Private investment in infrastructure projects in primary markets
1. Private investment in infrastructure projects in primary markets is not increasing, but it weathered the pandemic shock.
Private investment in infrastructure projects has been stagnant for five years running. However, while several other sectors of the economy were significantly affected by the COVID-19 pandemic, private investment in infrastructure projects remained stable overall in 2020 compared to 2019 (note, however, our third finding related to the investment gap between high-income countries and others).
2. Overall, private investment in infrastructure projects remains insufficient to close the infrastructure gap.
Private investment in infrastructure projects in 2020 was USD156 billion. At just 0.2% of global GDP, this is far shy of the 5% of global GDP (combining public and private investment) that some studies have indicated is required to close the infrastructure gap. It also pales in comparison to the USD3.2 trillion of public investment in infrastructure stimulus that has been announced by G20 governments in response to the COVID-19 crisis.
3. The private investment gap between high-income countries and others persisted in 2020.
High-income countries attract about three-quarters of all private investment in infrastructure projects, and investment levels remained steady in 2020. In contrast, private investment in infrastructure projects in middle- and low-income countries represents only a quarter of the total global private investment in infrastructure projects, and it declined by 28% in 2020.
Financial performance of global infrastructure equities (listed and unlisted) and infrastructure debt
1. In the last decade, returns for both listed and unlisted infrastructure equities have strongly increased.
The COVID-19 pandemic temporarily stalled this trend in 2020, but it resumed in 2021.
2. Historically, unlisted infrastructure equities have provided higher risk-adjusted return than global equities and listed infrastructure equities.
Although global equities perform better on a short-term basis, unlisted infrastructure equities generate the highest returns historically. This remains true when historic returns are considered on a risk-adjusted basis.
3. Infrastructure debt consistently performs better than non-infrastructure debt worldwide.
Infrastructure debt performs better than non-infrastructure debt in high-, middle-, and low-income countries. It has lower default rates than non-infrastructure debt and performs as an investment-grade security sooner.
Project preparation capacity
1. Infrastructure project preparation has substantial scope for improvement across all regions.
Project preparation is a dimension that can be improved across all regions and income groups, and improvement could make an even larger difference in low-income countries.
2. Project preparation facilities (PPFs) are providing technical and funding support for project preparation mainly in developing countries.
We explore how funds are being channelled to emerging economies with an aim to improve project preparation through the lenses of PPFs, which play an important role in supporting project preparation to develop bankable and investment-ready projects.
ESG factors in infrastructure investment
1. Companies investing in infrastructure are incorporating ESG factors better than other companies.
Environmental factors (particularly climate-related factors) are the largest and most common ESG concern, whereas social and governance dimensions are less assessed.Green private investment in infrastructure projects has been increasing since 2014 mostly in the renewables sector, and now represents half of all private investment in infrastructure globally. Yet, significantly more effort is required to drive investment to levels that will help reach global climate targets.
2. Preliminary evidence shows sustainable investments perform better than the overall infrastructure sector.
Evidence on the relationship between ESG impact and financial performance is scarce. However, preliminary evidence shows that in the last 10 years, wind and solar equities have generated a higher return than listed and unlisted infrastructure equities.
