Photo by Maarten van den Heuvel
Infrastructure impact funds have experienced substantial growth in both the number and capital raised over the past year, according to the latest monthly report from Amsterdam-based consultancy Phenix Capital Group. Despite challenging market conditions, the number of infrastructure impact funds on the firm’s database grew by 10.9% to 357, compared to the previous report in August 2023. This marks a significant increase of over 200% since the database’s inception in 2015. These funds, managed by 174 fund managers, collectively highlight the growing interest and investment in sustainable infrastructure.
Phenix Capital’s report reveals that nearly 40% of these funds are currently open for investment, with a total target size of €111 billion. The total capital raised towards these infrastructure impact funds has reached €150 billion, representing an 11% increase since last year. This growth underscores the importance of infrastructure development in achieving the United Nations’ Sustainable Development Goals (SDGs), with about 72% of SDG targets linked to infrastructure.
However, the report also notes a discrepancy in the geographical distribution of these investments. Only 65 of the funds in the database are focused on the developing world, while the majority—251 funds—are directed towards developed markets. This uneven distribution raises concerns about the adequacy of infrastructure investments in regions that are most vulnerable to climate-related disasters. Phenix Capital emphasized the critical need for climate-resilient infrastructure, especially in developing countries, where the impact of infrastructure failure can be devastating.
Mixed Global Support for Green Infrastructure
Phenix Capital’s report presents a mixed picture regarding global support for green infrastructure initiatives. On one hand, robust policy frameworks such as the U.S. Inflation Reduction Act, the European Union’s Green Deal, and green infrastructure plans in countries like Malaysia and Singapore have bolstered the sector. On the other hand, wavering support for energy transition programs, particularly in the UK, due to economic headwinds and a cost-of-living crisis, is tempering growth in some regions.
The focus on SDG 7, which aims to provide “affordable, reliable, sustainable, and modern energy for all” by 2030, remains strong, with 322 funds targeting this goal. SDG 9 on innovation and infrastructure and SDG 11 on sustainable cities and communities also see significant attention, with 75 and 70 funds respectively. Interestingly, there has been a notable 60% increase in funds focusing on SDG 13, which addresses climate action, reflecting a growing emphasis on climate resilience.
Investment Trends and Emerging Funds
Foundations are the largest segment of investors in infrastructure funds, accounting for 19% of the total 463 institutional investors in the Phenix database. Funds of funds, banks, and pension funds also represent significant portions of the investor base.
Regional priorities differ in terms of impact metrics. In developed and global markets, net-zero alignment is a priority for 59 funds, compared to 56 in emerging markets. Social metrics, addressing issues such as poverty, education, and inequality, are prioritized by 135 funds in emerging markets, contrasting sharply with only 47 funds in developed markets focusing on these issues. Environmental metrics also see differing levels of focus, with 51 funds in developed markets compared to 44 in emerging markets.
Phenix Capital highlighted two notable funds launched over the past year. The Alexander Forbes Investments’ AF Infrastructure Impact Fund-of-Funds, launched in August 2024, focuses on South Africa’s infrastructure, targeting a range of sectors including renewable energy, transportation, and public health facilities. This fund is particularly significant as it takes advantage of a South African government policy allowing pension funds to allocate up to 45% of their investments in infrastructure.
Another significant launch is the BNP Paribas Climate Impact Infrastructure Debt fund, introduced in December 2023 by BNPP AM’s Private Assets division. This Article 9 fund is aimed at financing projects in renewable energy, clean mobility, and the circular economy, with a target size of €500 million to €750 million.
Outlook
The growth in infrastructure impact funds, as reflected in the Phenix Capital report, suggests a buoyant short-term outlook for investment opportunities, with a 75% increase in new funds compared to 2023. As infrastructure continues to play a critical role in global sustainability goals, the sector is likely to attract further attention and capital, particularly as investors seek to align with global development and climate resilience objectives. However, the need for more balanced geographic distribution and consistent policy support remains essential to address global infrastructure challenges effectively.