Michael Harrington article in IPE Reference Hub: The case for growth markets infrastructure

Michael Harrington, Partner and Chief Investment Officer at Actis, wrote an article in IPE making the case for growth markets infrastructure. To read the full article, click here, click “download publication” or read on below.

Disclaimer

Actis sponsored this article in IPE, which was published on 8 July 2025, and compensated IPE through this sponsorship.

The statements made by Michael Harrington herein regarding growth markets infrastructure investment opportunity and energy sector demand growth are as of 8 July 2025 and represent the views of Actis which is not research and should not be treated as research. Historic market trends are not reliable indicators of actual future market behaviour or future performance of any particular investment which may differ materially and should not be relied upon as such. Moreover, there is no assurance historical trends will continue. Any forward-looking statements, forecasts, estimates, projections or results herein are based upon current assumptions, may be simplified and may depend upon events outside of the control of the Actis group and Actis does not undertake any obligation to update them. Changes to any assumptions may have a material impact on forward-looking statements, forecasts, estimates, projections or results. We therefore wish to caution you against placing undue reliance on any forward-looking statements, forecasts, projections or results contained herein. The case studies and figures referenced herein are presented for informational purposes only and were selected to demonstrate the type of investments that Actis will seek to make. There can be no guarantee that transactions with similar characteristics will be available to Actis. This case study, key developments and current priorities are presented for discussion purposes only. There can be no assurance that Actis will be successful in implementing its current priorities or sustainability plan. There can be no assurance that this investment would be profitable or avoid substantial losses.

The case for growth markets infrastructure

We firmly believe that the global investment landscape is being shaped by three mega-trends: decarbonisation, digitalisation and deglobalisation. These trends are generating what we think are strong opportunities to invest in critical, essential service sustainable infrastructure.

We believe there is a fourth ‘D’: demographics. Since the 1960s, global population growth has been on the decline. The 1960s saw the planet’s population grow at 2% per annum and now we are adding less than 1% each year to the global population. This will likely continue to decline. In contrast to these ageing populations in the West, over 90% of the population growth through 2045 will come from non-OECD countries.

We are seeing emerging “big middle” income economies experience a dynamism driven by increasing wealth, industrialisation and urbanisation. Households buying their first appliances, mobiles or video game consoles, and companies connecting to the cloud through new towers and fibre networks – this is all creating demand similar to what the US experienced half a century ago. Southeast Asia for example, has seen electricity demand grow by four to five times since 2000, while demand in the US has been relatively flat.

Not only do we see these creating a circa US$9 trillion annual infrastructure investment opportunity, but we think this opportunity is particularly relevant and compelling in today’s economic and geopolitical outlook. We’re living through a period of disruption affecting many markets and policy areas, from trade to defence. In this context, countries are likely to reassess their reliance on old global systems, which could see policymakers re-focus political attention to domestic matters such as infrastructure, including energy security and data protection.

This shift can create further opportunities in the funding of infrastructure. But it is in emerging markets where we believe these opportunities to
be strongest. Indeed, it is outside the West that the demand for infrastructure is growing fastest, notably in sectors such as energy and data, thanks to multiple factors including higher economic growth, rising populations, industrialisation and the rise of mass consumer classes.

While advanced economies grapple with high debt, emerging markets in Asia, Latin America, parts of Central Eastern Europe, and the Middle East and Africa are, we believe, better positioned. These regions often have lower debt, stronger growth projections, and more resilient financial systems, insulating them from external shocks. We think it is primarily perceived risk – often overstated in our experience – and limited on the ground experience that dissuades more global investors from allocating capital to these markets. Western markets were never risk-free but hopefully the perception of risk between advanced and emerging markets is shifting and can be more nuanced.

Beyond the broad developed or emerging market characterisations, investors ought to remain selective as to the markets they invest in. Emerging and growth markets are not a monolith. As such, Actis takes a prudent and targeted approach to these markets, using the Actis Atlas tool and taking into account a broad range of macroeconomic factors before deploying capital. The firm favours growth markets with a demonstrated history of private infrastructure investment across business and political cycles.

We have long invested in the “big middles” – economies like India, Brazil, Mexico, and South Korea. These G20 members have substantial financial resources and resilience from domestic savings, not credit. We believe they are attractive investment destinations due to low or declining currency volatility, high real rates, and central bank credibility. Big middles are large markets with significant domestic financial sector resilience. When combined with solid macro performance and fiscal discipline they can enable superior economic growth. India is a case in point and has become the third largest infrastructure market in the world.

We think that for investors that can navigate today’s complexity, private market infrastructure is increasingly attractive, as pension funds and insurance capital demand stable, longer-term investments with predictable cash flows and some degree of inflation protection. Infrastructure outside the US and Europe can offer exactly that: diversification, better pricing with less competition, and the fundamentals for long-term value creation. They are also more insulated from tariff volatility. This is all in contrast to US public markets which have demonstrated significant volatility in recent months and are unlikely to be able to maintain the growth rates of the past 15 years.

Southeast Asia is a testament to this, notably in the energy sector with the growth of power demand and this trend is expected to continue. In fact, it’s already happening at scale. Actis recently completed an investment into MTerra Solar in the Philippines, which will be one of the world’s largest integrated solar and battery storage facilities once developed, featuring a 3.5GW solar photovoltaic plant and a 4.5GWh battery energy storage system. Similarly, data centre demand is growing at twice the rate of the US. This expansion is propelled by emerging economies’ increasing access to electricity, mobile phones, and cloud-based technologies.

To capitalise on these what we call most of world opportunities, infrastructure investors should focus their strategy on operational excellence and disciplined pricing. Today, leveraging debt to drive returns is less effective. Instead, we think driving organic growth, operational improvements, and identifying the best-priced assets in emerging markets will be core levers of success.

Those asset managers with experience in these lesser understood global markets and that have longer-term capital commitment ready to deploy, will be well placed to navigate uncertainty. We think these approaches can offer diversification, unlock growth, and deliver superior returns to investors, even when the investment tea leaves are getting harder to read.

The three global themes there remain same:

• What has changed
• How best to seize these opportunities
• In our view the case for investing in growth markets infrastructure has never been more compelling