Investing in the energy transition through infrastructure debt

How does infrastructure debt compare to other forms of private debt?

Infrastructure debt typically has long-term, predictable, and recurrent cash flows that can provide higher visibility for debt investors. The debt can be structured to include additional covenants and protections, within a comprehensive security package as collateral, to preserve capital.

Default ratios of infrastructure debt have been historically very low, while recovery rates are relatively high compared to other forms of private debt. At the same time, credit spread and therefore yields may be very attractive relative to the risk profile. Our view is that a senior infrastructure debt strategy can offer a complexity premium of 70bps over corporate lending. Regulatory frameworks can also be favorable to infrastructure debt. For instance, Solvency-II Infra may enable insurance companies to benefit from a lower ‘cost of capital’, while the SFDR provides incentives to invest in assets that have measurable impact and help drive the energy transition.

How should infrastructure debt managers source deals?

Sourcing deals directly from industrial and financial sponsors with whom they have fostered close relationships, and structuring debt instruments to be within the risk profiles of the mandates granted by investors is one good way to uncover deals. When proprietary investment opportunities are sourced earlier than competitors, the manager can influence pricing (top-end credit spreads), covenant protection, and potentially the yield that is returned to investors.

Anticipating trends is not about taking additional risks but having the skills to identify and mitigate them. This has allowed us to source and structure assets in spaces where we were early movers, enabling us to mitigate risks more efficiently and size the debt more reasonably. Having senior team members who have worked for industrial sponsors is helpful as they can take a sound view alongside consultants during due diligence.

BRIDGE-IV Senior was the first European debt fund to be granted the Greenfin label. Since this fund, all BRIDGE funds have been at least SFDR Article 8-compliant or above. The BRIDGE platform offers three distinct strategies with different risk profiles: Senior/IG (BBB), Yield Plus (junior/BB/BB+) and Yield Plus Growth (BB/BB-), and has so far gathered $7.5bn across all vintages to date. We are currently fundraising for our sixth fund, BRIDGE VI, which offers a mix of commingled funds and managed accounts. It invests in assets under construction (greenfield) or in operation (brownfield).

How should fund managers mitigate investor concerns in today’s volatile climate?

Experience and cautiousness are important characteristics. The safest approach is to be almost paranoid – always assume anything can happen and build strong protections into your deals accordingly.

Our team relies on over 30 years of experience, discipline, and proactive management to anticipate any credit matters and manage them efficiently through strong documentation. Long-term relationships with sponsors are key.

As ESG regulations evolve, we also proactively embed ESG principles to structure our products and measure impact. When SFDR came into play in 2021, BRIDGE funds were already articulate with Article 8 and ESG-compliant.

About
Jean-Francis Dusch is CEO of Edmond de Rothschild (UK), Edmond de Rothschild’s Global Head of Infrastructure & Structured Finance, and CIO of the firm’s Infrastructure Debt platform (BRIDGE). He is a member of the Investment Committee and sits on the board of the GP.

This article originally appeared in Private Debt Q2 2025: Preqin Quarterly Update.

_{This is a sponsored opinion by Edmond de Rothschild. The views expressed are provided as of August 2025, do not constitute an endorsement, recommendation, or any other advice, and are subject to change. The following content does not necessarily reflect the views of BlackRock, Preqin, or any of its affiliates. Edmond de Rothschild is not affiliated with Preqin. Preqin received compensation from Edmond de Rothschild in exchange for publishing this content.}