13 Jul 2017

European infrastructure finance: a stock-take

The report demonstrates the industry's active support for the European Commission’s recent initiatives on infrastructure. These include the recent revision of the infrastructure capital requirements in the context of Solvency II and a potential extension of the European Fund for Strategic Investments, currently being discussed, which could extend the initial EUR 315bn fund to EUR 500bn for jobs and growth and further leverages private sector investment.

You can download a copy of the Guide here and its accompanying press release here.

This report is a review of the state of infrastructure financing, investment and related initiatives in Europe, and an assessment of how to further advance and encourage private sector finance for infrastructure projects. The review was undertaken as a follow up to the ‘AFME-ICMA Guide to Infrastructure Financing’ published by the two associations in June 2015.

Studies show that a substantial increase on current investment levels in infrastructure is required to support future expected economic growth. Since the financial crisis, institutional investors have substantially increased their investment in infrastructure, but this welcome trend requires further encouragement, which may be achieved via a mix of financial instruments, innovative financing solutions and familiarity with the different risk and return profiles of individual projects. The review highlights some of the measures which could help to generate a positive environment to boost private sector infrastructure investment, including:

  • understanding, structuring and allocating risk, including country-specific risk
  • the importance of coherent and trusted legal frameworks to ensure long-term regulatory and political stability, and the equal treatment of foreign, local and institutional investors
  • developing expertise and standardisation of best practice
  • more and better-quality disclosure of information on infrastructure projects and on ongoing infrastructure debt performance
  • a review of regulation to ensure that investing in infrastructure does not become punitive as against other asset classes

The Guide is part of several industry initiatives supporting the European Growth agenda, which include ‘Unlocking funding for European investment and growth’ co-written with Oliver Wyman, ‘Bridging the growth gap’, co-written with The Boston Consulting Group (BCG), the AFME SME finance guide to support European SMEs ability to raise all types of finance, and the recent reports on‘The shortage of risk capital for Europe’s high-growth businesses’ and ‘Bridging to Brexit: Insights from European SMEs, Corporates and Investors’.