Core+ Strategy Rise: The New Battlefield for Infrastructure Lenders Chasing Higher Returns

Core-Plus Strategy: The New Frontier of Infrastructure Lending

Over the past decade, infrastructure assets have become a core allocation for global institutional investors due to their stable cash flows and low volatility. However, as yields on traditional "core" assets such as airports and toll roads have been compressed, capital has shifted toward "Core-Plus" strategies, which offer higher risk-adjusted returns.

In a recent interview, Rafick Ramadan, Head of Infrastructure Financing at Crédit Agricole CIB, noted that lenders are following equity capital into new frontiers with unprecedented enthusiasm. This shift is not only cyclical but also structural—global energy transition, digitalization, and supply chain restructuring are creating a whole new class of infrastructure assets.

From Passive Defense to Active Offense

Traditionally, infrastructure lenders favored operational assets with long-term contracts and regulatory protections, keeping risk exposure low. But the rise of Core-Plus strategies has broken this convention. Ramadan observed, "Lenders are proactively participating in the early stages of projects, accepting construction, technology, or market risks in exchange for higher spreads."

This change is most evident in two major sectors:

• Energy Transition: Renewable energy (offshore wind, large-scale storage), carbon capture, and hydrogen projects require significant debt financing, but their technological pathways and revenue models are not yet mature. Lenders manage risk through structured designs (e.g., staged drawdowns, contingent clauses) while earning spreads 100-200 basis points higher than those for traditional thermal power projects.

• Digital Infrastructure: Data centers, fiber networks, and 5G base stations have infrastructure-like long-term contract characteristics, but demand growth and tenant concentration introduce unique risks. Core-Plus loan products in this asset class have risen from less than 10% of total in 2019 to over 35% in 2025.

Capital Flow: From Developed Markets to the Global South

Another dimension of the Core-Plus strategy is geographic expansion. Ramadan revealed that Crédit Agricole CIB is closely monitoring PPP projects in India, Southeast Asia, and the Middle East. "Legal frameworks and exchange rate risks in these regions were once obstacles, but sponsor guarantees and local bank participation are making deals more bankable."

Take India's National Infrastructure Pipeline (NIP) as an example: in 2024, the country's infrastructure debt issuance grew 45% year-on-year, with Core-Plus projects (such as hybrid renewable energy plants) accounting for more than half. Similarly, in debt financing for Saudi Arabia's NEOM project, lenders accepted flexible repayment structures tied to urban development progress—almost unthinkable just five years ago.

Repricing of RiskCore+ loans are not without cost. Ramadan warns that the market should be wary of "collective optimism": some lenders, in their quest for mandates, may underestimate technical or commercial risks. He recommends adopting risk pricing models specific to infrastructure rather than simply applying corporate bond frameworks.

• Key distinctions:
• Core assets: default rate below 0.5%, recovery rate above 85%;
• Core+ assets: default rate 1.5%-2.5%, recovery rates vary significantly by asset type (e.g., telecom towers have better recovery rates than data centers).

"We insist on deep due diligence of project technology, offtake agreements, and the regulatory environment," Ramadan said. "Core+ does not mean abandoning discipline, but rather using more refined structural design to earn returns."

Outlook: A Golden Age for Infrastructure Debt?

The Global Infrastructure Hub (GIH) predicts a global infrastructure investment gap of $15 trillion by 2030. The maturation of core+ strategies is expected to mobilize more private capital into areas that were previously difficult to finance. However, the real challenge for lenders lies in maintaining pricing discipline: as more and more funds chase a limited number of projects, spread compression will be inevitable.

Crédit Agricole CIB's approach offers a reference: by engaging early in project development, building specialized industry teams, and sharing risks through cooperation with multilateral institutions, it can maintain a competitive edge in the core+ wave.

As Ramadan put it: "Infrastructure debt is evolving from a 'safe haven' into a 'growth engine.' Lenders that master new asset classes first will occupy the high ground in the next decade."