Infrastructure is at the heart of Europe’s economic transformation. Richard Marshall, Head of Infrastructure Research at DWS, explores how subsectors like data centres, renewable fuels, transport, and power grids are becoming increasingly attractive for investors, and what it will take for Europe to compete with the U.S. in mobilising private capital.
Find out more about “The Transformation of Europe”
Europe vs. the U.S.: A long-term play
Europe is sending the right signals to investors, with ambitious energy security and decarbonisation policies, a focus on digitalisation, and commitments to strategic autonomy. But can it truly rival the U.S. as an investment destination?
Richard Marshall believes so. “Europe is a big ship to turn, but it is turning,” he says. The U.S. has succeeded in mobilising capital faster in recent years through tax credits, but Europe offers regulatory stability across political cycles, broader sector diversity, and lower entry valuations than North America. “The key for Europe to transform quicker is to activate private capital with simplified bureaucracy, clear long-term support for key sectors and to efficiently support public-private finance partnerships to de-risk and scale up breakthrough technologies”, Marshall says.
According to Marshall, there are several sub-sectors offering opportunities for infrastructure investors as the European transformation gathers pace.
Data centres – Digital infrastructure powerhouse
AI adoption, expanding cloud demand, and data sovereignty concerns are propelling data centre growth. “New hotspots such as Italy, Spain, and the Nordics are coming into play, due to renewable energy access and grid stability, replacing traditional hubs like the FLAP-D markets (Frankfurt, London, Amsterdam, Paris, Dublin)” notes Marshall. For investors, data centres combine infrastructure-grade resilience with digital-age expansion, he says.
Renewables and alternative fuels – Transition catalysts
Renewables will remain the cornerstone of the infrastructure market as Europe continues to reduce its reliance on imported energy, but it is the “drop-in” nature of sustainable fuels like biomethane, and sustainable aviation fuel that makes them particularly interesting. These solutions fit seamlessly into existing industrial and transport systems, reducing the rollout risks that exist with many emerging infrastructure sectors.
Transport – Repositioning for net zero
The transport sector is undergoing profound transformation. Public transit and rail are buoyed by consumer and policy shifts toward lower-carbon mobility, such as the electrification of public buses and growth of micromobility. Airports, too, are repositioning with net-zero business models. “With larger transport assets coming back to market, investors can play a direct role in decarbonising this critical part of the economy,” Marshall says.
Grids – The unsung hero of the transition
Grids are the backbone of Europe’s energy transition, enabling electrification, renewable integration, and cross-border trade. They also offer investors regulated, inflation-linked cash flows with strong growth potential. “Investors are not just able to potentially earn stable returns – they are also playing a role in enabling other parts of the transition,” says Marshall.
Key drivers of growth
Marshall highlights four pivotal subsectors driving Europe’s investment case:
- Data Centres – Demand surge from AI and cloud, plus emerging markets beyond FLAP-D hubs.
- Renewables and alternative fuels – Scalable, de-risked projects and drop-in fuels that fit into existing value chains.
- Transport – Decarbonisation of airports and expansion of rail/public transit driving long-term demand.
- Grids – Inflation-linked, stable returns with structural growth from electrification and renewable integration.
These sectors combine resilience with growth, positioning them at the core of Europe’s infrastructure transformation.
Why Infrastructure appeals to investors
Infrastructure offers qualities that are increasingly attractive to investors across the risk spectrum. Its long-term, income-based returns provide predictability, with many assets potentially offering inflation protection. Regulated sectors such as grids or utilities provide defensive characteristics, while growth-oriented subsectors like digital infrastructure and renewables offer exposure to secular megatrends.
“Infrastructure delivers the best of both worlds: stability and scalability,” Marshall says. “We believe it generates resilient cash flows while allowing investors to participate in the transformation of Europe’s economy.” The diversification benefits are significant too – offering portfolio resilience during market volatility and alignment with sustainability objectives that are now central to institutional mandates.
Challenges and considerations
Despite the opportunities, infrastructure investing in Europe is not without its challenges. The biggest hurdle is fragmentation: different national regulatory regimes, subsidy schemes, and permitting processes often slow project timelines and complicate scaling across borders. This complexity does offer investors the opportunity lower value entry valuations, but only if you can access them. As Marshall points out, “The fundamentals are strong, but execution risk in Europe can be higher if you don’t have the right expertise or partnerships.”
From a sector perspective, grid bottlenecks are also a constraint: connecting renewables or digital infrastructure to available capacity can delay projects and increase costs.
Conclusion: The road ahead
Europe’s strengths are clear: policy stability, market diversity, and attractive valuations. For investors, the subsectors of data centres, renewables, transport, and grids offer both resilience and growth – backed by long-term structural demand. As Richard Marshall concludes, “The transition is already underway. The question is not whether Europe can deliver, but how investors position themselves to capture the value it creates.”
Find out more about “The Transformation of Europe”
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