The infrastructure sector’s strategic importance and diverse and dynamic nature make it a compelling lens through which to consider the investment community’s approach to non-financial risks. In 2025 S-RM surveyed 150 global infrastructure investors (50 APAC, 50 EMEA and 50 Americas) who shed light on the key risks facing this sector and how they are leveraging these to unlock alpha.
In this article, we share the top-level findings from this survey and the insights we have gathered through our corporate intelligence and cyber security consultancy work for clients across all regions and major sectors. For a more comprehensive view, please download our Investor Sentiment Report | Forces of Change: How deal teams can thrive in an age of instability.
Investor appetite, combined with the need for infrastructure improvements, has helped to stimulate significant investment in telecoms and digital infrastructure (especially data centres), energy transition assets and transport infrastructure. There has also been a marked uptick in investment in defence and adjacent sectors.”
– Paul Doris, Partner at global law firm DLA Piper
The non-financial risk landscape
Survey participants viewed non-financial risks differently depending on which subsector of infrastructure they were considering, but consistently identified the following as top concerns across the wider segment: cyber security, regulatory instability, geopolitical risk, sustainability risk, and organisational culture. Remedying issues caused by the top five most costly risks – including cyber security, corruption and financial crime, and sanctions – cost an estimated USD 1.6 million, making their early identification and effective mitigation all the more important.
- Cyber security is a risk that is here to stay, with infrastructure investors seeing it as both the risk that is most likely to increase in the next three years, and one that is least likely to decrease. Several interviewees independently and without prompting raised the emergence of risks linked to the increasing use of artificial intelligence (‘AI’), making it clear that the topic will be front of mind for deal teams for many years to come.
Surprisingly, cyber security risk was not a top-five risk for investors into social infrastructure, despite hospitals, healthcare, and other social infrastructure assets being key targets for cyberattacks. This suggests that there is still some way to go in raising awareness of cyber threats in this subsector that ten years ago might have been considered low risk.
- Geopolitical and regulatory risk both appeared as consistent causes of deal collapse for infrastructure investments. This reflects the vulnerabilities of infrastructure as a long-duration – and fixed-place – asset class, creating disproportionate exposure to external pressures, whether changing governments, regulatory shifts, or even war. In many cases, governments approach infrastructure projects as a soft diplomacy tool, and their level of buy-in or strategy can evolve depending on the needs and reactions of their electorates and other geopolitical considerations. Investments exposed to newer technologies can also face more uncertainty than ‘traditional’ assets, such as roads, as the regulatory landscape plays catch-up.
- Sustainability risk has remained a leading cause of deal failure, despite a stop-start approach to enacting flagship ESG legislation in Europe and a partial rollback on renewables in the US. Beyond displaying financial potential, projects must prove environmental viability and appropriate community engagement. While it is crucial to ensure regulatory licences have been obtained for a project, investors must also consider whether a potential investee has gained the ‘social licence to operate’. Failing to conduct proper due diligence on the impact on communities can lead to significant reputational fallout.
- Organisational culture or conduct issues ranked fourth when our respondents were asked about non-financial risks that had significantly impacted value creation in the past three years – surprisingly for a sector traditionally associated with real assets. Several interviewees cited organisational culture issues as being the most difficult, time consuming, and expensive to address, with a Singapore-based alternative investment manager observing: “you can change systems, you can hire advisors, you can improve reporting but shifting the mindset inside a company takes time, and honestly, it’s not always guaranteed to succeed.” It serves as a reminder that people remain a crucial component in every successful transaction, and that despite its strong focus on financial returns, private equity remains a fundamentally people-based industry.
In addition to causing deal failure at the investment stage, cyber security, regulatory instability, and geopolitical risks are also leading causes of delays to investors’ exits. They are increasingly being priced into valuations, thereby underscoring the importance of risk discovery to avoid impacting returns. Looking ahead to their exit before even having made the investment, some infrastructure investors decide to walk away despite near-perfect financials and market standing if certain risks cannot be overcome during the holding period without a significant impact on the expected rate of return.
Mitigation strategies for non-financial risk
Effective risk management requires holistic strategies — discover, mitigate, transfer — supported by robust due diligence and contractual protections. Respondents generally viewed due diligence as their first line of defence. Many investors go beyond database searches and AI-powered tools to engage external consultants early in the investment process to conduct in-depth, on the-ground analysis of targets, their executive teams and their operating environments. Due diligence findings feed into investors’ 100-day plans – in addition to informing their decision to invest – and guide them in working closely with their portfolio companies to share best practice and implement improvements post-transaction.
62 percent of surveyed investors viewed the contractual protections in sale and purchase agreements (‘SPAs’) as their key protection against non-financial risks. These are supplemented by insurance, which provides an opportunity to reallocate risk. Warranty and indemnity (‘W&I’) insurance or representations and warranties (‘R&W’) insurance is also a useful tool in expediting pre-acquisition negotiations between sellers and buyers, as well as negotiations with potential debt finance providers. Beyond mitigating costly issues during the holding period, investors use these tools to reduce delays to their exits. They pre-empt buyers’ concerns through sell-side due diligence, ESG exit preparation, or cyber look-back reviews.
The survey revealed a mismatch between rising awareness of certain risks and under-investment in key risk mitigation tools. This was most evident in the areas of cyber, geopolitical, and regulatory risk. This finding suggests that investors are still working out how best to identify and mitigate these risks during a transaction process to unlock quick wins for value creation.
Ultimately, however, some risks cannot be sufficiently mitigated. In some instances, investors reported deciding to walk away after reaching an advanced stage – and even after target companies had attempted to implement changes to assuage investor concerns – showing that it is important to have firm boundaries when it comes to risk tolerance.
Conclusion
Achieving outsized returns through strategies centred on financial leverage has become increasingly challenging, given the backdrop of higher interest rates and stickier-than-expected inflation in many economies. With the intensification of operational and strategic risks on multiple fronts, it is clear that we have entered an era in which operational leverage is paramount to unlocking alpha. In this context, the link between effective risk management and value creation is stronger than ever. Investors must adapt to evolving risk landscapes, leveraging institutional knowledge and innovative tools to drive operational transformation and unlock value.
While concerns can be dealbreakers, often the identification of risks have forced repricing, restructuring, or much deeper diligence before moving forward.”
– Investment executive at a European private equity firm
