Building Resilience and Bridging Gaps with Private Capital
In a world buffeted by macroeconomic turbulence, infrastructure investment remains a rock‑solid anchor – critical for spurring job creation, long‑term development, and resilience. Even amid surging inflation and rising interest rates, infrastructure has proven itself a favoured asset class.
With stable revenue streams and government backing, it delivers lower risk, steadier returns, and often better performance compared with other private investments.
This article is inspired by the World Bank Blog by Aisha William, Global Director of the Global Infrastructure Finance Department at the World Bank, and expands on the topic with additional insights, data and context for construction professionals, investors, and policymakers.
A Post‑Pandemic Rebound
The World Bank’s Infrastructure Monitor 2024 reports that private investment in primary infrastructure markets rose in 2023 to 46% above the pre‑pandemic five‑year average. Yet, rising delivery costs, about 10% above inflation, demand a cautious view of this growth.
While high‑income countries enjoyed a near‑15% jump in primary infrastructure investment, low‑ and middle‑income countries (LMICs) saw a 2% decline. LMICs now receive less than a quarter of global primary infrastructure capital. The secondary market for acquisitions, refinancing, and securitisations shrank by 17% in 2023.
Sector Shifts and the Green Surge
Renewables and transport have long dominated infrastructure project finance investments. But in 2023, renewables, particularly wind, solar, and hydrogen, surged ahead, while transport investment fell.
Digital infrastructure is also gaining momentum, riding the wave of global connectivity. Green investment hit a record 62% of private infrastructure spending in 2023.
Why Infrastructure Attracts Capital Even in Tough Times
Infrastructure debt consistently outperforms non‑financial corporate debt in credit quality and recovery rates. Even in non‑investment‑grade categories, default rates are lower. Between 2016 and 2022, infrastructure funds delivered average annual returns of 11.3%, with only a slight forecast dip to 10.9% through 2028. This compares favourably with sharper declines projected for private equity and venture capital.
More than 70% of infrastructure fund allocations now go to core, core‑plus, and debt strategies, while high‑risk opportunistic plays lose ground.
High‑ and Lower‑Income Markets
In 2023, high‑income countries saw primary market infrastructure investment rise by nearly 20%, but LMICs experienced a small decline. Most private investment in emerging markets flows to a handful of economies: China, India, Brazil, Mexico, Türkiye, and Indonesia.
Together, they accounted for 67% of LMIC private infrastructure investment between 2021 and 2024.
Guarantees and Blended Finance
Guarantees significantly boost commercial participation. Projects with guarantees see 80% private debt participation versus 42% without. Yet, cross‑border guarantee availability has barely recovered since COVID‑19.
Regulatory Reform
Stronger regulatory frameworks unlock investment. Each improvement can generate up to $450 million in new capital.
Examples from PPIAF support include:
- Serbia – Shift from feed‑in tariffs to auctions, halving renewable energy costs.
- Cameroon – Port Authority of Douala raised €152 million locally and secured first long‑term credit ratings.
- Cameroon also adopted a new PPP law improving oversight, risk allocation, and budget controls.
DFI and MDB Engagement
Development finance institutions (DFIs) and multilateral development banks (MDBs) catalyse private capital in risk‑heavy markets. In 2023, private mobilisation by DFIs and MDBs rose 23% year‑on‑year.
The Global Infrastructure Facility (GIF) supported a Brazilian municipal street‑lighting PPP programme expected to mobilise $180 million, serving 7 million people and cutting energy use by 60%.
Emerging Concerns
Private capital flows remain uneven. Many low‑income markets see little institutional investment due to perceived risk and lack of transparency. Critics argue DFIs sometimes act more like private investors than catalysts. Calls are growing for stronger legal frameworks, transparent data, and proactive risk‑sharing.
MDBs aim to attract $65 billion in private investment annually by 2030, but bureaucratic hurdles and slow project preparation still impede progress.
A Path to Inclusive Infrastructure
Infrastructure is more than an economic driver, it’s the backbone of job creation, equitable access, and resilience. The private sector is ready to invest, but enabling conditions must improve. Policy reform, robust regulation, blended finance, and better project pipelines are essential.
By scaling proven solutions and fostering deep public‑private partnerships, the global community can deliver the infrastructure needed for a sustainable, inclusive future.
