Carnegie Endowment | The Future of Global Infrastructure Investment

What's New

The G7's Partnership for Global Infrastructure and Investment (PGI) aims to mobilize $600 billion in global infrastructure investment by 2027, directly competing with China's Belt and Road Initiative. The report emphasizes the need for substantial public sector involvement to derisk projects and build state capacity in the Global South. Proposed reforms to U.S. institutions, like the Development Finance Corporation (DFC) and Export-Import Bank (EXIM), include expanded funding limits and new financial tools to attract private capital.

Why It Matters

• Growing Investment Needs: Developing economies face a critical $2.5 trillion annual financing gap for infrastructure and climate adaptation.

• Private Capital Hesitation: Without significant public support, private equity investors will struggle to navigate risks such as currency volatility, project illiquidity, and political instability.

• Geopolitical Stakes: The PGI positions U.S.-backed investment as an alternative to China's Belt and Road Initiative, giving PE firms an opportunity to align with projects that have strategic significance and public support.

Key Drivers

1. Public Sector Intervention: Loan guarantees, concessional financing, and state-backed capital are critical to derisking and unlocking private investment in infrastructure.

2. Macroeconomic Constraints: High interest rates and limited foreign currency liquidity deter private capital, demanding creative solutions like IMF Special Drawing Rights (SDRs) and currency risk hedging.

3. Legislative Reforms: Proposed upgrades to the DFC and EXIM would expand project pipelines, financing caps, and equity flexibility, enabling greater co-investment opportunities.

4. Sustainability and Resilience: Investments targeting climate adaptation, energy transition, and supply chain resilience are key focal points for PGI, aligning with rising investor demand for sustainable assets.

By the Numbers

• $600 Billion: PGI’s target infrastructure investment by 2027.

• $60 Billion: U.S. private and public capital mobilized under PGI to date.

• 95% Decline: Year-on-year drop in private infrastructure fund capital raising in 2023, highlighting challenges in securing private investment.

• 18 Years: Average lead time for new mining projects, underscoring the need for patient, long-term capital.

• $50 Billion: China's new commitment to African energy transition projects, highlighting competitive pressure on U.S. initiatives.

The Bottom Line for Investors

Private equity firms must recognize that infrastructure investments in emerging markets are not fully viable without substantial public-sector support. Opportunities within PGI offer potential for high-impact, de-risked projects aligned with global decarbonization and geopolitical priorities. However, patience and alignment with state-backed mechanisms are critical to navigating illiquidity and macroeconomic risks. For PE investors, this is a moment to seek strategic co-investment partnerships with institutions like the DFC and EXIM while focusing on sectors like clean energy, supply chains, and digital infrastructure that promise growth underpinned by public guarantees.

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