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PAF Insights

Energy Transition


Infrastructure Investment in the Global Clean Economy

Executive Overview

Executive Overview

Green Capex will be the dominant driver of global infrastructure

  • Net Zero targets have emerged as a useful tool to indicate a country, company or asset manager’s commitment to climate action, uniquely focused on carbon emissions or equivalents

  • Around $6.0 Tn of annual investment is required in 2020s to meet Net Zero, Clean Water and Infrastructure objectives, up from legacy $3.2 Tn

  • China, US and Europe represent more than half of required investment for Net Zero by 2050 pathway, consistent with weighting of overall emissions

  • Meeting the Net Zero pathway objectives involves not only the expansion of power plant capacity, however also of transmission lines, batteries, charging infrastructure, and carbon capture/sequestration

Energy transition 2.0

  • Global oil prices have returned to pre-2014 levels, with wholesale electricity prices in Europe rising accordingly

  • However, not all assets will benefit if risk-conservative offtake structures are in place. Many merchant power developers, on the other hand, will reap the full upsides, with low-marginal-cost renewables investors seeing greater growth in free cash flows, having avoided the price effect in their cost base

  • This has prompted both political and regulatory reactions, and calls to cap energy suppliers’ prices in some regions could limit these gains, but still at up to three times more than some investors’ best-case scenarios

    Pressure on performances

    • Sustained strong performance by unlisted infrastructure means it has yet to witness the drops seen in public markets, or in other private capital asset classes. The index climbed to 353 in the first quarter of the year, up 61 points since Q1 2021

    • Longer-term, the asset class has a strong footing for expansion. US President Biden’s recent legislation may have global impact by locking a leading nation into a once-in-a-generation program of infrastructure investment

    • The energy sector’s dominance across manager portfolios will also support returns, with expectations that high energy prices will persist well beyond the next 12 months


    • It is forecasted that infrastructure will be the second-fastest growing in private capital in terms of AUM, with an expected 13.3% CAGR up to 2027, behind venture capital at 19.1% CAGR over the same period

    • Despite a jump in North America-focused fundraising, to 68% as of Q3 2022 it is expected Europe-focused fundraising to dominate by 2027

    • The need for both renewable and conventional energy investment in that region to deliver long-term energy security, if not independence, will help underpin the asset class’s future growth

    • In terms of renewable technologies, solar PV and wind power continue to dominate new investment in renewable energy. At the same time, water treatment facilities and/or e-recycling have emerged as a key additional choice of area for investment