Nicolas Escallon article in Infrastructure Investor: Navigating risk and reward
In the December / January issue of Infrastructure Investor, Nicolas Escallon, Managing Director, Energy Infrastructure and Co-Head of Latin America at Actis, sets out why disciplined investors with on-the-ground expertise are increasingly turning to growth markets – and why the perception of higher risk often doesn’t match reality. In this interview, Nicolas dives into the growth markets infrastructure opportunity and explores why Actis seeks to convert perceived volatility into disciplined, risk-adjusted returns thanks to deeply embedded local teams with sector and market expertise, a data driven Risk Engine, and a portfolio built around essential, contracted and resilient infrastructure.
Click here to read the full article online or here to read in the digital print issue.
Disclaimer
Actis sponsored this article in Infrastructure Investor, which was published on 1 December 2025, and compensated Infrastructure Investor through this sponsorship.
Actis on navigating risk and reward in growth markets
Infrastructure managers with a preference for investing in more established markets such as North America and Europe could be missing out on opportunities to generate higher returns in faster-growing regions of the world.
Nicolas Escallon, co-head of Latin America at Actis, argues that with the right structuring and on-the-ground expertise, investors can effectively mitigate risk and capture alpha in growth markets. Looking ahead, he expects investor appetite to grow, noting that the fundamental supply-demand gap is creating tailwinds for investors seeking superior returns.
Where are the transformative opportunities for infrastructure managers going to come from over the next five to 10 years?
Four-fifths of total global energy demand growth in 2024 took place in growth markets. Looking ahead, more than two-thirds of global infrastructure build-out needs over the next decade are expected to be in growth markets. These are markets where 80 percent of the world lives. At the same time, those regions account for less than a third of the capital flowing to private infrastructure.
There’s a supply-demand mismatch in the markets where we operate. This mismatch isn’t just a data point, it’s a structural inefficiency born from undercapitalisation and demographic and economic momentum, which is precisely where disciplined investors find enduring alpha. We’re talking about fundamental, essential, core infrastructure – power generation, transmission, roads – the critical infrastructure underpinning growth. Powering people’s homes, providing digital connectivity for the cloud and e-commerce – these are the transformative opportunities.
Do you see a gap between perception and reality in terms of how investors understand risk in growth markets?
In our experience, growth markets aren’t defined by higher risk, they’re defined by greater inefficiency. The real opportunity lies in turning perceived volatility into priced discipline.
First, there are misperceptions around risk, for example default risks. Studies show default rates in growth markets can often be lower than they are in developed markets. That might seem academic. But when you look at our portfolio, we’ve been doing this for over 20 years, and across 200 assets our loss ratio is less than 2 percent. We haven’t had a single project default.
The reality is that the supply-demand gap in growth markets provides a multi-decade tailwind and is a risk mitigant in itself. There’s strong underlying demand, and strong political and regulatory regimes open to infrastructure capital and significant capital imbalance.
There are of course risks associated with some of these markets. Some, such as FX risk, we structure and position for. Others, such as regulatory risk, are less severe than you may imagine if you choose the right strategies and markets. And where risks do exist, there are protection mechanisms that investors like us can take advantage of.
It’s important to note that growth markets are highly diverse. We don’t take a binary view. Through our Actis Atlas taxonomy, we’ve developed a more nuanced lens through which to assess the 80-plus growth markets, rather than as a single monolithic group. This approach means we’re better able to balance portfolios and risk criteria across multiple geographies.
How can investors build portfolios to lower risk?
Lowering risk starts with what you own and what you pay for it – selecting assets with lower inherent exposure to volatility acquired or built at reasonable prices. We think the most resilient assets are essential ones: those that provide critical services, operate under long-term contracts, and deliver reliable, affordable outputs. These are assets and businesses that people and economies depend on regardless of market cycles.
But portfolio construction matters just as much as asset selection. Diversification by label (region, sector, or index) can often be deceptive. Many investors believe they are diversified when in reality their exposure is highly concentrated. As an analogy, the Vanguard Emerging Markets Index, for instance, is roughly 75 percent weighted to just three countries: China, Taiwan and India. That’s not true diversification.
At Actis, we construct portfolios that first and foremost give investors access to what we believe to be the most attractive opportunities available in infrastructure across growth markets. We then diversify by risk return and risk-tilts, not by headline category. With teams on the ground in17 countries, we originate and evaluate opportunities at source from Peru to the Philippines to Poland, building portfolios that balance return and risk-tilts for currency, contract types, regulation and execution profile.
This approach, supported by our Risk Engine, allows us to quantify and combine exposures intentionally, rather than accidentally. The result is a portfolio that absorbs shocks, compounds steadily, and delivers true diversification and resilience. For example, in India, which has one of the most advanced energy transition strategies in the world, our energy strategy takes a high degree of execution risk. We balance this with a focus on Peru and Mexico, where recently the opportunity set has been centred on more established energy businesses with operations and financing optimisation at the heart of the investment thesis.
What are the keys to managing risk in growth markets?
Creating value in growth markets starts with structuring risk intelligently, knowing which variables matter and pricing them with discipline. We take a highly structured, data-driven approach to doing so, supported by our 20-year experience of building, operating and owning over 200 assets across our markets.
Across our portfolio, we evaluate more than 50 distinct variables that capture how risk behaves in different arenas: macro factors like inflation, currency and political stability; commercial factors like counterparty strength, regulation and pricing; and operational factors such as development exposure, execution risk and leverage levels.
These inputs feed into what we call the Actis Risk Engine – an analytical system designed to translate decades of experience into a consistent, comparable framework. The Engine maps and quantifies risk across core dimensions: macro, pricing, commercial, execution, leverage, liquidity and sustainability. By quantifying risk this way, we can convert what’s often perceived as uncertainty into measurable, investable insight.
Ultimately, managing risk in our markets isn’t about avoiding it – it’s about understanding it probabilistically, pricing it accurately and assembling portfolios intelligently. The question to us isn’t whether to invest in growth markets, but how – which risks to own, which to structure and which to avoid entirely. We believe this is what allows us to generate resilient, repeatable, risk-adjusted returns through cycles.
Will we see more investors attracted by the risk profile in growth markets?
I think we will. And this is partially cyclical. Over the last 15 years, allocations have been more concentrated in developed markets. The decade prior to that was different. Infrastructure is maturing as an asset class, and investors are looking to assemble global portfolios.
You look at everything, from the equity markets to the dollar index to gold, and you see a large rotation of portfolios. People are worried about waking up with a portfolio that’s overweight with yesterday’s winners. Instead, investors are looking for diversification and resilience.
By investing in growth markets where demand for infrastructure is most acute – driven by urbanisation, digitalisation and the need for reliable, affordable energy – investors gain exposure to a level of growth combined with resilience that is underrepresented in most global portfolios. Combine disciplined structuring with real-economy demand and growth markets become some of the most predictable places to invest anywhere in the world.
We’re seeing interesting opportunities across growth markets, particularly in Asia, Latin America and the Middle East, where evolving energy markets and digitalisation are creating investment demand. The supply-demand imbalance in core infrastructure isn’t a temporary anomaly, it’s a structural dynamic that will compound over decades as populations urbanise and economies digitise.
India, for example, has one of the highest electricity demand growth rates in the world. It also has a supportive regulatory environment for private capital. We’re also seeing programmes being launched in Malaysia and Vietnam. There’s an abundance of opportunities globally, as long as you’re partnering with the right team.
Are you concerned about increasing competition?
We definitely see more people looking at some of the markets that we invest in. But that’s probably a net positive in the sense that it’s helped mature the environment, particularly liquidity. We’ve exited to different types of players, including strategics from different regions. And we’ve also been able to sell to and partner with other infrastructure funds. More funds investing in our markets provides more robustness, more liquidity and more transaction opportunities.
How do you see the technology focus changing?
We’ve been investing in energy for the last five fund cycles. Within renewables, we’re seeing a shift in the balance. For example, we’re focusing on large battery deployment. And we expect that to continue to increase. Integrating batteries is unquestionably a complement to the large solar base that already exists in many growth markets.
Renewable energy combined with storage is one of the cheapest and most available technologies. In the Philippines, we’re building one of the largest solar-plus-battery projects in the world – this is a mega-project with 3.5GW of solar, 4.5GW hours of batteries. We’re also deploying batteries in India and we’re looking at deals with batteries everywhere, from Chile to Japan. Gas has a role to play in supporting intermittency too, particularly as large consumers look for stable kWh solutions.