Understanding the Impact of Emerging Risks on Infrastructure Private Equity

Introduction: A New Era of Investment Challenges

Over the last three years, infrastructure private equity portfolios have faced unprecedented challenges due to cyber security, sustainability, regulatory, and geopolitical risks. According to the latest 2025 Investor Sentiment Report: Forces of Change, produced by S-RM, a global corporate intelligence and cyber security consultancy, more than a third of investors have felt significant impacts from these non-financial risks.

Key Findings from the 2025 Investor Sentiment Report

Non-Financial Risks in Focus

The report reveals that 72% of investors now recognize the escalating significance of non-financial risks. Regulatory and geopolitical uncertainties are particularly pressing, ranking among the top five non-financial risk factors affecting portfolio companies. Notably, these risks contribute substantially to deal failures, with 67% citing cyber security risks as the leading factor, followed closely by 60% and 59% for regulatory and geopolitical uncertainties, respectively.

The Proportion of Investors Reporting Non-Financial Risk Impacts

The data from the report identifies the following non-financial risks impacting investors’ portfolios over the past three years:

• Cyber Security Risk: 58%
• Sustainability Risks: 38%
• Regulatory Instability: 38%
• Organizational Culture or Conduct Issues: 35%
• Geopolitical Risk: 24%

These statistics reveal the vital areas where investors must pay keen attention to safeguard their portfolios.

Discrepancies Between Concern and Action

Despite the apparent risks, there is a notable gap between investor concern and proactive measures. A mere 17% of investors employ scenario mapping or political stress tests to prepare for potential disruptions. Additionally, just 18% monitor political sentiment during transaction processes, indicating a tendency towards reactive approaches rather than proactive preparedness.

Cyber Security as an Increasing Concern

Interestingly, 60% of investors acknowledged a significant increase in the importance of cyber security as a non-financial risk, yet less than three-quarters utilize essential tools to identify these risks during transactions.

The Evolving Landscape of Risks

The report also forecasts an adaptation in risk perceptions. Over 80% of investors anticipate that risks related to cyber security, war, conflict, corruption, and geopolitical factors will either remain the same or increase in the coming years. Particularly, 55% predict that cyber security threats will intensify, while emerging risks from generative artificial intelligence (AI) have been recognized as new frontiers for risk management.

The Challenges of Generative AI

Investors expressed concerns over regulatory challenges, data governance, and the potential impact of AI-enabled cyber-attacks on reputations. The increase in AI-generated deepfakes poses significant risks that must be considered during deal-making processes.

Expert Insights on Navigating Novel Risks

Ian Massey, Head of Corporate Intelligence, EMEA at S-RM, emphasizes the necessity for investors to adapt to rapidly evolving risks. He notes, “We’re seeing geopolitical or regulatory factors shift mid-deal and disruptions that create new investment opportunities.”

The Connection Between Risk Management and Value Creation

Massey’s insights stress that effective risk management is crucial for value creation. Traditional due diligence practices must now extend to include modeling for unexpected legislative or policy changes to protect portfolios from unexpected shocks.

Foresight in Dealmaking

Competitive advantage will increasingly stem from the ability to predict and navigate these emerging risks. “Scenario planning and stress-testing assumptions are becoming as fundamental as financial or operational due diligence,” Massey mentions. This intelligence-led approach is vital for unlocking, protecting, and enhancing value within investments.

Conclusion: Embracing the Future of Investment

The findings of the 2025 Investor Sentiment Report provide essential insights for investors navigating an age of instability. With an increasing focus on non-financial risks, understanding and preparing for these challenges is paramount. For those looking to thrive in today’s unpredictable investment landscape, intelligent foresight and robust risk assessment tools will be key.

For further exploration of these insights, download the full report, 2025 Investor Sentiment Report | Forces of Change.

By integrating proactive strategies into the investment process, stakeholders can better adapt and leverage the complexities of today’s evolving market dynamics.