This is a critical decade for efforts to tackle global climate change and make progress towards the Sustainable Development Goals. The need to accelerate private investment in low-carbon and resilient critical infrastructure is more important than ever. To avoid sowing the seeds for future crises, we need to build back better and build back greener from the current combined health and economic crisis. An increasing focus on infrastructure development by both governments and institutional investors suggests there is growing momentum to scale up green infrastructure investment.

Energy, water, transport, health and other infrastructure are critical for socio-economic development. Yet, infrastructure suffers from an estimated annual investment gap of around USD 2.5-3 trillion globally. The on-going public health emergency is a telling reminder of the risks of underinvestment in infrastructure. Among other things, underinvestment compromises our ability to effectively respond to systemic challenges, like climate change.

Infrastructure investment is key to economic growth, meeting climate and sustainable development goals, and ensuring resilience to systemic challenges like the COVID-19 crisis and climate change. Yet, infrastructure investments globally fall USD 2.5 – 3 trillion short of estimated annual needs, and remain misaligned with climate mitigation and resilience goals. This report provides detailed empirical analysis of current infrastructure holdings by institutional investors, and explores in greater depth promising instruments to scale up green infrastructure investment.

Accelerating and shifting institutional investment in green infrastructure requires a clear and granular understanding of the current investment landscape. This chapter presents a comprehensive empirical mapping of infrastructure investment by institutional investors domiciled in OECD and G20 countries with a view to assess progress and provide a baseline for future tracking. Currently, institutional investors hold USD 1.04 trillion worth of infrastructure assets. USD 314 billion of these are identified as investments in green infrastructure. For asset owners, the bulk of their infrastructure investment occurs through unlisted funds and project-level equity or debt, suggesting an illiquidity preference. Asset managers predominantly use securitised products for their infrastructure allocations. Investors exhibit a preference towards assets located within their region of domicile. For cross-border holdings, which are relatively limited, the lion’s share is directed towards mature markets. This highlights the critical role of a domestic policy frameworks and an investment-grade enabling environment to attract and scale-up institutional investment.

The previous chapter 2 shows the relevance of unlisted funds and direct investments for asset owners and the importance of the securitised instruments YieldCos, infrastructure REITs and INVITs for asset managers to shift and scale up institutional investment in infrastructure. Based onthat mapping of current holdings, this chapter develops a framework to identify levers and policy priorities to shift and accelerate institutional investment in green infrastructure. Important levers exist for both investors and policymakers. Interventions to scale up investment through unlisted funds and direct investment should aim to target investment-decision making by asset owners. Interventions to scale-up investment through securitised instruments should aim to target investment-decision making by asset managers. Policymakers can employ a set of measures to accelerate institutional investment in green infrastructure. These include establishing an enabling policy environment, clarifying fiduciary duty, supporting institutional innovation, to active de-risking and public-private initiatives, and facilitating securitisation of infrastructure assets.