November 20, 2024 — Infrastructure is one of the fastest growing asset classes in institutional portfolios around the globe, but institutions in North America and the rest of the world are investing in the asset class for starkly different reasons. 
In the U.K. and Asia, institutions see investing in infrastructure as an opportunity to participate in powerful investment trends related to the transition to green energy and digitization, while also making a positive impact on the environment. In the U.S. and Canada, the attraction is more bottom-line oriented. 

“Institutions in North America are much less interested in environmental trends and much more interested in inflation and volatility protection for their portfolios,” says Mark Buckley, Global Head of Investment Management at Coalition Greenwich.

Infrastructure Boom
About 70% of the institutional investors participating in a recent study by Coalition Greenwich invest in infrastructure or plan to do so in the near future. Current investment is highest in Canada, Europe and Asia—only 52% of the U.S. institutions invest in or are considering the asset class. 

Study results suggests institutions across these regions are investing in infrastructure for dramatically different reasons. While all institutions participating acknowledge infrastructure’s ability to make portfolios more diversified and resilient to inflation and volatility, 54% of institutions in the U.K. and 75% of investors in Asia ex. Japan report one of their top reasons for investing in the asset class is the opportunity to participate in powerful trends such as energy transition and digitization. In the U.S., less than a third of infrastructure investors cite that opportunity as a reason to invest. In Canada, that share falls to approximately 15%. 

The ESG Divide
There is an even bigger divide between investors in the U.S. and Europe when it comes to questions of environment, social and governance. Almost 80% of investors in Continental Europe and 85% in the U.K. rank ESG criteria as “very” or “extremely” important in their infrastructure investment decisions. In the U.S., less than 15% of investors place that level of emphasis on ESG, and a full 40% of investors do not take sustainability issues into account at all when making decisions about how and where to invest in infrastructure. 

“Attitudes toward ESG investing have been diverging for several years between Europe and the U.S. and this research highlights the extent of the divide,” says Mark Buckley. “European infrastructure investors are looking to maximize both environmental impact and returns by centering their investment strategies around support for renewable energies and other ESG issues. Meanwhile, most U.S. investors are investing for investment factors, completely ambivalent to ESG.” 

2024 Highlights on Infrastructure Investing Trends includes insights on institutions’ approach to infrastructure investing, including private vs. listed infrastructure, infrastructure equity vs. debt, preferred vehicle (comingled fund, co-investments, direct investments, or separate accounts), and primary private infrastructure investment strategies, as well as data on overall usage/investment rates, investment goals and challenges.