Sunday, June 16, 2024

2024 can be a huge year for private investment in infrastructure

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This – in a nutshell – is the macro environment facing infrastructure funds as they plan out their strategies for 2024 and beyond. And already, a number of themes are emerging that provide clear pointers to how things will play out.

One is that, with regard to investing towards the energy transition, funds are moving up the risk curve. In the past, they’ve focused mainly on “traditional” sustainable energy assets such as solar and wind farms. But now they’re increasingly expanding outside this comfort zone to target opportunities in adjacent areas supporting the transition, like electric vehicle (EV) charging networks.

A further theme? The ongoing broadening of the definition of infrastructure itself to include new asset classes with infrastructure-like characteristics. This is a shift that’s been underway for several years. But it’s now gaining momentum and critical mass, as funds increase their risk appetite and widen their horizons in search of the higher returns that investors are demanding.

As a result, funds are looking beyond their traditional hunting-ground of regulated utilities – water, electricity, gas, airports and so on – to target new and different assets with infrastructure-like attributes, such as mobile telecom towers, fibre networks and data centres. Much of this investment plays to the pervasive move towards digitisation, which often links in turn to the energy transition through impacts such as reduced need for physical transport.

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