Allocatability may be the primary constraint on infrastructure capital at scale, according to a new analysis released ahead of the G7 Summit and London Climate Action Week.
Bankability versus allocatability
The report, prepared by the Sustainable Markets Initiative, Africa investor, the Institute of Sovereign Investors and partners, argues that the long‑standing focus on bankability—whether a project can obtain financing—does not guarantee that institutional investors will actually place capital in the project.
Bankability determines participation. Allocatability, in contrast, determines scale. When projects are not allocatable, they remain absent from the portfolios, benchmarks and governance frameworks that guide the world’s largest pools of capital.
Fiscal constraints drive the shift
Governments have traditionally scaled infrastructure through balance‑sheet funding, while institutional investors have done so through allocations. As fiscal capacity tightens, the analysis suggests that the bottleneck moves from the supply of risk‑transfer mechanisms to the ability of projects to meet institutional allocation criteria.
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Dr Hubert Danso, chairman and chief executive officer of Africa investor Group, emphasized that “the challenge is no longer how to remove more risk. It is how to create allocatable exposure.” He warned that despite three decades of guarantees, blended finance structures, political‑risk insurance and first‑loss capital mechanisms, the global infrastructure financing gap remains substantial.
More than US$300 trillion is already allocated across institutional portfolios worldwide, yet the gap persists because many projects do not fit the admissible exposure standards required by mandates and benchmarks.
Allocatability‑Risk‑Bounding (ARB) is presented as a framework to address the conditions under which infrastructure exposure becomes institutionally allocatable. The report argues that understanding this distinction will be increasingly important for sovereigns, investors and policymakers seeking to mobilise private capital at scale.
In practice, the shift mirrors past attempts to align climate‑related projects with investment criteria. Just as green bonds required new disclosure standards to become mainstream, infrastructure projects may need comparable adjustments to satisfy allocation rules. That parallel suggests a broader trend: capital markets are less interested in risk removal than in meeting predefined portfolio guidelines.
Implications for future financing
The analysis arrives at a time when leaders, sovereigns and investors are gathering to identify mechanisms that can accelerate private capital mobilisation for resilient infrastructure systems. If allocatability proves to be the key constraint, policymakers may need to focus on reforming benchmark definitions, governance frameworks and allocation mandates rather than solely expanding guarantee schemes.
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For investors, the report signals that due diligence will increasingly examine whether a project’s exposure can be classified as admissible under existing portfolio construction disciplines. Projects that meet lender requirements but fail to align with institutional allocation filters may continue to sit idle, despite being commercially viable.
Institutional capital does not allocate to projects directly; it allocates to exposure that fits its internal rules. Consequently, the cost of capital for infrastructure could be more closely tied to how well projects conform to allocatability standards than to the amount of risk mitigation provided.
While the analysis does not propose specific policy solutions, it highlights the need for coordinated effort among governments, multilateral development banks and private investors to redefine what qualifies as allocatable infrastructure exposure. Only then might the persistent financing gap begin to narrow.
The gap remains.
