Introduction to Infrastructure - Holocene Impact Capital

Investing in infrastructure

In this month’s edition of our Real Estate newsletter, we wanted to take a closer look at Infrastructure assets. As an asset class, infrastructure has been historically funded by governments, large banks, pension funds and specialist infrastructure funds. However, according to the Global Infrastructure Outlook, by 2040, globally we will face a $12 trillion shortfall between investment needs and funds available. As governments become more and more cash restricted, we believe that private capital will be a key driving force in the coming years and we have already seen new players, such as family offices and boutique investment firms entering the market.

If you missed previous installments of our Newsletter please proceed to our Insights page – you can access them here.

Benefits of investing in infrastructure

Starting-off, what are the benefits of investing in infrastructure?

First, infrastructure assets have been historically recession proof (which is particularly important in the current environment) – infrastructure assets are essential to each country and will continue to be used, regardless of the economic cycle. Additionally, revenue from infrastructure assets is typically linked to inflation – that means that returns are adjusted for the current rate of inflation.

Second, investors in infrastructure can take advantage of long-term, stable cash flow – majority of assets are tied to a contracted revenue, sometimes backed by the government.

Finally, historically, infrastructure assets are not correlated to other asset classes which means they can serve as a diversification tool.

Infrastructure with impact

At Holocene Impact Capital we specifically focus on financing assets with long-term potential and infrastructure certainly fits the bill. We then go step further and source transactions that, besides superior financial returns, provide positive impact to the local and wider economy. There are multiple ways in which infrastructure can create long lasting impact, such as:

Transition into a low-carbon environment – investment into infrastructure can help reduce carbon emission in the loan run. For example, improving the quality and coverage of public transportation leads to reducing carbon footprint from private vehicles. Another big aspect of low-carbon transition is moving towards renewable energy such as solar or wind. At HIC we are proud to work on several projects across four continents that aim to address that specific issue.
Providing access to employment opportunities – infrastructure can have a two-fold impact on creating additional opportunities for local communities. First, developers undertaking infrastructure projects can look to employ local contractors to assist with the project therefore increasing demand for work. Second, certain types of infrastructure projects (mainly projects supporting transportation) can affect communities in the long run by providing the ability to commute between urban and rural areas, increasing the supply of workers. This is specifically the case for emerging markets where a significant part of the workforce might be unable to work simply due to distance and difficulties with commuting.

How can HIC help?

We are aware that infrastructure might be a relatively new proposition for private capital and we are here to help our clients with navigating the market. HIC can work with project owners looking to raise funds for infrastructure projects as well as with private clients and investment companies seeking new investment opportunities.

For project owners looking to raise funds – at Holocene, we are perfectly placed to assist with raising funds for infrastructure projects. We are working with a variety of fund providers starting from international banks, through specialist debt and equity funds, to single-family offices and private clients. Across these funding sources we can arrange senior and junior debt as well as equity. We are currently involved in projects in Central America, Africa, Europe, and Asia Pacific.

For private clients looking to deploy their capital – we are proud to have access to multiple off-market opportunities that will allow our clients to invest in infrastructure projects. We will work with you to help identify the most competitive markets, asset types and projects. Our approach is “project-specific.” However we do work with multiple funds that can provide exposure across multiple assets.

If you would like to learn more about our offering and how we can help please get in touch at [email protected].