The latest monthly report from the Amsterdam-based consultancy shows growth of more than 10% in both the number of infrastructure impact funds on its database and the amount of capital raised by them over the last year.
The number of infrastructure impact funds and the collective size of their assets has grown over the last year, despite challenging market conditions for the infrastructure market in general, according to the latest impact report from Phenix Capital Group.
The Dutch-based investment consultancy said the number of infrastructure funds mapped on its database grew by 10.9% to 357, compared to the last impact report published in August 2023. This also represents growth of over 200% since the database was created in 2015. The 357 funds are managed by a total of 174 fund managers.
Almost 40% of the funds (137) are open for investment and have a total target size of €111bn. Overall capital raised towards infrastructure impact funds in the database totals €150bn, a rise of 11% since the 2023 report.
“Part of the driver for the growth in infrastructure as an impact asset class is that infrastructure development plays a key role in achieving nearly all of the UN’s Sustainable Development Goals with some 72% of the SDG targets linked to infrastructure development,” Phenix said in the report.
However, the consultancy noted that the assets are still not necessarily in the places where they are needed most. Only 65 of the funds in the database are focused on the developing world, with the other 251 funds oriented towards the developed world – a similar split in share to that seen in the August 2023 report.
“Climate-related disasters can lead to widespread infrastructure failure and damage, which disproportionately impacts developing countries, making climate resilient infrastructure planning and decision-making now an essential part of governments’ duty,” Phenix said.
Mixed picture on support
In terms of incentives for investment around the world, Phenix reported a mixed picture.
On one hand, initiatives to incentivise green infrastructure development such as the US Inflation Reduction Act, the European Union’s Green Deal, and the green infrastructure plans and climate resilience policies of other smaller, but influential economies such as Malaysia and Singapore are helpful to the sector. But, on the other hand, wavering support for energy transition programmes in the face of economic headwinds and a cost-of-living crisis in countries such as the UK are keeping opportunities in check there.
The development focus remains strongly on SDG 7, which calls for “affordable, reliable, sustainable and modern energy for all” by 2030. There are 322 funds on the Phenix database focusing on SDG 7, followed by SDG 9 on innovation and infrastructure (75 funds) and SDG 11 on sustainable cities and communities (70 funds). Phenix noted what it described as an “interesting change” in the attention being directed towards SDG 13 on climate action, with a 60% rise in the number of infrastructure funds saying they are targeting that.
Foundations account for the largest segment of those investing in infrastructure funds, making up 91 (19%) of a total of 463 institutional investors on the database. Funds of funds are the second largest investor group, comprising 11% of allocators, followed by banks (10%) and pension funds (9%).
Differing regional priorities
As to be expected, global and developed markets and emerging markets have different priorities in terms of some impact metrics selected.
Net-Zero aligned metrics are the priority for 59 funds focused on the developed and global markets, compared to 56 in emerging markets. But the difference is more acute in social metrics, which target poverty, education, inequality. In emerging markets 135 infrastructure funds prioritise this impact metric, while only 47 of the funds focused on the developed and global markets have this as a priority. Environment metrics are a focus in 51 developed and global market funds, compared to 44 for emerging market funds.
The database numbers suggest a buoyant short-term outlook in terms of investment opportunities, with a 75% growth in the number of new funds coming to the market, compared to 2023.
Phenix highlighted two of the funds to emerge over the last year. Alexander Forbes Investments’ AF Infrastructure Impact Fund-of-Funds, launched in August 2024, is focused on South Africa’s infrastructure needs, including renewable energy, roads, railways and public health facilities. The fund has a target size of R5bn (€252m) and is due to close at the end of 2024. Phenix noted the launch is taking advantage of a South African government move to permit South African pension funds to invest up to 45% in infrastructure.
The other is the BNP Paribas Climate Impact Infrastructure Debt fund, managed by BNPP AM’s Private Assets division. Launched in December 2023, the strategy is focused on financing renewable energy, clean mobility and the circular economy, including expanding sectors such as batteries, hydrogen and carbon capture. The Article 9 fund is targeting €500m-€750m from institutional investors.
