Financing Asia’s infrastructure boom

Asia’s infrastructure needs are enormous. To put the scale of demand into perspective, the region’s developing countries need to invest USD1.7 trillion per year until 2030 to maintain their strong economic growth, according to the Asian Development Bank¹.

But the ADB also points out that many Asian economies are investing less than the 5% of GDP needed to meet their infrastructure requirements².

This means more needs to be spent on everything from traditional infrastructure – such as airports, water supply, and telecommunications – to newer forms of infrastructure – notably, the renewable energy sources that will power a more sustainable future.

While governments are increasingly committed to support new projects, public sector funding cannot keep up with demand on its own.

So far the region have been heavily relying on bank loans to fund its infrastructure projects. Banks can fund both in hard currencies and local currencies, and offer the flexibility required to finance projects during construction. As volume of funding grows however, banks’ regulatory capital is likely to become too stretched to meet the demand for new financing, and other types of sources should be contributing to bridge the funding gap.

Like in other, more mature, markets like the US or Europe, institutional investors such as infrastructure funds, insurers or pension funds are increasingly looking to deploy capital into private debt, with a focus on the infrastructure asset class which offers a natural match to their long-term liability. Whilst some challenges remain, such as the ability to deploy competitively priced local currency at scale, these assets are seen as a hedge against inflation, providing stable returns over the long term.

These additional sources of liquidity come at the right time as Asia infrastructure market is primed to receive a private-sector boost from one of the most dynamic trends in infrastructure today – the rise of the data centre.

“There is very strong interest among international investors to finance Asia’s digital infrastructure, providing developers with a wide range of financing options. And with demand for computing power and data security likely to remain robust in the coming years, data centres will continue to attract capital for some time to come,” said James Dynon, Head of Infrastructure Finance, Asia & MENAT.

Asia’s data centre capacity is second only to North America. With a forecast live IT capacity of 15,174MW in 2026, the region will account for around 19% of global capacity³. But in terms medium-term of growth, Asia is the leader, with a compound aggregate growth rate of 13.1% over the 2025 to 2030 period, compared to 9.2% in North America and 5.3% in Europe⁴.

The explanation for such strong demand is simple: Asia has an enormous population with deep penetration of digital services. Future data centre needs will be driven by the development of the local AI industry, especially in China, as the training of large-language models requires even more computing power.

Data centres have high energy requirements, which will largely be fed by new renewable energy capacity. Many of the technology companies that lease data centres have serious net zero commitments, making them long-term customers of renewables power. In fact, solar and wind power are often the most affordable energy sources for a data facility. The development of data centres therefore often goes hand-in-hand with the scaling of renewables power generation and storage capacity.

The sheer number of data centres planned for construction over the coming years, combined with the relative homogeneity of the transactions, means that capital can be deployed and replicated easily at scale. Contrast this with traditional infrastructure in recent years in the region, where market was dominated by smaller projects each having its own idiosyncrasies.

Data centres development also bring some new features into infrastructure delivery, where stable revenues are underpinned by long-term contract with private sector players, such as big tech names from China and the US, instead of being built for a government-linked entity, like a power utility. It remains to be seen how investors will adapt to his new long-term exposure to private sector, especially from a concentration risk perspective.

HSBC is in a unique position to bring together all the parties that drive infrastructure delivery in Asia: from developers to capital providers to long-term asset owners. And with a strong presence in the region and expertise in infrastructure finance, the bank can assist in mitigating risks and enhancing project viability.

“We can structure financing solutions, in partnership with institutional investors from the outset,” James said. “This can help de-risk projects and make them more appealing to private funding,”

By leveraging its extensive network of institutional investors, HSBC can bridge the gap between capital and projects. The bank ensures that once projects are sufficiently de-risked and past the construction phase, they are positioned to attract investment from both public and private sources.

“One example of this process in action is our work in supporting the rapid growth of Taiwan’s offshore wind power industry by advising developers and providing financing to support the construction of 3GW of renewable energy since 2020,” said Gregoire Bouzereau, Head of Infrastructure Finance, Asia-Pacific, HSBC.

On recent example is the USD 3.25bn project financing for Ørsted’s Greater Changhua 2, 632MW offshore wind farm in Taiwan, where HSBC acted as Financial Advisor, Green Loan Coordinator and Arranger of the financing and the hedging solution, amongst other lead roles, to deliver a financing package consisting of commercial and ECA-covered facilities across a group of 30 financial institutions, including 25 banks and insurers and 5 Export Credit Agencies.

The Project marks Ørsted’s third offshore wind farm transaction in Taiwan and represents the completion of the 1.8GW Greater Changhua cluster of projects for the developer.

Over the last 7 years, HSBC, as Financial Advisor to Ørsted, has raised a combined USD 8bn of project finance facilities to fund the construction of the cluster, committing over USD 750m towards facilities across the three projects.

“The Taiwan offshore wind market is a great example of how the public and the private sectors together across commercial banks and institutional sources of funding are delivering financing at very large scale to support the procurement of green sources of energy. This kind of blended financing solutions are playing an increasingly important role in the coming years as Asia builds out new forms of infrastructure – such as a data centres and renewable energy sources,” Gregoire said.