Private investment in infrastructure in primary markets occurs differently among subsectors, with investment over the past decade dominated by the energy and transport sectors. From 2010 to 2020, these two sectors alone accounted for 86% of total global private investment in infrastructure projects (57% energy and 29% transport). Meanwhile, there has been very little private capital flowing into the social infrastructure (6%), telecommunications (4%), and water and waste sectors (4%).
The energy sector has always attracted significant private investment. This may be due to shorter gestation periods of projects, lower construction risks, or greater revenue visibility thanks to power purchase agreements. On average over the past 10 years, 57% of private investment has gone to energy, with this participation even more marked in middle- and low-income countries (60%, compared with 55% in high-income countries).
Within the energy sector, private investment in renewables has grown significantly over the past decade to be the largest subsector of investment in 2020. Since 2010, it has more than doubled its share of private investment in infrastructure, from 21% to 47%. This is being driven by high-income countries, where the renewables share was 54% in 2020, compared with only 21% in middle- and low-income countries. Meanwhile, there has been a notable decline in non-renewables investment, falling from 24% of total private investment in infrastructure in 2010 to just 10% in 2020. Again, there is a stark difference between income groups, with the non-renewables share in high-income countries falling to 5% in 2020, compared with 26% share in middle- and low-income countries.
Despite the considerable expansion in renewables, there is still a concerning level of private capital flowing into fossil fuels. This is particularly alarming in a context where according to the IEA’s countries must halt all new investment into fossil fuels in order to meet net zero goals.
The transport sector has attracted the second largest amount of private investment in the past decade. However, its share has been declining, falling from 30% in 2010 to 20% in 2020. This decline has been driven by high-income countries given that in middle- and low-income countries the transport share of investment increased from 29% to 35%. However, 2020 saw a decline in both income groups, with the sector highly exposed to demand risk and declining business activity due to pandemic-related lockdowns and travel restrictions which are likely to have cancelled or delayed the closure of many deals already in the pipeline. Preliminary data suggests that this weakness in the transport sector continued into 2021.
Energy and transport subsectors have been dominating private investment in infrastructure. Strong and growing investor appetite for renewable energy projects is particularly encouraging. But there is still ample scope to ramp up investment in other infrastructure sectors, such as social, which are critical to meeting global infrastructure needs and emerging from the COVID-19 crisis.