Institutional investors are at the forefront of an infrastructure overhaul expected to be worth more than $100 trillion, which will be crucial for global energy transition plans, according to a report by IFM Investors.

It found over the next three decades, investments in infrastructure equity funding for renewable energy and climate change adaption methods will dominate the energy transition sector.

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Infrastructure assets’ underlying return streams are highly linked to regulatory or contractual frameworks, said the report, noting these assets have demonstrated resilience and an effectiveness as an inflation hedge.

The Australian superannuation market is credited as having been the first to move into infrastructure investment in the 1990s, followed by Canadian pension funds that invested in foreign infrastructure funds in the early 2000s. Although infrastructure assets are deemed as a standalone asset class in Australia and Canada, institutional investors based in Europe, Asia and the U.S. still place these opportunities within their portfolio of alternatives, the report noted.

“This first-mover advantage meant investors in [Canada and Australia] were able to gradually build up a dedicated infrastructure exposure, outside of a private markets or alternatives allocation. The growth in the sector has led to an increased maturity in the way assets are assessed and the risks taken on by investors.”

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