This financing gap cannot be addressed through traditional sources of capital alone, which can be constrained by regulatory requirements. But from challenge comes opportunity; that capital shortfall leaves room for innovative new breeds of securitisations and private credit to step in and redefine the infrastructure investment landscape, specialists explained at a recent panel discussion headlining the Global ABS in Barcelona.

Financing the Foundations: Infrastructure & Project Finance

Rahel Haque, Sustainable Finance Advisory, Funds & Sponsors Lead - NatWest

Torsten Albrecht, Principal Investment Officer, Fixed Income & Structured Products - Asian Infrastructure Investment Bank (AIIB)

Nicholas Tan, Chief Executive Officer - Bayfront Infrastructure

Infrastructure represents an immense opportunity for both investors and policymakers globally. Last year alone, global infrastructure fundraising grew by 14%, showcasing heightened interest from asset managers and private capital providers. Notably, infrastructure equity investments create a multiplier effect, generating 4-5 times the funding requirement in infrastructure credit. The debt financing opportunity is vast, particularly given that equity funding typically accounts for only 20-30% of total project needs.

The United States and Europe are leading the charge, with the former projected to reach $900 billion in project finance investments in 2024—a 25% increase from the previous year. Europe, with an estimated $700 billion to be directed into key areas like LNG and energy storage, is also making strides. 

While Asia experienced a decline in infrastructure investment due to geopolitical uncertainty and high interest rates, there is encouraging momentum across renewable energy sectors, with the region deploying significant capital into clean projects. For example, China surpassed 70% clean energy investment and aims to scale this further, Nicholas pointed out.

Innovations in securitisation structures and private credit mechanisms are pivotal in accelerating infrastructure investment. Infrastructure Asset-Backed Securities (ABS) have emerged as powerful tools to mobilise capital. These products, often built around operational assets generating steady cash flows, offer diversification benefits and enhanced liquidity.

Private credit is another transformative force. Nearly 80% of project finance deals are currently bank-led, yet banks face capital constraints that limit their ability to support new projects. This opens the door for private debt funds, which can offer flexible capital pools tailored to varying risk profiles. These funds complement the role of banks, particularly in mobilising capital for projects that require bridging solutions during construction phases before assets become operational.

Despite the promising growth trajectory, several challenges remain. Infrastructure ABS typically require a maturation period of 3-4 years for assets to become securitisation-ready, which can be longer for complex projects like offshore wind or geothermal energy. The long development timelines for nuclear infrastructure further complicate thing further, demanding patience and sustained capital support.

Another challenge lies in achieving sufficient diversification across infrastructure securitised portfolios, which typically encompass 30-35 investments – maintaining alignment between managers and long-term cash flow generation is therefore critical. While the fundamental financing gap in the infrastructure space presents an opportunity, it also underscores the need for innovative models to scale investment effectively.

The growth of vehicles that enable banks to more efficiently deploy capital are essential here, too. In August 2024, for example, NatWest executed a £1.1bn own-asset securitisation deal with funding from Nuveen Infrastructure and Christofferson Robb & Company to allow the bank to secure risk-weighted asset (RWA) relief, recycle capital and increase lending to the renewable energy and energy transition sectors. 

Sustainability is no longer just a checkbox for investors; it is a cornerstone of value creation, Rahel said. The ESG lens has become integral to due diligence processes, particularly in segments like renewable energy, energy storage, and data centres.

“Investors are also increasingly focused on the supply chain dynamics of projects, ensuring that materials are ethically sourced and that manufacturing processes align with sustainability goals.”

Bayfront Infrastructure, for instance, has been pioneering sustainability tranches within infrastructure securitisation frameworks since 2021. These tranches align with International Capital Markets Authority (ICMA) standards, giving investors confidence around the use of proceeds. Furthermore, shorter development cycles for assets like data centres—often just 18 months to 2 years—make them attractive candidates for securitisation, driving quicker returns. The seemingly unstoppable growth of AI would suggest that demand for datacentres, and the energy solutions that power them, is only likely to continue its meteoric rise.

The transition towards cleaner energy continues to gain traction on a global level, with regions like Europe and the United States achieving clean energy investment ratios upwards of 65-73%. However, the picture is less optimistic in developing regions, where clean energy still constitutes less than 50% of total investments, according to AIIB figures. This disparity highlights the critical role of targeted financing structures, such as green bonds and sustainability-aligned securitisations, in bridging the gap between fossil fuels and renewables – particularly in emerging markets, where credit ratings and currency dynamics can be prohibitive for some investors.

The infrastructure investment landscape is evolving rapidly. Innovations like sustainability tranches, securitised offerings, and private credit mechanisms are scaling up, yet the question remains: how can we grow these asset classes further to address the infrastructure gap? Increasing familiarity among investors and establishing broader track records will be essential for driving participation, bringing new pockets of capital to bear on the economic ambitions of many, and reducing barriers to entry.

“As we look ahead, the interplay between technological advancements, sustainability commitments, and capital innovation will influence future ​infrastructure investment,” Rahel said.

With the right mechanisms in place, the financing gap can transform into an unprecedented opportunity—unlocking growth, resilience, and progress for generations to come.

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