Identifying Legal Frameworks Impacting Institutional Investors’ Participation in Infrastructure Projects

Abstract

The rapid changes in the financial intermediation landscape have significantly impacted the sources of funding available for infrastructure projects. While commercial banks used to dominate the funding sources for project finance, their ability to provide the long-term financing needed for infrastructure projects has been restricted due to the new capital and liquidity requirements introduced by Basel III. This was counterbalanced by an increasing appetite for institutional investors to provide such financing.

The increasing participation from institutional investors in financing infrastructure projects with a proportionate decrease in the share of commercial banks to finance these projects are not unfolding at a consistent rate worldwide. While institutional investors have been significantly increasing their relative participation in financing infrastructure projects in advanced economies, their participation in financing such projects in emerging markets has been modest, both in absolute terms and relative to the overall private infrastructure investment in these jurisdictions. Funding sources remained concentrated with commercial banks in the emerging markets but have become more diversified in advanced economies.

The thesis assesses the impact of the legal frameworks applicable to institutional financing of infrastructure projects on the appetite of institutional investors to invest in these projects, and aims to identify the legal frameworks that can directly attract or deter such institutional investment in infrastructure projects. The analysis is conducted from supply, demand, and financing instruments perspectives. The supply-side analysis comprises the legal requirements impacting investment decisions by the key types of institutional investors from the lens of the regulations applicable to such investors. The demand-side analysis comprises the legal frameworks relating to an investment in the infrastructure asset classes in the country where the infrastructure asset is located. The financial instruments analysis comprises the tools through which institutional investors can channel their funds to infrastructure projects.

Date of Award	2022
Original language	English
Supervisor	Stephen Dow (Supervisor) & Volker Röben (Supervisor)