The fight against climate change calls for a major energy transition, but the undertaking is made even more complex by a growing demand for electricity driven by the proliferation of artificial intelligence and other new technologies. However, the urgency of the problem alone does not make a project to fix it bankable. As we mentioned in our previous article in this series,1 a project is financed on a risk-by-risk basis, based on demonstrable revenue streams and coherently allocated contractual risks. Similarly, environmental criteria must be identified, measured and allocated so that they can be incorporated into feasible projects. This article examines the issue in two parts. First, it outlines the conditions a green project must meet to be bankable. These are the same as for any infrastructure project, but in an environment that now requires a common language, verifiable indicators and guarding against greenwashing. Second, it provides concrete examples of how these stringent standards are put into practice. Making a green project bankable: the same principles, but with greater discipline The fundamentals of bankability do not change simply because a project carries a green label. The principles set out in our previous article—risk allocation, revenue certainty, commercial viability and regulatory stability—apply in exactly the same way. What is added is the need for a framework to assess environmental performance using common, precise and measurable language. This terminology is currently being defined in Canada. The Taxonomy and Transition Council, established by the Business Future Pathways consortium in collaboration with the Canadian Climate Institute, is developing a national sustainable finance taxonomy. In its draft methodology report, open for public consultation until August 13, 2026,2 three categories of activities are proposed: green, transition and abatement. Furthermore, the Council is expected to issue guidelines for six priority sectors by the end of 2027. In Quebec, the White Paper on Sustainable Real Estate, published in April 2026 by Décarbone+ with the support of Hydro-Québec, the CDPQ, the National Bank, Montoni, Lavery and the Pôle IDEOS at HEC Montréal, pursues the same objective in the real estate sector: to provide a collective benchmark based on concrete data and demonstrate that building decarbonization is not only possible, it is profitable.3 In a financing context, a proper taxonomy can facilitate due diligence, broaden the investor base by providing clarity and predictability, and, through the certainty it brings, reduce the rates at which funds are made available. However, a standardized taxonomy is not sufficient on its own, and any environmental claim must be verifiable. According to TD Securities, global sustainable debt issuances stood at just under USD 1.6 trillion in 2025, down 7% from 2024, while sustainability-linked loans fell from 530 to 418 billion.4This decline could be attributed to a tightening of standards, with lenders looking beyond advertised “greenness” to analyze the underlying substance of a project. Since 2017, Québec’s green bond program has yielded nine issuances totalling approximately $5.7 billion,5 and the $1.85 billion issuance for the REM is among the largest in Canada.6According to the Ministère des Finances, “green bonds do not represent an additional source of financing for Quebec. They are simply another means of financing borrowings that would otherwise have been financed through conventional bonds.”7 The innovative aspect of green bonds lies in the allocation, tracking and reporting frameworks built into them, which unlocks access to pools of investors bound by mandates restricting capital to green initiatives alone. If the project company promises a specific level of environmental performance to a public authority, such as a building’s energy consumption, carbon intensity or a proportion of recycled materials, it must be able to secure the same standard from the contractor, operator and suppliers. Definitions, measurement periods, audit rights and remedies must be consistent across all contracts; otherwise, the project company will face a payment reduction with no recourse against the party responsible for the shortfall, exactly as applies to an improperly allocated construction risk. The risk of greenwashing follows the same logic. An unsubstantiated environmental claim is no longer merely a reputational risk. Since June 2024, such a claim can be sanctioned under the Competition Act, with a fine of up to 3% of annual worldwide gross revenues. Furthermore, since June 20, 2025, the Act has also introduced a private right of action, making third parties entitled to bring proceedings before the Competition Tribunal under certain conditions.8In cases of project financing, an unsubstantiated claim represents an unallocated risk trapped within the structure that could jeopardize the project’s bankability. A well-defined scope and verifiable indicators are necessary to effectively analyze and mitigate this risk. From principles to practice Deep Sky: revenue certainty takes precedence over environmental benefits Although direct air capture is becoming increasingly essential to achieving carbon reduction targets, the bankability of these projects remains grounded in revenue certainty, rigorous contracting and the quality of the financial model. The Deep Sky Alpha facility in Innisfail, Alberta, combines several direct air capture technologies with permanent geological storage.9 Its financing was made possible in particular by carbon removal credit purchase agreements concluded with companies such as Lufthansa and ENGIE, with the latter having committed to purchasing up to 15,000 credits.10 These contracts serve the same purpose as power purchase agreements in wind farm projects, for example, by providing the project with the revenue certainty needed to attract financing. However, as with any offtake agreement, the parameters must be clearly defined: price, volume, delivery schedule, removal certification, permanence of storage, replacement of undelivered credits and buyer creditworthiness. Deep Sky also secured an $11-million credit facility from Finalta Capital backed by refundable clean economy tax credits,11 a structure in which the federal tax credit acts as financing leverage. These examples illustrate the principle that a technology is not bankable simply because it is green—it becomes so when its revenues are as predictable as those of a conventional project. Énergir: financing the transition in a shifting regulatory environment Strict standards do not dictate that only assets that are already “perfectly green” can be financed. The Canadian taxonomy recognizes the “transition” and “abatement” categories, reflecting the reality of an economy in which many sectors can only gradually reduce their carbon intensity rather than shifting it overnight. To finance transition and abatement projects, regulatory predictability is absolutely necessary. Énergir’s trajectory is a clear case in point, as are the uncertainties inherent to its environment. Its regulatory obligation to supply gas from renewable sources rose to 5% in 2025–2026 and was set to reach 10% in 2030–2031.12 To achieve this, Énergir launched a dual-energy program combining electricity and natural gas in April 202613 and set up a subsidiary dedicated to residential geothermal energy in December 2025.14However, in July 2026, the Québec government announced its intention to review the regulatory trajectory for gas from renewable sources, requested an opinion from the Régie de l’énergie (slated for fall 2026), and formed an expert committee whose recommendations are expected in early 2027.15 Clearly, if the regulatory targets underpinning a transition project are subject to midstream changes, the project’s financial model is weakened, its revenue assumptions open to challenge and its appeal to lenders diminished. Because the markets and revenue streams of entities such as Énergir are governed by planning approved by the Régie de l’énergie du Québec, projects led by regulated utilities generally benefit from an unusually high degree of predictability. They are largely insulated from occasional shifts in government policy. Furthermore, the same technical system can produce different results depending on the power grid, the climate or the baseline it replaces. The economic viability of different projects using the same system must therefore be assessed jurisdiction by jurisdiction. Measuring Beyond: measuring what is promised Verifying that environmental promises are kept requires a standard of measurement that goes far beyond simply including covenants into contract documentation. The Measuring Beyond Initiative, launched by HEC Montréal in partnership with the University of Oxford’s Saïd Business School, was designed with this objective in mind: to measure ESG performance with sufficient rigour to allow the findings to be built into financial models, not simply relegated to annual reports.16 The initiative is accompanied by the creation of a Chair in Sustainable Finance, a sign that measuring non-financial performance is now a professional discipline in its own right. HEC Montréal’s Sustainable Transition Office, co-led by Dominique Anglade, is also helping train decision-makers to understand and articulate transition challenges. Climate literacy is, in itself, a prerequisite for sound governance. Decision-makers must be able to understand the environmental assumptions they build into a project before they become contractual covenants. For their part, lenders must verify the consistency of the information throughout the project lifecycle, from the tender stage, through construction and operating contracts, to the financing documentation. Ultimately, sound governance is precisely what turns an environmental metric from an aspirational target into verifiable data that financiers can truly rely on. Conclusion To paraphrase Romain Rolland, rising to the challenge of the energy transition requires combining the pessimism of the intellect—which cuts through every illusion—with the optimism of the will. Optimism is needed to devise ambitious projects, while realism (in lieu of pessimism) provides the discipline required to make them bankable. Without such discipline, an environmental label can turn into greenwashing, undermining the very financing it was intended to support. With it, however, the verified sustainability of a project broadens access to capital markets and makes climate-related revenues genuinely bankable. The same logic applies to so-called “smart” infrastructure. Its data and performance indicators must likewise be reliable, verifiable and subject to contractual requirements. This will be the subject of the next article in this series. D. Tournier and J. Menard, 2026. “Our infrastructure contracts: from the ideal project to the bankable project.” Lavery, de Billy. https://www.lavery.ca/en/publications/our-publications/6468-our-infrastructure-contracts-from-the-ideal-project-to-the-bankable-project.html Business Future Pathways, 2026. Canadian Sustainable Finance Taxonomy: Methodology Report. https://www.businessfuturepathways.ca/public-comment-period-begins-on-canadas-sustainable-finance-taxonomy/ Décarbone+, 2026. “White Paper, Sustainable Real Estate.” https://decarboneplus.org/initiatives/atelier-1-immobilier-durable/ TD Securities, 2026. “Sustainable Finance 2025 in Review and 2026 Outlook.” https://www.tdsecurities.com/ca/en/sustainable-finance-2025-in-review-and-2026-outlook Ministère des Finances du Québec, 2025. Green Bond Newsletter. https://www.finances.gouv.qc.ca/documents/Autres/en/AUTEN_MFQ_OblVertes_Bulletin_Nov2025.pdf CDPQ Infra, 2026. “REM successfully raises $1.85 billion through its first green bond issuance.” https://cdpqinfra.com/en/news/pressreleases/rem-successfully-raises-185-billion-through-its-first-green-bond-issuance Ministère des Finances du Québec, n.d. “Additional information.” https://www.finances.gouv.qc.ca/department/financing/green_bonds/additional_information.asp Competition Bureau Canada, 2025. “Environmental claims and the Competition Act.”https://competition-bureau.canada.ca/en/how-we-foster-competition/education-and-outreach/environmental-claims-and-greenwashing Deep Sky, 2025. “Deep Sky Alpha Begins Operations with North America’s First CO2 Storage via Direct Air Capture.” https://www.deepskyclimate.com/blog/history-made-deep-sky-alpha-begins-operations-with-north-americas-first-co2-storage-via-direct-air-capture-2 Deep Sky, 2026. “Deep Sky and Lufthansa Group Enter Carbon Removal Credit Agreement.” https://www.deepskyclimate.com/blog/deep-sky-and-lufthansa-group-enter-carbon-removal-credit-agreement; Deep Sky, 2026. “Deep Sky Announces Partnership to Advance Direct Air Capture with ENGIE.” https://www.deepskyclimate.com/blog/deep-sky-announces-partnership-to-advance-direct-air-capture-with-engie Deep Sky, 2025. “Deep Sky Secures First-of-its-Kind Financing with Finalta Capital to Advance Carbon Removal in Canada.” https://www.deepskyclimate.com/blog/deep-sky-secures-first-of-its-kind-financing-with-finalta-capital-to-advance-carbon-removal-in-canada Énergir, 2026. “Renewable Natural Gas, Your Energy Transition Ally.” https://energir.com/en/residential/renewable-natural-gas Énergir, 2026. Dual-Energy Electricity and Natural Gas Program. https://energir.com/files/energir_common/import/Fichiers/Subvention_bienergie/Guide-Participation_bienergie_EN.pdf Énergir, 2025. “Énergir Geothermal Solution: A New Subsidiary Dedicated to Deploying Residential Geothermal Systems in Québec.” https://energir.com/en/about/media/news/energir-geothermal-solution-new-subsidiary-dedicated-deploying-residential-geothermal-systems-quebec Government of Québec, 2026. “Québec veut renforcer sa sécurité énergétique et réduire la facture pour les consommateurs de gaz naturel.” Press release dated July 16, 2026. https://www.quebec.ca/nouvelles/actualites/details/quebec-veut-renforcer-sa-securite-energetique-et-reduire-la-facture-pour-les-consommateurs-de-gaz-naturel-71977 [in French only] HEC Montréal, 2023. “Measuring Beyond Initiative.” https://www.hec.ca/en/sustainable-and-responsible-management/measuring-beyond-initiative/index.html

There is currently much debate about what is the “best” infrastructure project delivery method. Design-build-finance-maintain? Collaborative model? Alliancing? Another way? Even though the labels may change, one underlying reality remains: The structure best suited to financing, whether private or public, stands the best chance of success.  After exploring the reasons why infrastructure financing needs to be modernized and reviewing emerging models, our series is finally getting to the heart of the matter: the contractual framework and risk allocation. This is where a project transitions from just a vision to reality.  That is because, while risk allocation may be viewed differently by various stakeholders, the requirements of the financier or public authority are what ultimately dictate a project's success or failure. Stakeholders would therefore be well advised to keep this in mind right from the design phase.  The bankability of a project, that is, whether it can actually be financed on acceptable terms, is a matter of contractual discipline aimed at stabilizing costs and revenues, making risks manageable and establishing a management structure that can deal with deviations without letting the project spiral out of control. Put another way, a project is financed risk by risk, each one (supply, construction, operation, or refinancing) must be assessed, mitigated and contractually assigned to the party best positioned to manage it. The same principles apply whether the goal is to secure bank financing or simply stay within a public budget. Given the length of this article, we can only provide a brief overview of these principles.  Project financing in short: special purpose vehicle, financial model and off-balance-sheet  The most common structure, especially in public-private partnerships (PPPs), is a special purpose vehicle (SPV), which, depending on the type of project, is an entity created to contract with the public authority, own the future infrastructure and carry the debt. This entity raises equity capital from developers, builders, operators and investment funds, and debt capital from banks, bond investors and development finance institutions. In limited-recourse project financing, the purpose of an SPV is the resulting compartmentalization: lenders are repaid from the project’s cash flows, without a security interest (or with a limited security interest) in the shareholders’ assets. The idea is not new. A famous predecessor is the Suez Canal Company, a joint-stock company founded in 1858 to carry out a single project by raising capital based solely on the project’s potential.1 What has changed is the financial model underpinning the transaction: It has become far more sophisticated. It is now a complex labyrinth of Excel sheets, with a continuous thread of cash flows under the firm control of the lenders, with all project documentation bringing the model to fruition within a coherent, “closed system.” The model thus dictates how rigorously due diligence is conducted, how cash flow allocation is prioritized (operations, reserves, debt service and distributions), and how strictly dividends are capped as long as safety margins are not met.  This financing structure is not the only possible option. For example, for smaller projects or less liquid markets, we often see full-recourse corporate financing. Here, SPVs backed by corporate guarantees facilitate closing when pure non-recourse financing is out of reach, but the result is that project compartmentalization is reduced and shareholders face more exposure. No matter which model is available or chosen, the project owner and developer must be as disciplined as a lender, even if no financier needs to be brought on board. A project carried out and paid for with public funds must be just as thorough as a private one: A budget must be kept and value for money achieved through the same assessment of risks and the same search for the party best placed to assume them.2 Even when no funds are sought from a bank, a banker’s perspective is still indispensable.  Bankable income  The risk differential is considerable between a model with contractually secured or regulated revenues and one left to the mercy of fluctuations in demand, prices or government decisions. A project’s risk profile will ultimately dictate interest rates, acceptable debt levels and even whether the project can achieve financial close. The solutions depend on the type of project. Examples include pricing regulated by a credible regulator for a transport project; long-term purchase agreements at a fixed price or a price linked to raw materials in the energy or petrochemical sectors; or availability payments in PPPs, where compensation is based on the provision of services under the contract rather than on the number of users. Of course, much civil infrastructure generates no income from users, instead, the public authority compensates the operator for availability. In all cases, the cash flow must be predictable and viable, but the payment mechanism must be enforceable and within the financial capacity of the final paying party.   While availability payments in a PPP shift demand risk, they also concentrate revenues with a single public authority, and that authority’s creditworthiness will dictate whether other guarantees, such as budgetary safeguards and dedicated payment mechanisms, are required.  A toll project is bankable if traffic assumptions are conservative, toll rates are adjustable and social acceptability is addressed in advance. In addition, predictable revenues at a rate that covers debt service open the door to signing a credible—and therefore bankable—operating contract. In an industrial project, a solid offtake agreement must substantiate the financial model’s projections, and when a cost cannot be fixed in advance, it must be linked to the revenues it drives, through indexation or cost pass-through, so that the two vary in tandem rather than in opposite directions.  Assessing, mitigating and allocating risks  The essential preliminary step before drafting any contract is to identify risks, evaluate their probability and impact, and determine appropriate mitigation measures for each. Only then can the contractual framework be established, allocating each residual risk to the party best suited to assume it. Debt financing is only available for risks that have been identified, quantified, and allocated. This is why lenders demand consistency: If the SPV guarantees a service standard to the public authority, it must be able to “procure” this exact standard from its contractors. Otherwise, the SPV will retain the risk and the project will become difficult to finance.  Construction provides the most compelling illustration of this principle. To establish the price of a project, a market-tested cost estimate is conducted (ideally through real bids), and then a fixed-price, fixed-deadline turnkey EPC contract is concluded. Lenders favour this specific structure precisely because it establishes the cost of completion. The contractor includes a margin for its own contingencies, which represents the price of certainty. Any residual default risks are covered by performance bonds to ensure project completion if the contractor falters, letters of credit guaranteeing the reimbursement of advance payments, payment holdbacks and late penalties. These mechanisms ensure that, whatever happens, the project will be delivered on budget, in compliance with the financial model.  However, even though we prefer fixed-price EPCs, they are not used across the board. In Quebec and Ontario, more flexible procurement is often used, such as EPCM, alliancing and progressive design-build, where the contractor is engaged early in the process but the price is not locked in from the outset. A target price is established during the draft-design phase, featuring a risk-and-reward sharing mechanism for overruns and savings, typically capped, to align interests without placing the entire risk burden on one party.3 However, the golden rule of finance still holds true: the less certain the price, the greater the uncertainty, leading the lender to require higher equity, completion guarantees or shareholder support—driving up financing costs to account for the risk.  The contract must be structured for the long term, as infrastructure projects are financed over decades in a changing world. Legislative changes, superior force, climate and geotechnical hazards must all be anticipated to prevent an external event from triggering a default. In addition, lenders are often granted step-in rights through direct agreements with the public authority, allowing them to take back control should the contractor default on its obligations, thereby avoiding termination and ensuring service continuity. When they are well-designed and have precise triggers and realistic remediation deadlines, such mechanisms also serve the public interest by providing a window for corrective action before the government has to step in.  Capitalization and leverage  The level of financial leverage and the quality of the SPV’s capitalization are direct determinants of bankability. Shareholders often have an interest in maximizing debt, as it is generally less expensive than equity and increases returns. The lenders, for their part, want an SPV that is sufficiently capitalized to absorb shocks and maintain incentive alignment. If the equity portion is marginal, financial close is often more difficult and contractual protection requirements may increase. Should the economic balance deteriorate, an operator with limited financial exposure may prefer to withdraw rather than incur prolonged losses, leaving the public authority facing a forced renegotiation. Minimum equity requirements, combined with restrictions on the sale of shares prior to commissioning and a stabilization period, are specifically designed to avoid such misalignment.  Lastly, when a public authority awards a contract before financing is fully committed, the interval between the award and financial close exposes it to renegotiation pressure, because lenders will impose conditions precedent as they finalize their due diligence. To mitigate this risk, the public authority will adopt a banker’s perspective by including credibility requirements for the financing plan right from the tender stage. Where appropriate, it will also incorporate incentive or disciplinary mechanisms, such as bid bonds, more advanced financing commitments, optional pre-arranged financing. Over time, bankability requires that the contract cover the allocation of refinancing risk and the allocation of refinancing gains, if any, so as to avoid difficult future negotiations on value for money.  The mechanics of public intervention  Public intervention is compatible with the market, provided that it is intended to remove specific barriers rather than replacing the market. A public subsidy or loan can fill a viability gap, offset the lack of long-term maturities or mitigate an excessive risk premium. Partial guarantees and credit enhancement, which allow an institutional guarantor to cover a portion of the default risk, help to make private commercial debt available at a lower cost. Other financing structures can go even further. The public authority can waive most of its defences against the lenders once the work has been completed and accepted. This is called “debt assignment,” a typical example being forfaiting, a well-known mechanism used in European PPPs. The public authority’s debt thereby becomes almost unconditional and can be transferred to the banks, which no longer carry project risk, but instead take on direct exposure to the public authority. This drives financing costs down. Of course, the intent is never to use public funds to serve private interests or to manage them any less rigorously. Ultimately, any commitment of public funds calls for the exact same discipline in risk management and contractual structuring.  Conclusion  We can all dream of a better world, but we need to give ourselves the means to build it. Private financing comes at a cost, and that cost justifies the discipline it forces on a project. A non-recourse lender only signs off on what they have assessed, quantified and mitigated, and such an exacting approach benefits the entire project. Whether a banker is involved or not, structuring contracts in this way is the best guarantee of success.  Sir William Cornelius Van Horne, who directed the construction of the Canadian Pacific Transcontinental Railway, completed in 1885 in less than half the planned time, is quoted as saying “It has always been a profound belief of mine that the things which people regard as next to impossible are the easiest things to do”.4 Yet the man was anything but a dreamer. He knew that the subsidies, in money and land, would only be paid as railway sections were completed, inspected and commissioned, and he was known for his iron discipline in payment sequencing and the choice of contracting partners. Still today, such a rigorous approach is what turns a project that exists only on paper into one that is actually built.  Encyclopædia Britannica, “Suez Canal”, https://www.britannica.com/topic/Suez-Canal  OECD, 2012, Recommendation of the Council on Principles for Public Governance of Public-Private Partnerships, https://legalinstruments.oecd.org/public/doc/275/275.en.pdf; and World Bank, 2017, Public-Private Partnerships Reference Guide (Version 3), https://ppp.worldbank.org/sites/default/files/2024-08/PPP%20Reference%20Guide%20Version%203.pdf Gouvernement du Québec (2024), Stratégie québécoise en infrastructures publiques — Des infrastructures de qualité, réalisées plus rapidement et à meilleur coût, https://cdn-contenu.quebec.ca/cdn-contenu/adm/org/sous-secretariat-infrastructures-publiques/publications/strategie/strategie_infrastructures.pdf ; Infrastructure Ontario, Choosing the Right Model for Each Project, https://www.infrastructureontario.ca/en/what-we-do/major-projects/model-selection/ Red River North Heritage, Creating a Legacy: The Van Horne Farm part I, https://redrivernorthheritage.com/creating-a-legacy/; Dictionary of Canadian Biography (1998), Van Horne, Sir William Cornelius, https://www.biographi.ca/en/bio/van_horne_william_cornelius_14E.html Source used throughout the article: World Bank, 2025, Infrastructure Monitor 2024 , https://openknowledge.worldbank.org/server/api/core/bitstreams/de04d2f1-f59f-499d-9aa1-2bf052d74eb3/content 

The first article1 of this series provided an overview of infrastructure financing in Quebec and Canada, explaining why it must adapt to address maintenance backlogs, the imperatives of the energy transition and increasing fiscal constraints. This second article turns to emerging financing models and their concrete applications. Updated, Alternative and Emerging Financial Models Public-Private Partnerships2 Public-private partnerships (PPPs) are a well-established financing and management model for infrastructure projects, under which the private sector may be involved in the design, construction, financing and, in some cases, the operation and maintenance of a public asset.3 In return, the private partner receives payments that are contingent on performance, including the achievement of predetermined milestones during construction and the availability or quality of the service during operation. Contemporary PPPs are distinguished by their contractual mechanisms for performance monitoring and change management, permitting adjustments to financial or operational conditions over time based on the actual performance of the private partner. This approach facilitates an improved distribution of risks among parties, with the private sector typically assuming risks associated with costs, timelines, and performance, while the public sector retains responsibility for defining service levels and ensuring that essential services remain accessible to the population. Modern PPP agreements increasingly incorporate detailed performance clauses and financial review mechanisms based on quantifiable project outcomes, which helps ensure rigorous contract management. These measures enhance transparency and accountability, allow for a more equitable allocation of benefits and increase resilience in the face of unforeseen events. From a public finance perspective, PPPs also offer an important budgetary advantage. Because the private partner provides the initial financing and is repaid over time through service payments, the upfront investment does not always appear in the same way as traditional public debt, depending on the applicable accounting framework. Instead, it is reflected in long-term contractual commitments, which can help governments move forward with priority projects despite tight borrowing limits or annual budget constraints. This should not, however, be confused with the economic rationale for PPPs, which is based primarily on risk allocation, implementation discipline and performance over the project lifecycle.  When maintenance and lifecycle renewal are included in the contractual framework, assets developed under PPPs also tend to be better maintained over time, since these obligations fall on the private partner and are not dependent on future political decisions to allocate maintenance budgets. For example, the Highway 25 PPP agreement expressly provides for the design, construction, financing, operation, maintenance and refurbishment of the infrastructure, and entrusts the private partner with responsibility for the operation and maintenance of the relevant section. That said, private financing often carries a higher nominal cost and is generally more expensive than sovereign borrowing. At the outset, the decision to opt for a PPP should therefore be supported by value-for-money analyses to assess, on a project-by-project basis, whether the premium associated with private financing is offset by the value created. The value of PPPs therefore lies in the transfer of risk, the discipline in project delivery and the more predictable management of the lifecycle – all factors that must be carefully assessed on a case-by-case basis. Performance-Based Contracts4 Performance-based contracts (PBCs) are increasingly used tools in the financing and management of public infrastructure, particularly in the energy, transportation and water management sectors. In such agreements, the private operator is compensated based on the quality of the service provided or the efficiency achieved, rather than through purely fixed or input-based remuneration. This model encourages a results-oriented culture, where payments are conditional on meeting measurable indicators such as asset availability, energy consumption, response times or user satisfaction. By directly linking compensation to performance, PBCs motivate private partners to innovate, optimize processes and maintain a high level of service throughout the project lifecycle. They can also help reduce long-term operating costs and better manage risks related to maintenance and obsolescence by promoting a proactive rather than corrective approach. PBCs and PPPs are not mutually exclusive. In practice,  PBCs can be embedded within PPP agreements (for example, where payments for availability or energy performance are central to the business model) or used on a stand-alone basis in more traditional procurement arrangements, particularly for the operation and maintenance of existing assets. In both cases, the common thread is that of aligning financial flows with objectively measured performance. Blockchain and Automation5 The integration of blockchain technology into infrastructure projects is emerging as a useful innovation, particularly where multiple stakeholders, large payment flows and complex supply chains are involved. Blockchain’s decentralized and tamper-resistant structure allows for the implementation of “smart contracts” — agreements whose key conditions (for example, completion of a construction milestone or delivery of materials) are encoded and can trigger automatic actions once verified. Applied to construction and infrastructure, this can streamline procurement and payment processes. For example, once an independent engineer validates that a bridge pier has been completed in accordance with the plans, a smart contract could automatically release the corresponding payment from an escrow account to the contractor, while updating the project ledger shared by the owner, contractors and lenders. Similarly, deliveries of critical materials can be recorded on a shared blockchain register, ensuring that only approved products are used and reducing the risk of fraud or substitution. By automating these steps, blockchain can reduce administrative delays, limit disputes over invoices and strengthen audit trails. From a financing perspective, this increased transparency and the reliability of project data are of particular interest to lenders and investors. More robust, real-time information about progress, costs and compliance can make it easier to monitor covenants, reduce perceived counterparty risks and ultimately support a more efficient disbursement of funds and potentially lower financing margins for well-structured projects. Crowdfunding6 Crowdfunding has increasingly emerged as a complementary mechanism for financing infrastructure and construction projects—especially smaller-scale, community-oriented ones—by tapping many smaller contributions rather than relying solely on large institutional investors or government grants. For example, the Luchtsingel pedestrian bridge in Rotterdam was partly financed through a campaign in which residents could “buy” individual wooden planks, each engraved with their names. Thousands of small donations collectively triggered a larger municipal grant, proving that citizen-led investment can catalyze broader public-private partnerships.7 While crowdfunding as an alternative source of financing offers greater community engagement and more transparency, it also requires strong campaign design, clear revenue models or public benefit justifications and credible governance to succeed. For the moment, it remains a niche instrument, but one that illustrates how citizens can be directly involved in financing and shaping the infrastructure of their communities. International Case Studies Europe: Green Bonds and PPPs In French public procurement, the prevalent model is the marché de partenariat, an integrated contract by which a private operator, under private project management, undertakes to provide private source financing, design, construction, maintenance, and possibly operation of an asset, in exchange for deferred public payments tied to performance. Created in 2015 by a reform aligning domestic law with EU rules, it unified prior heterogeneous PPP-like schemes into a specific category of public contract, distinct from concessions. The marché de partenariat targets whole -life cost optimization and transfer of relevant risks (design, construction, availability, energy performance) in return for a private financing premium, enforced through performance-based payments, financial adjustment clauses, and reinforced oversight. It suits complex, long-term projects integrating design–build–maintain and smoothing budget outlays.8 These advantages come with governance challenges: the contracts are complex, long-term and often costly to prepare and monitor, which raises issues of transparency, capacity of public authorities to negotiate on an equal footing, and democratic control over commitments that can span several decades. This partnership model is increasingly fuelled by green bonds and other sustainable finance instruments at the European level, which have emerged as central tools for sustainable infrastructure finance and provide a pipeline of targeted capital that can be structured within marché de partenariat frameworks to deliver measurable environmental performance. According to data from the European Environment Agency, green bonds accounted for 6.9% of all corporate and government bonds issued in EU27 countries in 2024, up from 5.3% in 2023-,9 while the European Investment Bank approved over €15 billion in new financing in mid-2025 directed at water, transport, energy, and housing infrastructure projects that support the green transition-.10 This reflects the region’s strategic shift toward the channelling of capital into low-carbon- infrastructure such as public transport, renewable energy, and thermal building renovation. Asia: Digital Modelling and Blockchain The Land Authority of Singapore built the first nation-scale digital twin: a high-resolution 3D model of the entire country created from airborne and vehicle-based laser scanning, covering above- and belowground assets. The platform integrates real-time data (buildings, infrastructure, mobility, environment) to simulate scenarios for urban planning, infrastructure management, sustainability, and emergency response. It enables cross-agency and public–private collaboration, supports data-driven policy, and provides a testbed for Smart Nation services and applications. With the ongoing integration of AI, Virtual Singapore functions as an evolving operational tool for resilient, efficient city management and research, with anticipated partial public access to enhance transparency and civic engagement.11 Complementing this digital modelling infrastructure, the OCBC bank and Land Transport Authority of Singapore have launched a pilot of a blockchain-based conditional payment solution for construction projects. Under this arrangement, the Authority can disburse “mobilization advance payments” to contractors once predefined conditions, encoded in smart contracts, are verified. This innovation streamlines the disbursement process, ensures greater transparency over the use of funds, and reduces administrative friction associated with large upfront payments typical of major infrastructure works. As of the initial deployment, over 22 million Singaporean dollars had already been disbursed under this mechanism.12 By combining digital modelling with blockchain, Singapore has adopted a technologically integrated approach to infrastructure development and financing. The digital twin allows for more precise planning, cost estimation and risk assessment, which helps structure bankable projects and gives greater comfort to investors and lenders. The blockchain-based payment system, for its part, secures and accelerates the flow of funds once milestones are reached. Together, these tools strengthen project transparency, coordination among stakeholders, risk management and lifecycle governance. Latin America: Mobilizing Regional Markets for Infrastructure Financing The Development Bank of Latin America and the Caribbean (“CAF”) has significantly stepped up its role as a structural financier of infrastructure across Latin America and the Caribbean. In December 2024, its board approved US$2.478 billion for sustainable development and infrastructure projects spanning water and sanitation, urban mobility, energy transition, and social infrastructure across 10 countries.13 In 2025, CAF further committed US$1.086 billion to support climate-resilient and strategic infrastructure operations in Brazil, Colombia, Uruguay, and Chile, including urban development, railway reactivation and water security for metropolitan areas.14 Beyond project-by-project financing, CAF has announced a broad long-term commitment. Over the next five years, it aims to mobilize up to US$40 billion to support a “triple transition”: green, digital and social, targeting energy transition, climate resilience, water and sanitation, sustainable mobility, ecosystem preservation and inclusive infrastructure.15 Through these combined efforts, CAF seeks to close the region’s infrastructure deficit and orient development toward sustainability, resilience and social inclusion, while deepening regional capital markets for infrastructure financing. Conclusion The evolution of infrastructure financing is being shaped by a convergence of innovation and technology, on the one hand, and by growing investment needs on the other. From modern PPPs and performance-based contracts to blockchain-enabled automation and community-driven crowdfunding, emerging instruments broaden the spectrum of available capital while improving efficiency, transparency, and accountability. International case studies demonstrate that these innovations are already being applied in practice. Europe is scaling sustainable finance with green bonds embedded into long-term partnership contracts; Asia is pioneering the integration of digital modelling and blockchain to streamline project delivery and provide financiers with more reliable, real-time information on risks and performance; and Latin America is mobilizing regional development banks to close infrastructure gaps through climate-resilient, socially inclusive investment. Taken together, these approaches reveal a global shift toward infrastructure systems that are more data-driven, performance-oriented, participatory, and financially diversified. As governments face rising fiscal constraints and increasing demands for sustainability, the adoption of these new financing models offers a path to delivering projects that are not only bankable, but also resilient, transparent, and aligned with long-term societal goals. Why rethink Infrastructure Financing: https://www.lavery.ca/en/publications/our-publications/6438-why-rethink-infrastructure-financing-.html The World Bank . (2017). Public-Private Partnership Reference Guide (3th ed.). https://ppp.worldbank.org/sites/default/files/2024-08/PPP%20Reference%20Guide%20Version%203.pdf Achats Canada. (2025). Partenariat public-privé. Gouvernement du Canada. https://achatscanada.canada.ca/fr/portail-de-l-acheteur/approvisionnement-specialise/strategique/partenariat-public-prive The World Bank. (2023). Performance-based contracts: Promoting quality road maintenance and economic efficiency. World Bank. https://blogs.worldbank.org/en/transport/performance-based-contracts-promoting-quality-road-maintenance-and-economic-efficiency Waqar, A., Khan, A. M., & Othman, I. (2024). Blockchain empowerment in construction supply chains: enhancing efficiency and sustainability for an infrastructure development. Journal of Infrastructure Intelligence and Resilience, 3(1), 100065. https://www.sciencedirect.com/science/article/pii/S2772991523000403 Construction Placements. (2025). Crowd-funded infrastructure: Can retail investors finance bridges?. https://www.constructionplacements.com/crowdfunded-infrastructure-retail-investors-bridges Petty, J. (2017). Crowdfunding architecture. Architect & Developer. https://architectanddeveloper.com/crowdfunding-architecture/ MEFSIEN. Les marches de partenariat. https://www.economie.gouv.fr/files/files/directions_services/daj/media-document/FT16_Le_marche_de_partenariat.pdf European Environment Agency. (2025). Green bonds in Europe. https://www.eea.europa.eu/en/analysis/indicators/green-bonds-8th-eap EuropaWire. (2025). European Investment Bank Group Unveils €15.5 Billion Boost for Water, Transport, Housing, Energy and Innovation. https://news.europawire.eu/european-investment-bank-group-unveils-e15-5-billion-boost-for-water-transport-housing-energy-and-innovation/eu-press-release/2025/07/18/12/28/51/159075/ OPSI. (2015). Virtual Singapore – Singapore’s virtual twin. https://oecd-opsi.org/innovations/virtual-twin-singapore/ OCBC. (2024). OCBC partners LTA to pilot blockchain-based conditional payment solution for construction projects. https://www.ocbc.com/group/media/release/2024/ocbc-partners-lta-to-pilot-blockchain-based-conditional-payment-solution-for-construction-projects CAF. (2024). CAF approves USD 2.478 billion for sustainable development in Latin America and the Caribbean. https://www.caf.com/en/currently/news/caf-approves-usd-2478-billion-for-sustainable-development-in-latin-america-and-the-caribbean/ CAF. (2025). CAF Board of Directors approves USD 1.086 billion to boost sustainable infrastructure and climate resilience in Latin America. https://www.caf.com/en/currently/news/caf-board-of-directors-approves-usd-1086-billion-to-boost-sustainable-infrastructure-and-climate-resilience-in-latin-america/ CAF. (2025). CAF to allocate USD 40 billion over the next five years to boost green growth. https://www.caf.com/traducciones/traducciones_en/caf-to-allocate-usd-40-billion-over-the-next-five-years-to-boost-green-growth/

Financing infrastructure, whether it involves maintaining the infrastructure we’ve inherited, building the infrastructure we need today, or anticipating the infrastructure that will be required in the future, is one of the greatest challenges facing modern societies. Civil, industrial and energy infrastructure are essential assets for the common good, and their maintenance and modernization require colossal investments. However, public finances are limited, which restricts the ability of governments to act alone. In this context, it is crucial to use all available financing methods by incorporating private capital and designing innovative financial tools. In this spirit, we will be publishing a series of six articles devoted to infrastructure financing in Quebec and Canada. In them, we will discuss the issues related to these strategic investments and highlight realistic solutions to address them. This first article begins by providing an overview of the situation in Quebec and Canada, and then looks at the current challenges and the solutions that will shape the infrastructure of tomorrow. The Current Situation in Quebec and Canada In Quebec, public investment in infrastructure is governed by the 2025-2035 Québec Infrastructure Plan (the “QIP”), which provides for the injection of $164 billion over 10 years1. The QIP is a government planning document identifying and prioritizing major infrastructure projects in all public sectors. The most recent version of the QIP pays particular attention to the longevity of the existing infrastructure. Keeping current public assets in good condition despite the chronic maintenance backlog will absorb nearly 65% of the planned funding. The investments are primarily directed towards road transport ($36 billion), healthcare ($28 billion), education ($23 billion), and public transit ($9 billion). In terms of energy infrastructure, Quebec has embarked on a major transformation. According to Hydro-Québec’s Action Plan 2035, the province has set itself the objective of doubling its electricity generation capacity by 2050, with an intermediate target of adding 60 terawatt-hours (TWh) in 2035. This plan involves investments of over $100 billion for the construction of new dams, wind farms, and electric transmission networks in order to meet the growing demand related to electric vehicles and the energy transition2. Energy issues are a top priority across Canada. We are witnessing a resurgence of nuclear power, with several provinces (Ontario, New Brunswick, Alberta and Saskatchewan) choosing to develop small modular reactors (SMRs) to decarbonize their energy generation and ensure energy security3. At the same time, there is strong pressure to build new pipelines for hydrocarbon exports, particularly to Asia and Europe, for the energy transition and supply security4. At the federal level, the 2025 budget gives concrete form to Prime Minister Mark Carney’s investment ambitions5 to address critical issues such as housing, public transit, climate resilience, and accessibility. One of the flagship programs at the federal level is the creation of Build Canada Homes6, a new agency established in September 2025 with a budget of $13 billion. This program aims to “supercharge” the construction of affordable housing, to leverage public land, and to make use of modern techniques such as modular and mass timber construction. Meanwhile, on September 11, the Prime Minister announced an initial nationwide series of energy, port, and mining projects. He also expressed the desire to add other projects in the coming years. This list includes the expansion of the Port of Montreal in Contrecœur. Current Challenges The asset maintenance deficit, that is, the estimated amount of infrastructure in poor or very poor condition, is estimated by the Quebec government to be over $40 billion in 2025. That’s the amount that would need to be invested today simply to bring systems back to an acceptable state. In addition to rehabilitating aging infrastructure, it’s also important to make existing infrastructure more resilient; for example, in 2024, the flooding further to Hurricane Debby caused $2.5 billion in damage in southern Quebec7. And infrastructure must be low-carbon, in order to allow Quebec to achieve its climate objectives in terms of greenhouse gas emission reduction. Furthermore, modernization must incorporate climate change adaptation, cybersecurity, and smart grids. We need to accelerate the construction of new infrastructure to ensure Canada’s prosperity. In 2023, the Canada Mortgage and Housing Corporation noted that 3.5 million new homes will be needed by 2030 to restore affordability in the country8. Added to this are the needs for energy, transportation and healthcare infrastructure, which are intensifying due to population growth, the energy transition, the desired reindustrialization and, in the future, the increasing use of energy-intensive artificial intelligence. However, in addressing these challenges, governments are facing a critical lack of liquidity. The 2025 federal budget in Ottawa includes a $78-billion deficit9, while the Government of Quebec’s budget includes a record $13.6-billion deficit10. These structural deficits considerably limit their budgetary leeway and force them to choose between the different issues our societies face. At the municipal level, municipalities are legally required to table a balanced budget. Given the rising expenses and the electoral need to not increase taxes significantly, potential investments are limited. Potential Solutions: Private Capital and Financial Innovation Faced with increasing pressure on public finances, particularly at the municipal level, governments can no longer bear the cost of modernizing and developing infrastructure alone. In this context, looking to private capital and financial innovation can bridge the gap between public financial needs and capacities. Some of the top solutions are public-private partnerships, smart pricing (tolls, usage fees, dynamic pricing), and mobilizing institutional savings, particularly through pension funds, insurance companies and investment funds. Pension funds and insurance companies are particularly attracted to infrastructure projects. Their long-term investment horizon is well aligned with the lifespan of the projects and the stable revenue streams they generate. For example, the Fonds de solidarité FTQ has a fund dedicated to real estate11. Banks are key partners in infrastructure projects. They offer hybrid financing, combining low-interest loans and government backing to secure investments in critical projects such as highways, bridges and railways. It is also worth noting that investment funds are increasingly turning to infrastructure financing, as evidenced by the example of BlackRock12. BlackRock recently strengthened its position in this sector by acquiring Global Infrastructure Partners for $12.5 billion, creating a leading investment platform in private infrastructure markets. This acquisition, combined with strategic partnerships with players like Microsoft, aims to meet the growing demand for essential digital and energy infrastructure to support technological advances and the digital economy. Furthermore, the purchase of key Panama Canal ports for $23 billion demonstrates BlackRock’s commitment to critical infrastructure assets globally. These investments, motivated by the desire to diversify portfolios and protect against inflation, allow for the integration of professionals in the execution of projects. While these approaches make it possible to diversify funding sources, accelerate project completion and distribute risks between the public and private sectors, they also raise issues of governance, transparency and social acceptability, which require special attention to protect the long-term public interest. Infrastructure financing in Quebec and Canada must evolve to address the maintenance deficit, the requirements of the energy transition, and increasing budgetary constraints. Private capital, whether from pension funds, banks or specialized funds, offers indispensable support for collective efforts. Beyond the diversification of funding sources, the emergence of contractual and financial innovations, such as performance contracts, green bonds and risk-sharing models, opens up new ways to attract private investors while protecting the public interest. Our next article will discuss these new tools and mechanisms in detail, as well as the conditions for their success in Quebec and Canada. Government of Québec (March 25, 2025). Plan québécois des infrastructures 2025-2035 : le gouvernement du Québec se donne les moyens de réaliser ses engagements et de soutenir l’économie québécoise.  https://www.quebec.ca/nouvelles/actualites/details/plan-quebecois-des-infrastructures-2025-2035-le-gouvernement-du-quebec-se-donne-les-moyens-de-realiser-ses-engagements-et-de-soutenir-leconomie-quebecoise-61815 Hydro-Québec (2 novembre 2023). Vers un Québec décarboné et prospère. Plan d’action 2035 d’Hydro-Québec. https://www.hydroquebec.com/data/a-propos/pdf/plan-action-2035.pdf Canada Energy Regulator (August 20, 2025). Market Snapshot: Canada’s role in small modular reactor (SMR) technology. https://neb-one.gc.ca/en/data-analysis/energy-markets/market-snapshots/2025/market-snapshot-canadas-role-in-small-modular-reactor-smr-technology.html Underground Infrastructure (September 2025). Canada eyes new pipelines to boost energy security, cut U.S. reliance. https://undergroundinfrastructure.com/magazine/2025/september-2025-vol-80-no-9/features/canada-eyes-new-pipelines-to-boost-energy-security-cut-us-reliance Prime Minister of Canada (November 2025). Prime Minister Carney shares Budget 2025 plan to build communities strong. https://www.pm.gc.ca/en/news/news-releases/2025/11/05/prime-minister-mark-carney-shares-budget-2025-plan-build-communities Government of Canada (September 14, 2025). Prime Minister Carney launches Build Canada Homes to supercharge homebuilding across the country. https://www.pm.gc.ca/en/news/news-releases/2025/09/14/prime-minister-carney-launches-build-canada-homes Insurance Bureau of Canada (September 13, 2024). The costliest severe weather event in Quebec’s history – August flooding caused nearly $2.5 billion in insured damage. https://www.ibc.ca/news-insights/news/the-costliest-severe-weather-event-in-quebec-s-history-august-flooding-caused-nearly-2-5-billion-in-insured-damage Canada Mortgage and Housing Corporation (June 23, 2023). Housing Shortages in Canada – Update on how much housing we need by 2030. https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/housing-research/research-reports/2023/housing-shortages-canada-updating-how-much-we-need-by-2030-en.pdf CBC (November 4, 2025). Budget fédéral : dépenses de taille, compressions humbles et un déficit qui se creuse. https://ici.radio-canada.ca/rci/fr/nouvelle/2205360/budget-federal-depenses-compressions-investissements-deficit-2025 Royal Bank of Canada (March 25, 2025). Quebec Budget 2025: Record deficit and a long and conditional path to balance. https://www.rbc.com/en/economics/canadian-analysis/provincial-and-fiscal-outlooks/provincial-budgets-and-economic-statements/quebec-budget-2025-record-deficit-and-a-long-and-conditional-path-to-balance/ Fonds immobilier de solidarité FTQ (2025). Who we are. https://www.fondsftq.com/en/business/fonds-immobilier/who-we-are Business Economy (March 6, 2025). Why BlackRock is Investing Heavily in Infrastructure. https://www.businesseconomy.com/latest-news/why-blackrock-is-investing-heavily-in-infrastructure/