Market Research

Infrastructure Quarterly: Q1 2024

By: Tania Tsoneva and Jake Parker Allen

March 22, 2024 10 Minute Read Time

A close-up of a glass wall


An unusual year for infrastructure investors

As central banks strove to curb inflation with a rapid tightening regime, dislocations in valuation expectations were felt across real assets in 2023. Private infrastructure market indices reflected stable performance with a slight moderation, while listed infrastructure felt the pressure of once-in-a-generation interest rate hikes and narrow investor focus on large technology and AI-enabling companies; the “Magnificent Seven.” Infrastructure fundraising fell to an eight-year low. A rise in greenfield deals partially offset a freefall in M&A. Looking forward, we believe the macro environment is more supportive of the asset class as moderating interest rates improve valuation clarity and robust policy support continues to enhance the investment case for infrastructure.

In this edition of the Infrastructure Quarterly, we provide a 2023 year in review of infrastructure markets and discuss our outlook for the sector, fundraising and deals. We also feature a Q&A on sustainability with GRESB, where we explore insights and findings from GRESB’s annual Infrastructure Asset & Fund Assessments.

Market Performance

Stable unlisted infrastructure performance

Despite challenging macroeconomic conditions and weakness in the listed markets, unlisted infrastructure continues to exhibit steady return performance (Figure 1). Returns moderated into single digits in 2023 as the asset class absorbed the impact of higher interest rates, though remained the clear outperformer against bonds while retaining the similar characteristics of low-risk, durable cash flows. As we look to 2024, we expect a similarly stable return profile underpinned by a more favorable economic growth outlook. Focusing on capital values and using data from the marked-to-market unlisted index provider EDHECinfra, we see that negative interest rate impacts over the last three years were largely offset by the growth in inflation-linked revenues (Figure 2).

Listed infrastructure, on the other hand, underperformed in 2023. Defensive infrastructure sectors such as utilities and wireless towers were largely shunned by investors as equity market focus shifted to large-cap technology and artificial intelligence-enabling companies. The macro outlook in 2024 is more supportive of listed infrastructure due to slower global growth, above-trend inflation and interest rate stabilization, which have historically catalyzed listed infrastructure performance (see The Starting Line: Listed Infrastructure ready to run). The 2023 Q4 performance statistics provided an early indication of what is to come; the intersection of discounted valuations and dovish interest rate sentiment drove the FTSE Global Core Infrastructure 50/50 index to an 11.1% quarterly return, led by a surge across communications, transport and utilities.

Figure 1: Infrastructure, bonds and equities annualized total returns (listed infrastructure, bonds and equities as of Q4 2023; unlisted as of Q3 2023)

Source: Refinitiv, Factset. Unlisted infrastructure: Cambridge Associates Global Infrastructure Index in USD, net of fees as of Q3 2023. Listed infrastructure: FTSE Global Core Infrastructure 50/50 Index in USD as of Q4 2023. Bonds: Bloomberg Global Aggregate Fixed Income Index in USD as of Q4 2023. Equities: MSCI World Index in USD as of Q4 2023. For illustrative purposes only. Current market conditions differ from prior market conditions; including during prior periods of stress and dislocation. There can be no assurance any prior trends will continue.

Figure 2: Change in net asset value (NAV) of global unlisted infrastructure due to changes in discount cash flow (DCF) components, last one-, three- and five-year averages

Source: EDHECInfra as of February 21, 2024. Data as of January 31, 2024. For illustrative purposes only. Current market conditions differ from prior market conditions; including during prior periods of stress and dislocation. There can be no assurance any prior trends will continue.


Infrastructure fundraising falls to an eight-year low

Infrastructure funds raised $90 billion in 2023, a 49% drop year-over-year and the lowest annual total since 2015 (Figure 3). The slowdown, felt across alternative asset classes – private equity, real estate, infrastructure and private debt – resulted in double-digit annual declines in capital raised, according to Preqin data.

Infrastructure fundraising faced two key roadblocks last year. Buyers and sellers were met with uncertainty around the trajectory and impact of higher interest rates on asset values and discount rate assumptions. In addition, the denominator effect was at play as steady infrastructure valuations began to overweight private market allocations in institutional investor portfolios following 2022 public stock declines. The 2024 outlook is more positive, with interest rate stabilization and possible cuts, along with strong public market performance as compared with the past year easing the denominator effect.

Figure 3: Historical infrastructure fundraising, value ($ billions) and volume

Source: Preqin, February 2024.

Despite the slowdown, records were broken: capital raised in the fourth quarter surpassed $69 billion, a new quarterly best, while Brookfield Infrastructure Fund V became the largest infrastructure fund ever raised at $28 billion. With $34 billion raised across equity and debt flagships, Brookfield accounted for over one third of capital raised in 2023. Consolidation continues to be a major theme in the asset class; average fund sizes have grown over 55% since 2019 to surpass $1 billion in 2022 and 2023 (Preqin). Commitment sizes are also expanding, despite challenging market conditions. Whereas the largest fund commitment in 2022 reached $400 million, 2023 saw a $2 billion commitment to Brookfield’s Global Transition Fund II from ALTÉRRA, the UAE’s recently launched climate fund, along with several other $500 million-plus pledges (Infrastructure Investor).

Other notable fundraising trends include the continued dominance of North American and European-focused funds (95% of total capital raised), and strategy divergence. The largest annual declines in final close values were seen at both ends of the risk spectrum in core and value-add strategies, while debt funds registered 15% year-over-year growth (Figure 4). Fundraising targets and hard caps were seldom achieved last year outside of two sectors: debt and the energy transition.

Figure 4: Infrastructure fundraising by strategy (% of total capital raised)

Source: Preqin, February 2024.


M&A collapse, greenfield resurgence

Unlisted infrastructure dealmaking was a similar story to fundraising in 2023. Deals fell 22% in value and 14% in volume year-over-year, with annual declines in every major sector and region bar North America (Infralogic). Not unique to infrastructure, capital markets experienced a broad M&A slowdown; global private equity and venture capital deals were down 35%, U.S. REIT M&A fell over 50%, and European real estate M&A hit a 13-year low (S&P Global Market Intelligence).

Infrastructure was not immune; M&A transactions dropped 40% to $336 billion (Infralogic). Uncertainty around the trajectory of rapid interest rate hikes underpinned the slowdown. Inflation elevated operational and development costs, while interest rate levels unseen for almost two decades drove up the cost of financing and created a disconnect between buyer and seller valuation expectations. As inflation cools and greater visibility on where peak rates settle improves confidence in real asset pricing , we expect dealmaking to pick up in 2024.

Despite cost challenges, greenfield development rose 16% to $347 billion in 2023, a positive indicator of growth in the asset class. Decarbonization and energy security is fueling that growth; the top five project finance deals were all linked to the energy transition. These included SunZia’s 3.5GW wind and transmission project across the Southwestern United States, three $9+ billion liquefied natural gas (LNG) export terminal developments also in the U.S., and Neom’s $8.4 billion green ammonia facility in Saudi Arabia. Overall deal flow was similarly renewables-driven, in particular by solar PV at $113 billion, along with a doubling in value of offshore wind deals. Smaller, more nascent renewable technologies such as battery storage and nuclear also experienced a sizable expansion in deals in the year following the passage of the Inflation Reduction Act. All values are based on Infralogic data.

Figure 5a: Private infrastructure dealmaking, values by deal type ($ billions)

Source: Infralogic as of February 3, 2024.

Figure 5b: Private infrastructure dealmaking, market share by sector (%)

Source: Infralogic as of February 3, 2024.

Sector Insights

Power and utilities

Record rate case requests (Figure 6), growing spending on power grid infrastructure, and strategic gas and renewable asset sales characterized the utilities sector in 2023. As the industry prepares for as much as a tripling of electricity demand by 2050, priorities are focused on addressing burgeoning load forecasts while reducing leverage. This is a challenging task in a decade of structurally higher inflation, interest rates and labor costs.

Key themes to watch within the power generation and utilities sector in 2024 include costlier gas supply, government focus on energy affordability and heavy capital expenditures on grids and renewables. Rapid growth of renewables generation will likely weigh on profitability via lower power prices and increase the need for battery storage and other reliability technologies.

Public utility stocks experienced their second worst year on record in 2023, behind 2008. The S&P Utilities Select Sector Index ended the year down by over 10%, despite a Q4 resurgence felt across listed infrastructure sectors at the prospect of early interest rate cuts and attractive valuations. We expect interest rate decisions and defensive vs growth investor sentiment to continue to influence the near-term performance of utilities.

Average allowed returns on equity (ROE) are ticking higher as required capital expenditures (capex) intensify, though rising cash flow deficits are pressuring credit quality across the sector (S&P). Leverage management strategies are critical with U.S. five-year electricity demand forecasts nearly doubling throughout 2023 (GridStrategies) and a similar story in Europe.

Figure 6: Record rate changes requested by U.S. investor-owned energy utilities, last 20 years ($ billions)

Source: Regulatory Research Associates, a group within S&P Global Commodity Insights. Data compiled January 23, 2024.


2023 proved a challenging year for market participants in renewables. Positively, global renewable capacity climbed 50% from 2022, policy expansion created significant development opportunities, and key macro hurdles, namely inflation and supply chain dislocations, eased. Renewable power purchase agreement (PPA) prices have trended higher in the U.S. as big tech drives corporate demand, and have fallen in Europe from 2022 peaks but remain above pre-pandemic levels. Yet project economics and returns were pressured by elevated inflation, complex regulatory processes and high funding costs. Stock prices of numerous publicly traded solar companies ended the year with double digit declines, while developers in the U.S. and U.K. cancelled or postponed ~15 GW of offshore wind projects amid soaring investment costs and impairments (IEA).

In spite of macro challenges, renewables remained the driving force behind unlisted infrastructure deals and fundraising. Renewables were the only sector besides infrastructure debt to meet hard cap fundraising targets while registering the lowest deal value decline, according to Infralogic data. Smaller subsectors within the space, particularly battery storage and nuclear, recorded strong growth in deals across regions. Dampened M&A shifted to more credit and joint venture-based strategies in the high interest rate environment. As capital costs recede across the sector this year, deal activity is likely to increase. Renewables are the most favored sector within infrastructure LP allocations in 2024 (Infrastructure Investor).

To achieve the COP28 target of tripling global renewable capacity by 2030, government policy stands as the largest incentive and potential roadblock. The International Energy Agency (IEA) recently revised 2027 global renewable capacity forecasts up by 33%, or 728 GW, from December 2022 as a result of current and expected policies. Country trends vary, with China accounting for the majority of upward revisions (Figure 7). Capacity forecasts are heavily influenced by political agendas, and in a year where more than half the world will hold an election, 2024 is a consequential one. Politics within the U.S., Spain and Sweden are classified as severely polarized by the Edelman Trust Institute, while the U.K., France, Italy, Germany and the Netherlands are viewed as close to severely polarized. Polarization increases the probability of distinctly different policies being adopted post-election.

Figure 7: Renewable electricity capacity forecast revisions by country, 2023-2027

Source: IEA, Renewable electricity capacity forecast revisions by country, 2023-2027. ASEAN = Association of Southeast Asian Nations. Revisions refer to the difference between 2023-2027 forecasts from Renewables 2023 and Renewables 2022 reports.


Continued post-pandemic travel recovery and the normalization of supply chains produced a solid year across transportation infrastructure. Airports saw revenues rebound as industry-wide air traffic grew 37% over 2022 to reach 94% of 2019 levels (Figure 8). Recovery was driven by domestic traffic, which surpassed pre-pandemic heights by mid-2023 (IATA). Asia Pacific airlines nearly doubled total passenger traffic year-over-year as China lifted travel restrictions, European passenger traffic grew 20% and North America travel climbed 15%. On the ground, toll roads experienced significant revenue growth in 2023 from inflation-linked toll increases and positive traffic trends.

At the tracks, destocking of high inventories over the past year as consumer spending shifted from goods to services will likely improve rail freight movement in 2024. As of early March 2024, U.K. rail passenger journeys recovered to 80% of pre-pandemic levels and the London Underground to 76% (U.K. government statistics), indicating a more permanent loss in volumes compared to roads. Public investment is also on the rise to increase the use of railway networks in reaching climate transition goals. We see ports as the most at-risk within the sector. Recent freight rate hikes from rerouting around the Red Sea have broadly surpassed operating costs, though container shipping supply is expected to significantly outweigh demand through 2025 and will remain a headwind to freight rates.

Figure 8: Revenue passenger kilometers (RPKs), annual growth and percent of 2019 levels as of December 2023

Source: International Air Transport Association (IATA) Sustainability and Economics, IATA Monthly Statistics, February 2024. IATA Air Passenger Market Analysis, December 2023.

In terms of investment activity, private transportation infrastructure recorded a substantial drop in annual deal values of over 50% to $132 billion (Infralogic). Risk aversion within tight lending markets was a key factor in transport’s slump. The slow year in deals could also be attributed to the natural moderation from peak 2022 levels, when several mega-deals – the Sydney Airport and Autostrade per I’Italia sales, and JFK Airport’s Terminal One development – inflated overall deal values.

The 2024 outlook is mixed. S&P Global expects global passenger traffic volumes to moderate as pandemic recovery winds down and global growth slows. Various airport, road and rail companies that deferred investment plans for financial flexibility during the pandemic are expected to resume projects at higher costs due to inflation and an expensive financing environment. Geopolitical tensions also pose risks to supply chains, most recently seen in the Red Sea shipping disruptions. Transportation infrastructure, however, remains a key beneficiary of decarbonization policy, reflected in the 68% growth of EV infrastructure deal values last year, and sits at the top of live deal rankings within Infralogic’s database at over $1.5 trillion.

Digital infrastructure

Data centers experienced an exceptional 2023 across private and listed markets. Record demand, historically low vacancies and power constraints are leading to rising rental rates and development yields for data center operators and developers alike. Generative AI has also become a powerful tailwind, boosting IT spending and amplifying power bottlenecks. AI demand is forecasted to grow by a 30% CAGR over the next five years and a generative AI-compatible data center requires 20-100 times more power than previously built facilities (Scotiabank). Cloud capex is subsequently expected to accelerate to ~16% in 2024 from 7% in 2023 as AI-related investments expand (Morgan Stanley). Growth projections were reflected in stock price performance last year. Using a blended average of leading operators as a sector proxy, data centers saw an average stock price surge of 38% in 2023 (Figure 9). Big tech had an even more impressive year (98%) while demand for Nvidia’s AI chips saw the company’s stock price swell by 239% (January 1 to December 31).

Figure 9: Cumulative stock price change of leading data center operators, big tech companies and Nvidia (rebased to 0 in January 2019, prices as of December 31 2023)

Source: Factset through December 31, 2023. Data reflects a blended stock price period average of leading data center operators and technology companies. Data centers: Equinix, Iron Mountain, Digital Realty and NextDC. Big tech: Meta, Google, Amazon, Microsoft.

Towers were a different story. Public tower companies trade closely with interest rates, given mostly fixed price escalators and often high debt requirements. Falling 5G capex from the Big Three wireless carriers – AT&T, T-Mobile and Verizon – drove slower leasing activity. Wireless capex budgets are set to decelerate by a further 8% in 2024 as cash flow preservation among carriers remains a priority and 5G buildouts moderate after years of heavy investment (Fitch Ratings). The outlook is thus mixed, since interest rate cuts in 2024 and 2025 will reduce the cost of capital for tower companies, while unrelenting growth in wireless traffic (30%-40% per year) necessitates ongoing network densification and supports leasing (Morgan Stanley). Weakening economic growth may also drive investor rotation into defensive, best-in-class business models, such as towers. Recent transactions of private tower portfolios have attracted high valuation multiples (20x+ EV/EBITDA) given strong fundamentals; contract visibility, high barriers to entry and supportive long-term demand trends.

Fiber investments in some jurisdictions have struggled with rollout and customer subscription growth. European fiber-to-the-home (FTTH) coverage experienced annual growth rates above 15% from 2015-2022; growth moderated into single-digits in 2023 amid challenges of overbuilds, higher development costs and servicing debt burdens with higher interest rates. Fiber coverage varies widely by country (Figure 10) with low rural penetration due to a reliance on public subsidies. A few large U.S. telecommunications and small fiber-to-the-home providers recently sought to extend debt maturities via distressed exchanges, and S&P Global Ratings expects defaults or subpar exchanges to rise in 2024 given cost challenges and worsening credit quality.

Figure 10: Total fiber-to-the-home (FTTH) coverage as a percentage of total households in Europe

Source: Fitch Ratings, European Commission, 2024.


In a challenging year of inflation, monetary policy tightening and slowdowns across alternative asset fundraising and deal flows, unlisted infrastructure performance proved stable. Looking to 2024, we see the macro environment as more supportive of the asset class. Structurally higher inflation generates revenue growth for a variety of infrastructure assets; robust policy support improves project economics; and moderating interest rates narrow the gap between buyer and seller expectations. As the impacts of tight monetary policy spread across economies, we believe the defensive, yielding nature of infrastructure assets are attractively exposed to the secular mega-trends of the energy transition and digitalization. We expect to see the continuation of infrastructure debt and higher yielding strategies generating interest within fundraising vehicles as rates remain high, the energy transition to keep driving project finance, and AI development to spur innovation within the evolving digital infrastructure sector.


In this edition of Infrastructure Quarterly, we speak with Fabio Schweinoster Manfroni, Infrastructure Associate at GRESB, about insights and findings from GRESB’s annual Infrastructure Asset & Fund Assessments.

Headshot of Fabio next to the GRESB logo

GRESB’s annual Infrastructure Asset & Fund Assessments contain valuable insights on the ESG performance of infrastructure assets. How is your framework evolving?

2024 will mark a year of notable changes at GRESB, with our standards continuing to evolve to address the most pressing ESG issues identified by the industry. Starting in April, we will introduce a new Infrastructure Development Asset Assessment aimed at evaluating the ESG performance of assets in the development phase, while the existing Infrastructure Fund and Asset Assessments will now capture more information on net zero, GHG emissions data coverage, verification/assurance, as well as climate-related opportunities. Looking further ahead, GRESB will focus on reducing the reporting burden, developing even better data quality, and continuing to prioritize critical sustainability issues like net zero and biodiversity. This approach reflects GRESB’s unwavering commitment to drive tangible, real-world performance improvements across real assets.

Physical climate risks are a key concern for infrastructure assets. What are your findings on the main risks?

Properly considering and incorporating physical climate risks in managing infrastructure is an ever more essential part of a sound investment strategy. Today, 88% of assets reporting to GRESB have a process in place for identifying physical risks that could have a material financial impact on the asset. Of these assets, 80% focus on identifying acute hazards such as flash floods (48%), river floods (41%), and storm surges (39%). Additionally, 76% of reporting assets also consider chronic stressors like heat stress (47%) and precipitation stress (43%) as material factors in their risk assessment.

How do physical climate risks translate to financial impacts and what can asset managers/investors do to mitigate?

2023 GRESB data shows that 78% of reporting assets have formal physical risk assessments in place. Among the risks identified through these processes, 67% are classified as direct impacts, with over half of these impacts linked to increased capital costs. Additionally, 80% of the GRESB Infrastructure Benchmark also identifies material indirect impacts to their assets, of which 49% relate to increased operating costs and 35% to elevated insurance premiums.

The data highlights the imperative for risk assessment and investment in infrastructure resilience. By embracing policies and measures that promote climate-resilient infrastructure, managers and investors can mitigate risks and reduce long-term costs associated with potential hazards and disruptions.

RM3.3 and RM3.4 Progression

Source: GRESB, Infrastructure Asset & Fund Assessments, February 2024. Ability to report on RM4.3 (Physical Risk identification) and RM4.4 (Physical risk impact assessment).