Australia, Brunei, Cambodia, China, Fiji, Guam, Hong Kong, Indonesia, Japan, Korea, Democratic People's Rep, Lao PDR, Malaysia, Marshall Islands, Micronesia, Mongolia, Myanmar, Nauru, New Zealand, Papua New East Asia and Pacific Guinea, Philippines, Samoa, Singapore, Solomon Islands, South Korea, Taiwan, Thailand, Timor-Leste, Tonga, Vanuatu, Vietnam Antigua & Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Curaçao, Dominica, Dominican Republic, Ecuador, El Salvador, French Latin America and the Guiana, Grenada, Guatemala, Guyana, CR, Haiti, Honduras, Jamaica, Martinique, Mexico, Netherlands Antilles, Caribbean Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Saint Martin, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, US Virgin Islands, Venezuela RB Algeria, Bahrain, Djibouti, Egypt, Arab Rep., Iran, Islamic Rep., Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Middle East and North Morocco, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Tunisia, United Arab Emirates, West Bank and Gaza, Africa Yemen, Rep. Angola, Benin, Botswana, Burkina Faso, Burundi, Cabo Verde, Cameroon, Chad, Comoros, Congo, Dem. Rep., Congo, Rep., Côte d'Ivoire, Equatorial Guinea, Ethiopia, Gabon, Gambia, The, Ghana, Guinea, Guinea-Bissau, Sub-Saharan Africa Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Reunion, Rwanda, São Tomé and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, South Sudan, Sudan, Swaziland, Tanzania, Togo, Uganda, Zambia, Zimbabwe South Asia Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka Infrastructure Monitor 2024 Private investment in infrastructure 148 Environmental, Social, and Governance (ESG) factors in infrastructure - Data Source 1. Data on infrastructure sector ESG performance are critical to catalyzing more private investment in sustainable infrastructure. However, such data are currently very limited in quality and coverage, particularly at the asset level. 2. For the analysis presented here, PPIAF-GI Hub collaborated closely with GRESB to present findings from GRESB’s 2024 Infrastructure Asset Assessment, currently the market leading source of ESG data for infrastructure assets. 3. GRESB’s ESG Scores reflect the extent to which entities have ESG policies in place, manage ESG risk, report transparently on their most material ESG issues, and have current and future ESG targets. It focuses on the disclosure of management and performance data, with a limited assessment of ESG outcomes and impact. In other words, an asset is assessed on whether it reports on GHG emissions rather than on the amount of GHGs emitted. GRESB is working with the infrastructure industry to reflect outcomes in the ESG Score in future years, to close this critical data gap. 4. GRESB’s data represents only a sample of the universe of infrastructure assets reporting on ESG. However, the data can still be interpreted as indicative of the broad market trends in ESG in infrastructure. 5. More detail on GRESB’s methodology can be found in the following reference guides: 2024 Infrastructure Asset Standards and Reference Guide and 2024 Infrastructure Asset Scoring Document. Sample distribution by sector GRESB Infrastructure Asset Assessment participation by region GRESB Infrastructure Asset Assessment participation by region sector (number of participating assets) (number of participating assets) 700 687 697 687 697 Other 651 700 651 Diversified 600 600 558 558 Environmental services 500 500 426 426 Power generation x 400 393 393 Renewables 400 Energy and 300 280 300 280 Water resources Social infrastructure 200 200 160 160 Network utilities 100 100 Data infrastructure 0 Renewable power 0 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 Transport Europe Americas Oceania Asia Globally diversified Africa Source: Authors’ analysis based on GRESB Infrastructure Asset Assessment. Infrastructure Monitor 2024 Definition 149 Definition The blended finance section of the Infrastructure Monitor report is based on Convergence’s definition of blended finance. The analysis also draws from the definitions adopted by the DFI Working Group on Blended Concessional Finance for Private Sector Projects for operational guidance and by the OECD Development Assistance Committee (DAC) for policy guidance. Convergence defines blended finance as the use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development. It is a structuring approach that allows public, private, and philanthropic to work together to address the investment barriers while achieving their own objectives. The main barrier to private investment is unattractiveness of risk-adjusted return. Blended finance approaches either enhance returns by providing concessional capital or grants or reduce risks by providing grants and guarantees. Blended finance improves risk-return profile of an investment Private capital Market-rate Market line (Expected risk-return Blended deal with for private investors) returns enhancement Blended finance C Mobilizing structures Project before blending B A (unacceptable to private investors) Blended deal with de-risking Development Concessional Risk-free funding return (Public and philanthropic funders) Source: Convergence. Infrastructure Monitor 2024 Definition 150 Definition DFI Working Group on Blended Concessional Finance for Private OECD Development Assistance Committee (DAC) defines Sector Projects (“the DFI working group”) has adopted a specific blended finance as “the strategic use of development finance for the definition of blended concessional finance for the private sector mobilisation of additional finance towards sustainable development operations of DFIs, that is, Combining concessional finance from in developing countries”. donors or third parties alongside DFIs’ normal own-account finance and/or commercial finance from other investors, to develop private The DAC has adopted the five Blended Finance Principles that sector markets, address the Sustainable Development Goals (SDGs), provide policy guidance for Unlocking Commercial Finance for the and mobilize private resources. Sustainable Development Goals: The DFI Working Group has outlined enhanced principles to • Principle 1: Anchor blended finance use to a development effectively operationalize blended finance for DFI private sector rationale. It recommends maximizing development outcomes operations, which are summarized below: and impact with commitment to high quality, while linking the deployed development finance to expected results. • Rationale for using blended concessional finance: DFI support • Principle 2: Design blended finance to increase the mobilization for the private sector should make a contribution that is beyond of commercial finance. It recommends to ensure additionality, what is available, or that is otherwise absent from the market, and seek leverage, address market failures, minimize the use of should not crowd out the private sector. Blended concessional concessionality, and focus on commercial sustainability. finance should address market failures. • Principle 3: Tailor blended finance to local context. It recommends • Crowding-in and minimum concessionality: DFI support for to support local development priorities, ensure consistency with the private sector should, to the extent possible, contribute to the aim of local financial markets development, and align with catalyzing market development and the mobilization of private efforts to promote a sound enabling environment. sector resources and minimize the use of concessional resources. • Principle 4: Focus on effective partnering for blended finance. • Commercial sustainability: DFI support for the private sector It recommends appropriate allocation and sharing of risk between and the impact achieved by each operation should aim to be parties, leveraging the complementary motivation of commercial sustainable. DFI support must contribute towards the commercial actors while not compromising on the prevailing standards for viability of clients. Level of concessionality in a sector should be development finance deployment. revisited over time. • Principle 5: Monitor blended finance for transparency and results. • Reinforcing markets: DFI support for the private sector should be It recommends to agree on metrics from the start, track financial structured to effectively and efficiently address market failures and flows, commercial performance and development results, dedicate minimize the risk of disrupting or unduly distorting markets or appropriate resources for monitoring and evaluation, and ensure crowding out private finance, including new entrants. public transparency and accountability on blended finance • Promoting high standards: DFI private sector operations should operations. seek to promote adherence to high standards of conduct in their clients, including in the areas of corporate governance, environmental impact, social inclusion, transparency, integrity, and disclosure. Infrastructure Monitor 2024 Data sources 151 Data sources: Infrastructure equity performance (1/3) Private investors can invest in the infrastructure asset class through equity markets. Equity investments can be in listed markets where listed infrastructure equities are publicly traded on a stock exchange. Alternatively, they can be in unlisted or private markets where investment opportunities are generally offered through private placements made by the company signatory of the project or concession agreement. The channel of investment is materially correlated with financial performance. The following indicators were used to analyze the performance of infrastructure equity investments: Listed infrastructure equities performance was measured using two indices: (i) Morgan Stanley Capital International All Country World Index Infrastructure Capped Index (MSCI ACWI-IC), comprising a global opportunity set of companies that are owners or operators of infrastructure assets that are selected from the parent index – Morgan Stanley Capital International All Country World Index (MSCI ACWI) – covers mid- and large-cap securities across 23 developed markets and 24 emerging markets for five infrastructure sectors: telecommunications, utilities, energy, transport, and social. FT Wilshire GLIO Listed Infrastructure Index Series is used to measure the financial performance of listed infrastructure equities (economic (ii)  infrastructure). The Index series covers global listed infrastructure companies that tend to own long-lived assets that provide essential services to society, such regulated utilities, renewables, energy transportation networks, communications and transportation infrastructure. These services are often in monopoly market situations with high barriers to entry and are supported by long-term contracts or regulation -- providing potentially stable and predictable cash flows. The Index comprises 210 companies of which 76 are in emerging economies. The index series uses free-float market capitalization in US Dollars as weights. It uses a systematic approach to determine company selection and eligibility. Natural Language Processing (NLP) is used to identify candidate companies and isolate infrastructure related EBITDA. NLP applied to each infrastructure sector. Companies and EBITDA are identified via an accept/reject of relevant words and phrases. New constituents must have infrastructure related EBITDA ratio ≥ 0.66 and identified key phrases to be eligible. It remove small and illiquid companies. Performance is compared against a benchmark of listed global equities. Listed global equity performance is measured by the MSCI ACWI, MSCI’s flagship global equity index, which is designed to represent the performance of the full opportunity set of large- and mid-cap stocks across 23 developed and 24 emerging markets. In May 2022, it covered more than 2,933 constituents across 11 sectors and approximately 85 percent of the free float-adjusted market capitalization in each market. Infrastructure Monitor 2024 Data sources 152 Data sources: Infrastructure equity performance (2/3) EDHECInfra data is based on a representative sample of 27 countries that exhibit sizable level of activity that could be measured.  The investment universe relevant to measuring performance in the principal market is defined in two steps: • National-market inclusion: Relevant national markets are determined based on national-level index inclusion criteria, including their level of activity (number and frequency of transactions and market participants), relative size, and minimum data availability. • Individual-company inclusion: Within the markets that qualify under these criteria, potential index constituents - whether they are equity or debt issuers - must also meet a set of minimum inclusion criteria. These include investability, age and minimum data availability. Once the investment universe is defined, the third step is to build a sampled universe that meets certain minimum representative criteria.  The markets included in the sample are: • Developed markets: Australia, Austria, Belgium, Canada, Denmark, Germany, Spain, Finland, France, United Kingdom, Hungary, Ireland, Italy, Netherlands, Norway, New Zealand, Poland, Portugal, Russia, Singapore, Slovakia, Sweden, United States of America • Emerging markets: Brazil, Chile, Malaysia, Philippines. Minimum National Market Inclusion Criteria Criteria Minimum Threshold (on measurement date) Cumulative primary and secondary dealflow since 2000 represents at least 0.5 percent of Size the total value of all identified markets AND -a  t least 20 percent by number of transactions OR Market Activity Market turnover ratio - at least 20 percent by transaction volume OR - the country is part of the European Union Availability of basic procurement and financial information including incorporation and Financial Information financial close dates, book values, etc. For these countries, 9200+ investible infrastructure companies were identified and categorized. Infrastructure Monitor 2024 Data sources 153 Data sources: Infrastructure equity performance (3/3) Unlisted infrastructure equities performance was measured by EDHECInfra Infra300 equity index, which is designed as a representation of 6,800 investible unlisted infrastructure companies (often private equity funds) identified in the 27 key markets by infrastructure sector, business model, and corporate structure. The index is equally weighted with 300 constituents with a market capitalization of nearly US$350 billion. The sectoral shares are: (i) transport - 27 percent (ii) renewable power - 20.3 percent (iii) data Infrastructure - 4.3 percent, and (iv) environmental Services - 5 percent. The geographical shares are (i) Europe - 68.7 percent (ii) Oceania - 14.3 percent (iii) Americas - 10 percent, and (iv) Asia - 7 percent. Project finance companies comprise 60 percent of the index. EDHECInfra uses the estimation methodology most consistent and compliant to the IFRS-13 fair value approach based on the largest data sample of infrastructure investments worldwide. Expected return is estimated using transaction prices of traded infrastructure companies and their dividend forecast. Then, the expected return is decomposed into risk factors: 1. Liquidity (size) 2. Leverage (credit risk (total debt/sales)) 3. Investment (capital expenditure) 4. Interest rates (term spread (different between long-term and short-term interest rates) and 5. Profits (EBITDA/sales), identified to be the key explanatory factors. Infrastructure-specific risk factors like business model/risk, sector, country, age/ time to maturity, were also included. The regression is used to extract market risk premia of each risk factor. These factor risk premia estimates are combined with firm-level factor exposure to compute the latest transaction prices of firms that did not trade as well as the overall market risk premia. Risk premia is added to the relevant term structure of interest rates to compute first-specific market calibrated discount rate determining the cost of capital. In addition, green unlisted infrastructure equity performance was analyzed to assess the relative performance of sustainable and climate- aligned investments. The performance is measured by the EDHECInfra InfraGreen index, which tracks investments in solar and wind projects worldwide and provides a unique view of the renewable energy sector’s performance. The InfraGreen equity index tracks 100 investments and goes back 10 years. The key findings and trends based on these equity indices were further assessed based on literature review, research studies and other data including cost data published by Freightos, G20 national statistics agencies, IMF, Mobilist, Royal Institution of Chartered Surveyors, Statista, OECD, and the World Bank. Infrastructure Monitor 2024 Data sources 154 Data sources: Infrastructure debt performance (1/2) Private investors can invest in the infrastructure asset class through debt markets. The debt investment can be in rated debt securities or unrated loans. The financial performance of debt investments in infrastructure were analyzed through the following metrics using the specified data sources: A. Return and volatility metrics were analyzed using the following data source: • EDHECInfra InfraMetrics Debt Indices track the performance of private debt issued by global infrastructure corporates and project companies. The Infra300 Debt Index reflects the monthly performance of recent senior debt from 300 unlisted infrastructure companies. The companies are selected form a representative sample by infrastructure sectors of an underlying universe of close to 9200+ firms in 25 countries. InfraGreen debt index tracks the performance of the outstanding senior debt of the constituents of the InfraGreen Equity index which tracks over 100 investments in solar and wind projects worldwide and provides a unique view of the renewable energy sector’s performance. B. Credit risk metrics including default and recovery rates were analyzed using the following data sources: • Global Emerging Markets (GEMs) Risk database for Multilateral Development Banks/Development Finance Institutions (MDBs/DFI) lending to private and public counterparts in emerging markets and developing economies. It pools de-identified contract-level data from 27 MDBs/DFIs on their performing and non-performing exposures compiled based on robust, shared methodological framework and harmonized template to derive output statistics encompassing default and recovery rates categorized by various dimensions. The estimates for energy, utilities and all sectors were derived from pooled data from 1994 to 2023 supplied by 21 member institutions, and are based on the following sample: Sector Private counterparts sample Public counterparts sample Energy 235 24 Utilities 1,359 171 Benchmark: All sectors 9,929 943 GEMs credit risk metrics for MDB/DFI contracts with private counterparts for the infrastructure asset class are based on the 1994-2022 database. The total number of private counterparts in the sample for infrastructure was 1,697 and for non-financial corporates was 4,476. Infrastructure definition includes these GICS sectors: Air Freight & Logistics, Airlines, Marine, Railroads, Trucking, Airport Services, Highways & Rail tracks, Marine Ports & Services, Health Care Facilities, Alternative Carriers, Integrated Telecommunication Services, Wireless Telecommunication Services, Electric Utilities, Gas Utilities, Multi-Utilities, Water Utilities, Independent Power Producers & Energy Traders, Renewable Electricity, Health Care Real Estate Investment Trusts – REITs. Infrastructure Monitor 2024 Data sources 155 Data sources: Infrastructure debt performance (2/2) • For rated infrastructure debt securities, Moody’s and S&P data reports were referenced: Moody’s Infrastructure Defaults and recovery rates 1983-2022’ data report and data supplement published on 12 December 2023, and S&P’s Default, Transition, and Recovery:2023 Annual Infrastructure Default and Rating Transition Study published on 11 September 2024 Data sample: Moody’s rated infrastructure debt securities covered 1,147 corporate infrastructure and project finance debt securities with a total value of US$2.7 trillion that originated from 1983 to 2022. By region, the shares in debt value were 54 percent for North America, 34 percent for Europe, Middle East, and Africa (EMEA), 9 percent for Asia Pacific, and 3 percent for Latin America & the Caribbean. LMICs accounted for over 10 percent of the sample. S&P Global Ratings analyzed the rating histories of corporate infrastructure and project finance credits  first rated between Dec. 31, 1980, and Dec. 31, 2023. The total number of ratings peaked to 1,488 in 2018. By region, the number of ratings were nearly 500 in the US, 120 in Canada, 460 in EMEA, and over 100 in Asia Pacific and Latin America. Infrastructure definition: Moody’s defines the term infrastructure is used in a broad sense, and includes securities issued by both public and private issuers (operating companies and projects) that provide large, capital-intensive critical assets that underpin economic activity. Typical infrastructure debt finances utilities, including power-generation systems, electric and natural gas transmission and distribution networks, long-haul energy pipelines, water and wastewater utilities and integrated utilities; transportation systems, including roads, bridges, ports, airports and rail networks; and; other fundamental facilities serving a country, city or subdivision, such as stadiums, military installations and hospitals. S&P Global includes five subsectors: utilities, power, oil and gas, social infrastructure, and transportation, and infrastructure was broadly defined to cover investment exposure to real assets vital to a country’s economic development and prosperity that provide essential services for the orderly operations of an economy, such as transportation networks, health and education facilities, communication networks, and water and energy distribution systems. • Moody’s data report on unrated sustainable project finance bank loans was referenced for the analysis of availability-based payment mechanisms, PPPs and green tag. The data sample included 8,468 projects and 320 Moody’s defaults from 1983 to 2020. Sectoral composition was 54 percent power sector, 33 percent non-power infrastructure sectors, and 13 percent oil and gas sector. The 8,468 projects included in the report were segmented into 6,286 non-PPP projects (74.2 percent) and 2,182 PPP projects (25.8 percent). Availability-based projects were 20.7 percent of the total data sample and 11.5 percent of total defaults. The subindustries for which the proceeds were typically earmarked to finance green projects were included in defining the green tag. In the renewable power sector, solar, hydro, wind as well as other energy efficiency projects were included. In the clean transportation sector, electric, hybrid, public, rail, nonmotorized, multimodal transportation, infrastructure for clean energy vehicles and reduction of harmful emissions, were included. In the environmental sector, wastewater and water sectors were included. In oil and gas sector, biofuels were included. Infrastructure Monitor 2024 Data sources 156 Data sources: Blended finance and guarantees Data Source: The sample was selected from the full Convergence historical deals database based on the following criteria: The analysis of blended finance infrastructure deals presented in this section is based on the Convergence historical deals database. The • Completeness and quality of the required data for the deal. Where database only covers emerging markets and developing economies. only some data input were missing, data was assumed based on realistic assumptions or literature review. When only one data Convergence maintains the largest and most detailed database of point was missing, it was derived based on logical mathematical historical blended finance transactions in the market. While this formulas. When multiple data points were missing, they were filled database is not fully comprehensive, it does give a sense of the scale based on detailed review of data available for the deal in secondary of blended finance. Convergence is continually building out this data sources in most cases. In a few cases, assumptions on debt-to- database to draw better insights about the market. Data is collected equity ratio by sector were made to fill missing data. Otherwise, the from i) credible public sources like press releases, ii) data sharing deals were deleted from the sample. The difference between the agreements, and iii) validation exercises with Convergence members. total deal value and the sum of values by financial instruments or investor type was reduced to less than 5 percent. To be included in Convergence’s database, a deal must meet three main criteria: (i) the transaction attracts financial participation from • Adherence of the deal to the blended finance definition. Only the one or more commercial investors that would otherwise not have deals in which both private and public or philanthropic finance invested in the opportunity, (ii) the transaction uses catalytic capital were blended were selected. The deals were deleted when they in one of the following ways: Public/philanthropic investors are were purely private or public, when private participation was only concessional within the capital structure or provided guarantees in management, refinancing, a company launch for which private or risk insurance priced below market-rate, transaction design investment was unknown. or preparation is grant funded, transaction is associated with a • Quality of analysis: No metric was estimated for which the sample Technical Assistance facility, and (iii) the transaction intends to create size of deals was less than 5 after disaggregation of the full sample development impact related to the SDGs in developing countries, or by variables of interest. directly impacts beneficiaries in developing countries Sample for analysis: This analysis is based on a dataset of 407 blended finance infrastructure deals from the Convergence historical deals database with the total deals value of US$104.3 billion. The deals with launch dates during the years 2000-2024 were selected. The data availability for recent deals especially those launched after 2010 is better, except limited data was available for deals that closed in 2024. Infrastructure Monitor 2024 Data sources 157 Data sources: Infrastructure cross-border guarantees Longer-tenor business: Export credit and investment insurance The International Union of Credit and Investment Insurers (Berne Union) includes government backed export credit agencies, private credit and political risk insurers, and multilateral institutions from across the globe who provide direct and indirect support for international trade and cross-border investments through insurance, guarantees, and various direct financing instruments. The Berne Union holds the most comprehensive data set on the business of export credit and investment insurance. Members submit data on their business activities twice annually, covering activity up to the end of the second quarter, and for the full year. The following two types of products are relevant for the infrastructure asset class and are included in our analysis: • Medium and long-term export credit: insurance, guarantees, and lending for export/trade finance credit of which the repayment term is greater than 360 days. • Political risk insurance: insurance or guarantees that indemnify an equity investor or a bank financing the equity investment for losses incurred to a cross-border investment, as a result of political risks. The metrics analyzed in the report are explained below: • New commitments: Flow item, showing the total volume of new insurance/guarantee/loan/ etc. commitments issued during the half-year for which commitment has been confirmed. This Includes the full amount of new commitments issued during the half-year, even if disbursements are to take place later. • Claims paid: Flow item recording the total volume of claims paid or non-performing loans, categorized by the type of loss event (political or commercial). • Claims ratio: Claims paid as a percentage of premiums earned. • Recoveries: Flow item recording the total volume of recoveries collected, categorized by the type of loss event (political or commercial). Infrastructure Monitor 2024 Methodology 158 Methodology: Private infrastructure funds Private infrastructure capital raised and invested by funds includes • Value-added strategies are deemed moderate- to high-risk, infrastructure capital raised and invested for core, core+, debt, value- targeting assets where enhancements are being made, and added and opportunistic strategies. where growth in usage of such assets or demand for the service provided or produced is the focus. These are typically greenfield • Core strategies target essential assets with no operational risk, or brownfield assets, potentially involving new or unproven where the asset is already generating returns. These are typically technologies that do not have pricing power at the time of the secondary stage assets in developed countries with transparent investment but that can be developed over time to provide pricing regulatory and political environments. Key features of the power in the future. Pricing power refers to a business’s ability to underlying assets include a monopoly position, demonstrated adjust and control the prices of its products or services in response demand, and long-term stable cash flows that are forecastable to various factors, such as changes in demand, costs, or market with a low margin for error. conditions. • Core+ strategies target assets exhibiting similar characteristics to • Opportunistic strategies have the highest risk/return profile of those of core assets. They are exposed to demand and market risk infrastructure strategies, focusing less on stable cash flows and but are more affected by and correlated with the economic cycle. more on capital growth via the value of the underlying assets. These assets have features that act to limit these risks, including Assets targeted by these strategies typically do not have an long-term contracts, long-term government or regulatory price existing cash flow. support, and/or high barriers to entry for competitors. Secondaries funds were excluded because they invest in pre-existing • Debt strategies use debt or issuing debt securities to fund infrastructure assets by acquiring interests in private capital funds investment activities. These strategies tend to be less risky from the original investors. Funds of funds were excluded because than other infrastructure strategies, targeting assets and/or they represent the acquisition of interests in other funds. infrastructure developers/owners producing regulated revenues for essential services or user revenues from assets with a monopoly position, as well as contracted assets. The risk/return exposure of these strategies depends on the type of debt provided, however, most infrastructure assets are typically financed by senior debt and have simple capital structures. Infrastructure Monitor 2024 Methodology 159 Methodology: Blended finance infrastructure funds Blended finance infrastructure funds include the funds in which investors from public and private sectors pool money to partner and support infrastructure projects. The analysis of blended finance infrastructure funds presented in this section is based on the funds listed in the Convergence historical deals database. The database only covers emerging markets and developing economies. Data is collected from: 1. Credible public sources like press releases 2. Data sharing agreements 3. Validation exercises with Convergence members To be included in Convergence’s database, a deal must meet three main criteria: 1. The transaction attracts financial participation from one or more commercial investors that would otherwise not have invested in the opportunity 2. The transaction uses catalytic capital in one of the following ways — public/philanthropic investors are concessional within the capital structure or provided guarantees or risk insurance priced below market-rate, transaction design or preparation is grant funded, or the transaction is associated with a Technical Assistance facility 3. The transaction intends to create development impact related to the SDGs in developing countries or directly impacts beneficiaries in developing countries Additional data input required for the analysis were identified through secondary research. The final data sample used in the analysis is based on 81 blended finance infrastructure funds/facilities for which data was available. Infrastructure Monitor 2024 Methodology 160 Methodology: Infrastructure Project Preparation Funds/Facilities (PPFs) The Infrastructure PPFs studied for this report provide technical support for infrastructure project preparation, and funding to support infrastructure project preparation. The sample of 130 PPFs was primarily sourced from the PPFs list published by the Overseas Development Institute (ODI), Cities Climate Finance Leadership Alliance (CCFLA), and Sustainable Development Investment Partnership (SDIP), which were validated by the GI HUB. Global • Access Co-development Facility • Global Infrastructure Facility (GIF) • Adapt–Asia Pacific Project Preparation Facility (AAPP) • Green Climate Fund PPF • African, Caribbean and Pacific – European Commission • Public-Private Partnership Project Preparation in the Southern Energy Facility II and Eastern MEDiterranean – MED5P • AIIB Project Preparation Special Fund • Mobilize Your City (MYC) • Arab Financing Facility for Infrastructure • Municipal Project Support Facility (MPSF) • Asia Pacific Project Preparation Facility (A3PF) • Nature Based Solutions PPFF • C40 Cities Finance Facility • PIDG Technical Assistance • Cities Development Initiative Asia • PIDG DEVCO • City Climate Finance Gap Fund • Private Financing Advisory Network (PFAN) • Climate Investment Funds • Public Private Infrastructure Advisory Facility (PPIAF) • Climate Support Facility • Scaling Solar • EBRO Technical Cooperation Funds • SEED capital assistance facility • EIB FEMIP Trust Fund (FTF) • Technical Assistance Facility of International Municipal • EIB Water Project Preparation Facility • Investment Fund • EU Technical Assistance Facility (TAF) • The OPEC Fund for International Development - OFID • Financing Energy for low-carbon Investment – Cities Advisory • US Trade and Development Agency (USTDA) Facility (FELICITY) • UNCDF – Local Finance Initiative (LFI) • Global Environment Facility Sustainable Cities Impact • Urban Projects Finance Initiative (UPFI) Program (SCIP) Infrastructure Monitor 2024 Methodology 161 Europe Asia • EIB’s EPEC • Asia Infrastructure Centre of Excellence • European Bank for Reconstruction and Development (EBRD)’s • Clean Energy Financing Partnership Facility (CEFPF) Infrastructure Project Preparation Facility (IPPF) • Climate Change Fund • European Local Energy Assistance (ELENA) • Energy and Environment Partnership Mekong (EEP Mekong) • Natural Capital Financing Facility • Green Finance Catalytic Facility’s Project Preparation Unit • Rural Community Energy Fund (ADB GFCF PPU) • Urban Investment Support (URBIS) • India Infrastructure Project Development Fund (IIPDF) • Western Balkans Investment Framework Infrastructure • Indonesia: Infrastructure Project Development Facility Project Facility • lnfraCo Asia • Japan Fund for Poverty Reduction Latin America • Japan Fund for the Joint Crediting Mechanism • Brazil Infrastructure Project Preparation Fund (PSP) • Philippines: Infrastructure Preparation and Innovation Facility • Estruturadora Brasileria de Projetos (EBP) • PPPTAF Bangladesh • Finance Line – River Plate Basin Development Fund (FONPLATA) • Project Development and Grant Fund (PDGF) • IDB AquaFund • Project Preparation and Startup Support Facility • Infra Fund • Public Private Partnerships Centre – China • lnteramerican Development Bank Project Preparation and • South Asia Infrastructure for Growth Trust Fund Execution Facility (PROPEF) • Tamil Nadu Urban Development Fund (TNUDF) • lnteramerican Development Bank Project Preparation Facility • The Philippines PPP Centre • National Infrastructure Fund Trust Fund (FONADIN) • Urban Environment Infrastructure Fund (UEIF) • NDC Pipeline Accelerator • USICEF – US India Clean Energy Finance Facility • Project Preparation Facility in Cuba • Vietnam Project Preparation Technical Assistance Facility • Regional Public-Private Partnership Support Facility • Water Financing Partnership Facility • Sustainable Cities and Climate Change • Sustainable Energy and Climate Change (SECCI Fund) • TheCityFix Labs • Transformative Actions Program (TAP) • UK – Caribbean Infrastructure Partnership Fund Infrastructure Monitor 2024 Methodology 162 Africa • Africa Clean Energy (ACE) Programme Competitive • Fund for African Private Sector Assistance (FAPA) Business Facility • Sustainable Use of Natural Resources and Energy Finance • Africa Climate Resilient Investment Facility (AFRI-RES) (SUNREF) • Africa Renewable Energy Access Program (AFREA) • Infra Co Africa • Africa Renewable Energy Fund Project Support Facility (AREF-PSF) • Infrastructure Investment Programme for South Africa (IIPSA) • Africa50 • Kenya Climate Innovation Centre (CIC) • African Development Fund Project Preparation Facility • NEPAD IPPF • African Legal Support Facility • PPP Commission Africa • African Water Facility (AWF) • PPP Transaction Advisory Services (TAS) • Cities and Climate Africa (CICLIA) • Program for Infrastructure development in Africa (PIDA) • Common Market for Eastern and Southern Africa (COMESA) Service Delivery Mechanism Project Preparation and Implementation Unit (PPIU) • Project Preparation Fund (Part of PPP Unit) • Covenant of Mayors in Sub-Saharan Africa • Kenya Climate Innovation Centre (CIC) • DBSA ElB Project Development and Support Facility (PDSF) • NEPAD IPPF • DBSA Project Preparation Fund • PPP Commission Africa • ECOWAS infrastructure Projects Preparation and Development • PPP Transaction Advisory Services (TAS) Unit (PPDU) • Program for Infrastructure development in Africa (PIDA) • ECREEE-GIZ Technical Assistance Facility for Grid-Connected Service Delivery Mechanism RE Project • Project Preparation Fund (Part of PPP Unit) • Energy4Impact • EU-Africa Infrastructure Trust Fund • European Union – European Development Finance Institutions Private Sector Development Facility (EU-EDFI EEDF) Infrastructure Monitor 2024 163 PPIAF Donor Partners PPIAF DONOR PARTNERS