Infrastructure Financing Instruments and Incentives

This taxonomy of instruments and incentives for infrastructure financing maps out the investment options available to private investors, and which instruments and incentives are available to attract private sector investment in infrastructure. While the taxonomy is meant to capture all forms of private infrastructure finance techniques, a focus of this work is to identify new and innovative financing instruments and risk mitigation techniques used to finance infrastructure assets.

The taxonomy provides the foundation for the identification of effective financing approaches, instruments, and vehicles that could broaden the financing options available for infrastructure projects and increase as well as diversify the investor base, potentially lowering the cost of funding and increasing the availability of financing in infrastructure sectors or regions where investment gaps might exist.

Part I of this report provides the foundation for the identification of effective financing approaches, instruments, and vehicles that could broaden the financing options available for infrastructure projects and increase as well as diversify the investor base, potentially lowering the cost of funding and increasing the availability of financing in infrastructure sectors or regions where investment gaps might exist.

• Mapping the risk mitigation mechanisms the public sector can use to encourage private sector financing of infrastructure, in particular targeting institutional investors (for example guarantees, grants, fiscal incentives, etc.). These actions may be aimed at fostering a more accommodating investment environment and/or at mitigating projectspecific risks to increase bankability. 
• Better understanding of market instruments and public support capable of aligning the risk profile of infrastructure assets with the risk tolerance of those involved in financing infrastructure.

Part II identifies the range of incentives and risk mitigation tools, both public and private, that can foster the mobilisation of financing for infrastructure, particularly those related to mitigating commercial risks.

• Mapping the full range of financial instruments available to facilitate investment in infrastructure, at different stages of the project life cycle and across the entire risk-return spectrum, focusing on new forms of equity and debt investment.
• Improving the understanding about opportunities and challenges of financing instruments alternative to traditional debt, in different economic and regulatory environments, and in light of on-going financial reforms.