Financing the $106 trillion infrastructure buildout

Software doesn’t work without hardware. For us to live increasingly virtual lives, more and more capital is required to build, repair and maintain the physical networks that underpin our online world. Global infrastructure investment into roads and bridges, electricity grids, clean energy facilities, semiconductor fabs and – above all – data centres, will add up to an astonishing $106 trillion by 2040, according to a  new report by McKinsey. 

Not only is this figure vast; it is still growing, as Massimiliano Battisti, Global Head of Infrastructure, Telecom, Media & Technology at Societe Generale, notes, “It’s easy to lose track of developments in this space. If you ask me in two years, the landscape will likely have evolved in ways we can't yet define, given the rapid expansion of digital infrastructure and data centres.” The sheer scale of the challenge, he points out, is matched only by its urgency.

The demand for infrastructure investment divides sharply both geographically and by sector. McKinsey estimates that two thirds of the $106 trillion total will be needed in Asia, driven by rapid urbanization, population growth, and industrial expansion. The United States and EMEA (Europe, Middle East, Africa) follow, with the US facing pressing needs in modernizing transport systems, energy grids, and digital connectivity. Europe’s needs are shaped by strict ESG standards, grid modernization, and ongoing maintenance requirements.

Sectorally, the landscape is shifting. Traditional infrastructure, such as roads, rails and buildings, remains a major component, but digital infrastructure is now at the forefront. Data centres, in particular, are experiencing explosive growth. A separate McKinsey study puts global investment into that sector alone at $7-8 trillion over the next four years. Hyperscalers like Microsoft and Amazon are today greenlighting projects costing tens of billions, that encompass multiple ‘shells’ spread across different campuses, connected with fibre and boasting dedicated on-site power plants.

Funds fill the financing gap

Historically, large-scale infrastructure was financed predominantly through public funding and bank project finance. As Hervé Le Corre, Deputy Head of Infrastructure, Telecom, Media & Technology at Societe Generale recalls: “More than 10 years ago, it was a quasi-fully banked market.” Banks provided long-term loans and held projects on their balance sheets. However, the Global Financial Crisis, subsequent regulatory changes, such as Basel III and IV, and mounting capital constraints have shifted this landscape. Banks now face higher costs and stricter liquidity requirements, making it more difficult to fund long-term infrastructure projects alone.

This retrenchment opened the door for new players. “With such huge demand, there has to be a complementary effort,” Mr. Battisti explains. “We need institutional investors, with their ability to tap different pools of liquidity and a competitive cost of capital, to fill the gap.” Pension funds and insurance companies, in particular, are able to match the long useful life of infrastructure assets to their own long-term liabilities.

The past decade has also seen a rapid rise in private-market infrastructure funds. Nearly every major private equity firm and asset manager now operates dedicated infrastructure vehicles. BlackRock, Blackstone, Brookfield, and others have become central to the market, offering a full spectrum of financing options: senior debt, mezzanine, quasi-equity, and more. These funds often have a lower cost of capital than banks and face lighter regulatory burdens.

The enduring role of banks

Banks are responding. Societe Generale, for example, has forged partnerships, notably with Canada’s Brookfield, which has over $1 trillion under management. “For Brookfield, and similar funds, we give visibility, we give access to our structuring capabilities,” says Mr. Le Corre. “We keep some of the debt on our books, but we are able to transfer what we structure today. This is partnership.” Such collaborations enable banks to underwrite larger deals and distribute risk, while funds benefit from banks’ expertise and client relationships.

The model is increasingly hybrid. Banks often provide construction loans, which are then refinanced through capital markets or sold to institutional investors once projects are stabilized. As Mr. Battisti notes, “The future of banks like Societe Generale is to connect, to act as a catalyst between demand and supply.”

Despite the rise of private funds, banks therefore remain indispensable. Their strengths lie in deep client relationships, market knowledge, and structuring expertise. “Banks still have the relationship with the client,” argues Mr. Battisti. “Institutional investors are more driven by returns. If things go bad, you need your banks close to you.” Mr. Le Corre adds: “We are able to structure deals, and even in tough times, we can find solutions. We have internal engineers to anticipate trends. I see us continuing to play a bigger and bigger role.”

Banks also play a critical advisory role, helping sponsors navigate project risk, regulatory barriers, and social challenges such as permitting and community acceptance. Infrastructure deals, after all, tend to be very complex and often involve governments: public money and guarantees remain vital for sectors like nuclear power, where private capital alone cannot bear the risk.

A new ecosystem

The infrastructure financing market is evolving into a complex ecosystem, where banks, institutional investors, private funds, and public entities each play complementary roles. “There is room for everyone,” Mr. Battisti observes. 

The scale of global demand should indeed ensure good returns for all players, but the future will depend on continued innovation in financing models, resilient partnerships, and disciplined risk management – historically, this is a cyclical market, and the current AI boom is starting to look like a bubble to some. Mr. Battisti counters, however, that even if future growth slows and individual players need to be restructured, all of the assets being built today will be required by someone in some form. 

In this new era, the challenge is not only to mobilize capital on the required scale but to ensure that infrastructure investment is sustainable, transparent, and aligned with long-term societal needs. The stakes -- economic growth, climate adaptation, and digital transformation -- could not be higher.