As institutional investors decide where to allocate their capital on the fixed-income side of the ledger, private debt a once hugely popular asset class, is facing significant headwinds due to credit quality issues. At the same time, the infrastructure debt, a sub-strategy within private debt, may have retained and even increased its allure.
Control Risks provided insights on the diverging fortunes within private debt in Infrastructure Investor’s May 2026 cover story “Has private debt’s fall fuelled infrastructure debt’s rise?”
Trends driving infrastructure debt
Away from the headlines on private debt’s woes, we see many of our major clients quietly focusing on current and upcoming opportunities in the infrastructure debt arena.
There are four key structural reasons for their interest:
1. Locking in attractive interest rates. Rate decreases are a matter of when, not if, but recent geopolitical tensions have contributed to sustained higher rates. Infrastructure projects are long-duration and while future refinancing by project sponsors is a likely possibility, strong current rates can be locked in on paper now.
2. Accessing key current investment themes. AI’s seemingly insatiable demand for both data centre locations and the energy to power them has buttressed a re-rating in project finance, particularly in developed markets. In the US, renewable energy projects are enjoying significant foreign equity and debt investor interest at healthy valuations. This is due to scarcity value resulting from the confluence of the Trump administration’s efforts to squelch renewable energy generation projects with spiking data centre-linked power demand. In Europe, a recent joint announcement by SoftBank and Schneider Electric to develop €45 billion in hyperscale-level data centre capacity in northern France using nuclear power is already attracting strong lender interest. Meanwhile, in developed Asia, massive new projects in Korea and Taiwan are expected to be popular with debt funds.
3. Benefiting from public sector industrial policy. European governments’ interest in encouraging new infrastructure builds is a key factor, as are US investment tax shelters grandfathered in from the Biden administration. US pension investment giant Nuveen’s recent $500 million investment in a tax-advantaged debt financing facility for US clean and renewable energy is a relevant example. In Europe, the lower capitalisation requirement for insurance investors in infrastructure debt is a key encouraging factor, as are tax exemptions for green bonds and outright co-financing of infrastructure debt by European development finance institutions.
4. Enjoying safe harbour from private credit’s current problems. While evidence here is anecdotal, many observers believe that institutional investors are choosing to expand their infrastructure debt allocations at the expense of private credit, whose structural troubles have been well documented. Infrastructure debt enjoys the advantage of stronger sponsors, longer durations and generous collateral.
Notwithstanding all the above, each infrastructure project presents execution risks throughout all financing and regulatory aspects and physical delivery phases of the project cycle.
Whether focusing on debt or equity, investors would do well to review project operators’ plans and practices, beginning from a venture’s formation and moving on to: feasibility funding and planning; permitting; design and engineering; financial close; procurement; all construction phases; operation and maintenance; periodic refinancings; permit refreshes and scrutiny by new governments; and eventual mothballing.
Staying ahead of execution risk
Control Risks’ Built Environment and Infrastructure practice conduct full project-level execution-risk reviews for direct lenders and support debt fund investors in assessing fund managers’ risk review and management frameworks. These reviews identify planning, design and organisational weaknesses early, helping to strengthen project execution and reduce the risk of major issues.