A broader infrastructure market demands tighter underwriting

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Desjardins Global Asset Management is finding opportunities across digital, renewable, and social assets while keeping a close watch on cash flow, leverage, and liquidity

INFRASTRUCTURE INVESTORS are looking across a wider range of assets, but Guillaume Morency does not think that means the definition of infrastructure itself has materially changed. Morency, vice president and head of infrastructure investments at Desjardins Global Asset Management (DGAM), says the team continues to look for the same fundamental characteristics: hard assets, long-term visible cash flows, significant barriers to entry, and a degree of inflation linkage. What has changed is that more subsectors within the infrastructure asset class are beginning to exhibit those characteristics. Digital infrastructure is one example. Data centres and fibre networks have become a larger part of the opportunity set, while demand for electricity is bringing digital infrastructure into closer contact with renewable generation and other parts of the energy ecosystem. Transportation and social infrastructure are also creating opportunities, although differences in asset maturity, revenue models, jurisdictions, and risk allocation can produce very different investment profiles. Pierre Asselin, senior director of infrastructure investments at DGAM, describes the team’s underwriting discipline, saying, “We buy tangible cash flows. We don’t buy potential cash flows.” That principle guides how the team assesses some of the areas attracting the most attention.

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“Power is scarce, while demand for data centres is rising. You need the energy infrastructure in place to support that growth”

Guillaume Morency, Desjardins Global Asset Management

For data centres, power comes first When evaluating a data centre, a site can look compelling on paper, but without secure access to power, the project goes nowhere. “Secure access to power is the first thing we assess when underwriting a data centre,” Asselin says. “It is often the most difficult element to secure and one of the most important barriers to entry. Location remains important, particularly because suitable land with access to sufficient grid capacity is scarce. But without reliable power, even the best site and the highest-quality facility cannot operate as a data centre.”

As part of its due diligence, the team supplements its internal analysis with advice from various independent experts. For Morency, a well-sited data centre with secured power exhibits an important infrastructure characteristic: it is difficult to replicate. “That’s one of the reasons we view it as infrastructure. We’re always thinking about the downside scenario and what the asset is worth if things don’t go as planned.” Morency says DGAM once viewed digitization and decarbonization as fairly distinct investment themes; however, “they’re much more integrated now,” he says. “Power is scarce, while demand for data centres is rising. You need the energy infrastructure in place to support that growth.” This convergence is also influencing how DGAM evaluates renewable energy opportunities. Renewables reward patience, not prediction “Renewable energy has become an established and durable component of the global power system,” Asselin says. “When DGAM first invested in the sector 16 years ago, some investors questioned whether its growth would endure. Today, the investment case is supported by increasingly competitive costs, aging conventional generation, and sustained growth in electricity demand.” Electricity demand is rising as transportation becomes more electrified and data centres require increasing amounts of power. At the same time, jurisdictions that previously took a more measured approach to adding capacity are now accelerating procurement and investment. “The need for new generation is becoming increasingly difficult to defer,” Asselin says. Meeting that demand requires investment across the power system, not only in renewable generation. Transmission, storage, and other sources of system flexibility are increasingly important for connecting new supply and maintaining reliability as electricity demand grows.1 That leaves DGAM wary of paying today for projects that still exist largely on paper. Asselin says operating renewable assets and projects already under construction can be valued against identifiable revenues and costs. A development right on a piece of land is another matter. “A development-stage project may have option value, but we distinguish that from value supported by contracted or otherwise visible cash flows,” Asselin says.

Higher rates change the price of risk In general, most of the financing attached to existing infrastructure assets is long term and fixed rate, Morency says, limiting their immediate exposure to rising financing costs. Inflation has also pushed up revenues on some assets through contractual or indirect inflation links. “If you look at the impact of interest rates in isolation, of course they have a negative effect on valuations,” Morency says. “But at the same time, the top line, or revenue, of a project may have increased because of higher inflation.” The GRI Institute’s April 20, 2026 report on global real assets says that core infrastructure return expectations have adjusted upward by 150 to 200 basis points,2 with core assets now targeting roughly 10 percent net returns over 15- to 20-year underwriting periods. The report places that repricing in the context of the end of easy monetary policy and the higher-rate environment. In effect, buyers are demanding a higher return before taking on the same asset risk.1

That makes leverage harder to ignore, particularly on assets being financed or refinanced at current rates. Asselin says DGAM has kept debt from doing too much of the work in its return assumptions. “We’re cautious with leverage. We want to sleep at night,” Asselin says. “We prefer to focus on the actual asset and its ability to generate revenue rather than rely on leverage to drive returns.” That same focus on risk allocation extends to social infrastructure. Schools, libraries, and courthouses may qualify as infrastructure depending on the contractual structure and the responsibilities assumed by the asset owner. “What matters is how the risk is allocated,” Asselin says. “Our role may be to provide and maintain the facility, while the public sector counterparty is responsible for the utilization and the operation of the asset.” In those structures, compensation is typically linked to the facility’s availability and performance rather than its level of utilization. Long-term care sits closer to the boundary, since some occupancy risk remains, while senior housing may more closely resemble conventional real estate when revenues depend on residents choosing where to live. Morency says one of the key challenges in social infrastructure is scale. “These assets are often relatively small,” he says. “For the largest infrastructure funds, it can be difficult to deploy enough capital to build a meaningful allocation. At our size, we can invest in the sector and achieve the exposure we are looking for.” Social infrastructure currently represents approximately 10 percent of the fund’s portfolio. A disciplined approach to liquidity in an evergreen fund DGAM’s open-ended infrastructure fund was built with a long-term-investor base in mind, drawing on the firm’s experience managing assets for the Desjardins employee pension plan and insurance businesses. Morency says that does not mean every asset is held indefinitely. Some may stay in the portfolio for seven to 10 years before being divested and the capital redeployed. “We want to have some sort of turnover in the portfolio and generate alpha,” he says, rather than allow the fund to continuously grow and become concentrated in mature assets with less potential for future excess returns. Infrastructure assets can take time to sell, while an open-ended fund may face redemption requests on a different timetable. By regularly recycling capital as assets are de-risked and sold, the fund can build liquidity into its investment cycle and manage redemption requests without being forced to sell at an inopportune time. Appropriate redemption terms remain another important part of how the structure works. Across data centres, renewables, and social infrastructure, DGAM is applying essentially the same underwriting principles it has used for years. The assets may look different, but the team still wants revenues it can see, counterparties it can assess, and risks it can price.

“We’re cautious with leverage. We want to sleep at night. We prefer to focus on the actual asset and its ability to generate revenue rather than rely on leverage to drive returns”

Pierre Asselin, Desjardins Global Asset Management

Note: International Energy Agency, Electricity Grids and Secure Energy Transitions: Executive Summary (2023) https://www.iea.org/reports/electricity-grids-and-secure-energy-transitions/executive-summary

Published Oct 26, 2026

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