The world is in dire need of an infrastructure makeover, but it won’t come cheap. An estimated $94 trillion in infrastructure investment is needed between now and 2040, according to the G20’s Global Infrastructure Hub. Most of the money will come from public entities and partnerships, but private investment is also needed to help cover projected shortfalls.
One of the leaders on the private side, New York-based investment firm KKR, has been leading the charge with a series of funds that will pour billions of dollars into global infrastructure investment opportunities.
KKR announced the final closing of its latest fund on March 14. Called KKR Global Infrastructure Investors IV, it’s a $17 billion fund that will focus on infrastructure investments in Organization for Economic Co-operation and Development (OECD) countries in North America and Western Europe.
The fund arrives during heavy demand for private infrastructure investment – particularly in digital communications, energy transition, transportation, water, waste, and industrial infrastructure.
The McKinsey Global Institute estimates that $3.7 trillion of annual investment in global infrastructure is needed through 2035 to support projected levels of GDP growth. That figure could increase by an additional $1 trillion a year to meet the United Nations’ sustainable development goals.
“Global demand for building and upgrading critical infrastructure, as well as supporting responsible energy transition and growing broadband access, requires funding far in excess of public sources, which provides a big opportunity for private capital,” Brandon Freiman, KKR’s head of North American Infrastructure, said in a press release.
The new fund will focus on needed infrastructure investments that combine low volatility, strong cash flows, and attractive reinvestment opportunities for future growth. According to Bloomberg, investors in the fund include the New York State Common Retirement Fund, the Teachers’ Retirement System of the City of New York, and the Minnesota State Board of Investment.
It’s the fourth-largest infrastructure fund on record, following only funds by Global Infrastructure Partners, Brookfield Asset Management, and EQT AB, according to Preqin, a London-based investment data firm.
KKR’s global infrastructure strategy dates to 2008. Since then, the firm has been among the most active global investors in infrastructure. It currently oversees about $40 billion in infrastructure assets worldwide and has made roughly 65 infrastructure investments across various sectors and geographies.
KKR’s recent investments include Refresco, a beverage manufacturer; CyrusOne, a provider of data center infrastructure; Ocean Yield, a maritime leasing company; and Atlantic Aviation, which operates private aviation terminals and infrastructure assets across North America.
Like many investment firms, KKR has built a program of responsible investing that emphasizes Environmental, Social, and Governance (ESG) principles. In 2009 it became a signatory to the United Nations-backed Principles for Responsible Investment (PRI). It helped develop the guidelines for responsible investing as a member of the American Investment Council.
Four years later, KKR codified its own global Private Equity ESG Policy and began communicating it to employees. In 2020, the firm replaced that policy with a Responsible Investment Policy that integrates ESG risks and value creation opportunities into investment processes across various asset classes.
Over the past decade, KKR has invested more than $9.5 billion in companies with core business models that advance solutions to global, environmental, educational, and workforce development, responsible consumption and production, worker safety, and societal challenges.
The company’s Global Impact Fund, launched in 2018, aims to invest in companies that measurably contribute to solutions that address global challenges as identified by the UN Sustainable Development Goals (SDGs).