Please wait . . .

Forgot password?

Climate Impact through infrastructure debt

< Back to Private Markets

Climate Impact through infrastructure debt at a glance

Infrastructure debt investing is crucial to the global transition towards sustainable energy and development. Investors contribute significantly to financing renewable energy installations, modernizing transportation infrastructure, and advancing other green projects. Through infrastructure debt investments, investors directly support critical initiatives driving the transition towards a sustainable future. Funds primarily invest in debt tranches, including senior and mezzanine, backed by infrastructure development projects such as project finance rather than corporate entities. This investment serves to fill financing gaps left by banks and government budgets. The projects typically involve monopolistic or semi-monopolistic sectors with regulated and inelastic demand, spanning industries like energy/utilities, transportation, telecommunications, and social infrastructure. These projects often have long-term horizons, reflected in closed-end fund maturities ranging from 10 to 20+ years. Investors perceive infrastructure investments as a reliable source of income and diversification, even though they are generally illiquid and long-dated. Due to their characteristics, these investments offer strong downside protection. Various strategies within infrastructure debt investing cater to different investor types, ranging from capital preservation to return enhancement and opportunistic approaches. The mix of debt seniority, credit quality, and project risk profile (whether new development or refurbishment) determines the return and risk characteristics.

See GPs fundraising on the platform

Asset class leaders

HSBC Asset Management
MetLife Investment Management

Why invest in Climate Impact through infrastructure debt

  • Income: Defensive source of income and diversification for investors.
  • Downside protection: Provide strong downside protection due to the characteristics of infrastructure projects, such as monopolistic or semi-monopolistic sectors, regulated demand, and inelasticity.
  • Duration: Typically features long-term horizons, aligning with closed-end fund maturities ranging from 10 to 20+ years, which can appeal to investors seeking stable, long-duration assets.
  • Risk/return: Various return and risk characteristics based on factors such as debt seniority, credit quality, and project risk profile, catering to different investor preferences and objectives.
  • Sustainability: Potential to contribute to sustainable development by financing critical initiatives like renewable energy, transportation modernization, and other green projects, thus aligning investment objectives with broader sustainable goals.

What are the main risks of Climate Impact through infrastructure debt

  • Geopolitical Risk
  • Credit Risk
  • Interest Rate Risk
  • Long-term illiquidity Risk
  • Construction and Operational Risk
  • Market Risk
  • Currency Risk
  • Environmental and Social Risk

What characterizes Climate Impact through infrastructure debt?

  • Industry/Sector: Infrastructure development projects encompass various sectors such as energy/utilities, transportation, telecommunications, and social infrastructure.
  • Instruments: Debt Tranches (Senior and Mezzanine) are utilized for financing, providing investors with different levels of risk and potential returns within the capital structure.
  • Maturity Profile: Typically Long-Term (10 to 20+ years), aligning with infrastructure projects' extended lifespan and revenue-generating potential.
  • Credit Quality: Typically lower/moderate or moderate/higher risk, but significantly depended on the project and borrower, reflecting the diverse range of projects and entities involved, each with its risk profile.
  • Interest Rate Risk: Typically floating rate, but depending on the structure and duration of instruments, influenced by market dynamics and the terms of the debt, with potential impacts on the valuation and cash flows of investments.
  • Borrower Size: Varied, including Government Entities, Corporations, and Special Purpose Vehicles (SPVs), representing a diverse range of entities responsible for financing and executing infrastructure projects.
  • ESG Impact: Significant, with opportunities to support sustainable development and renewable energy initiatives, but also facing risks related to environmental and social factors, highlighting the dual role of infrastructure debt in contributing to positive environmental and social outcomes while navigating associated risks.

Manager Q&A

Question 1. How can investing in infrastructure debt contribute towards the transition to net zero?


HSBC Asset Management

Infrastructure is responsible for the majority of greenhouse gas emissions worldwide, estimated at c.80% of total emissions (Source: Infrastructure for Climate Action report - UNOPS, UNEP and University of Oxford), with a large portion associated to energy, buildings and transport. 

Infrastructure debt has a critical role to play given the massive investment required for the transition to net zero, complementing sponsors and government funding. Through the asset class, institutional investors potentiate the transition to net zero while continuing to seek the long term and stable returns associated with the infrastructure sector. However, risk tolerance and/or regulatory constraints may impact investor demand early on for some of the new sectors and technologies that will be required for the transition. Credit risk underwriting capabilities and the ability to structure robust financing terms are determinant for portfolio performance as sector range and risk appetite expand to meet the investment needs associated with the transition to net zero.



The infrastructure sector is the backbone of the green transition. Transforming our economies to achieve net zero emissions require a massive overhaul of infrastructure. The "Green Transition" theme will likely dominate the European infrastructure market for decades to come, addressing critical environmental issues like climate change and the shift to zero-carbon operations. Additionally, it will support the process to become energy independent. 

Major infrastructure debt megatrends, like the energy transition, and decarbonized industry and mobility, are fuelling this transformation. The energy transition encompasses investments in renewable energy, energy efficiency, district heating, biofuels, battery storage and more – all areas where debt financing plays a crucial role. Decarbonized mobility, meanwhile, includes both established sectors like rolling stock leasing and fleet electrification, and emerging areas like EV charging, gigafactories and smart mobility. These trends highlight the critical importance of infrastructure debt financing in achieving carbon neutrality.


MEAG – A Company of Munich RE 

The transition to Net Zero will require solutions from across the investment spectrum including those built from Infrastructure Debt. Projects financed in this sector are, generally considered, to be of essential importance for the local economy – e.g., power grids, public transport, etc. To that end, Infrastructure Debt can play a crucial role in decarbonizing economies and societies. 

MEAG strives to identify investment opportunities that aim to promote the use of technologies for avoiding GHG emissions within the defined risk-return levels. MEAG’s dedicated Infrastructure Debt Team seeks out – among others – projects built to finance this transition in the form of renewable energy solutions. Projects designed to produce renewable energy or the exploration of new technologies that could, to the extent feasible, in the future enable carbon-free energy production (e.g. hydrogen) and services inducing significantly less emissions (e.g. electric public transport) may help in the pursuit of replacing traditional, carbon emitting facilities and assets – and ultimately, contribute to Net Zero transformation. 



Question 2. To what extent does following a climate impact strategy impact returns for an infrastructure debt portfolio?



We acknowledge concentration risk in sector-specific climate strategies, favouring diversification. However, we believe climate assets can deliver strong returns without dragging on performance. This requires robust origination capabilities to capture the full spectrum of opportunities, with the objective to invest in the most attractive deals selectively and proactively.

Distinguishing between markets and sectors is crucial, as is identifying where in the capital stack risk-adjusted returns are optimised. In some established, oversubscribed markets in Europe, established sectors such opco level financing of wind and solar projects does not deliver attractive credit margins to investors. In such cases, we explore alternative means of gaining the exposure to the asset class such as investing in a structured and protective manner at holdco or corporate level. Furthermore, we see an emergent new frontier of climate impact markets, including for example battery storage, EV charging, gigafactories, carbon capture and sequestration, and hydrogen where risk-adjusted returns remain compelling as investors are properly compensated for the underlying complexity.


HSBC Asset Management

There is the misconception that climate impact investing coincides with concessionary returns. Many of the sectors crucial for the mitigation and adaptation to climate change – such as climate technologies, electrification, energy storage, clean fuels, CCUS, etc. – are associated with higher financial returns. Institutional debt investors typically have limited appetite for technology risk and require robust business cases and revenue models, backed by strong offtake contracts, to ensure attractive risk-adjusted returns that are key for continued investor interest for the asset class. Higher returns may be possible through geographical and sector diversification, as well as by targeting the less crowded mid-market investment space.


MEAG – A Company of Munich RE 

At the asset level, investing in new technologies (e.g., EV charging, hydrogen, synthetic fuels, circular economy, etc.) might and very often means assuming more risk (e.g., merchant or market) – resulting in opportunities aligned with high yield or equity-like financing. At MEAG, we find that investment into specific assets may result in slightly lower credit margins along the achievement of specific Environmental, Social, and Governance (‘ESG’) criteria. Importantly, however, the impact on the absolute return of an individual infrastructure debt investment can be more or less negligible (3-5 basis points p.a.). 

At the mandate level, the investment universe of an infrastructure debt portfolio following ESG objectives may be more limited in contrast to an asset universe following traditional energy or oil and gas-related investments. Ultimately, the scope and resulting impact of any strategy with an ESG objective including climate-oriented strategies will range line with client, mandate and investment guidelines. As expectations and requirements evolve, MEAG offers a dedicated Infrastructure Debt Team to continuously evaluate across the spectrum of investment opportunities in line with our client’s goals and objectives. 


Question 3. How do you ensure you find the most attractive infrastructure debt opportunities in the market?


HSBC Asset Management

Having access to a broad origination platform and established relationships in the market are key to being able to source attractive infrastructure debt opportunities. Opportunities can include:

  • Bilaterals: directly originated by the fund, these loans will typically be higher yielding loans, with tighter covenants, with the possibility for repeat business as the team build on existing relationships.
  • Mid-Market: typically with a single arranging bank or a small club of lenders.
  • Syndicated Loans: arranged by a group of banks, these loans are typically of significant size. 

Our approach at HSBC Asset Management is to leverage the footprint, network, and brand of the HSBC group to source opportunities whilst also originating opportunities globally from a variety of different sources (such as banks, advisors, sponsors) and across several markets. 



We source deals through a constant dialogue with the market and involve all members of our very diverse investment team which includes more than 10 nationalities and provides us with a vast local network of sponsors with unique access to the European infrastructure financing pipeline, while breadth of sector and asset class experience supports rapid identification of priority transactions and sustained deployment.

Our ability to offer large tickets and experienced deal teams affords Infranity a privileged negotiation position, enabling us to offer single lender solutions to middle market players or be part of a small club of lead lenders on larger transactions. This typically means more access to fees and more influence in structuring the transaction.

Overall, we originate over 400 investment opportunities per year and typically invest in c.20 transactions, as we focus on selecting only the most suitable and attractive transactions for each of our vehicles. 


MEAG – A Company of Munich RE 

For more than a decade, MEAG has successfully established itself as one of the leading Infrastructure Debt providers in the European market. We believe our people are key to our performance. 

Our experts offer an established and extensive network of sponsors, banks and advisers built to evaluate the vast majority of European Infrastructure Debt opportunities in the market. Together, our dedicated MEAG Infrastructure Debt Team reviews hundreds of financing transactions each year. Our firm size and presence in the infrastructure market allow us to negotiate effectively. And, in arranging for or providing bilateral financing solutions for the majority of our deals, MEAG has designed a process that allows us to generate superior returns and attractive allocations for our investors. 


HSBC Asset Management

Unlocking value for investors through infrastructure debt

Download Whitepaper

Get free access today

Institutional Investor

Register as an investor or consultant and get access to our entire global network of asset managers and their products.

Sign up for free

Asset Manager or GP

List your funds for free in the GFS investment database (Open Ended Funds) or with our forward calendar (Closed Ended Funds) platform today.

Register here