According to numbers from the Banco Central do Brazil, 76.4% of the country’s 211 million population now use Pix, followed by debit cards at 69.1% and cash at 68.9%.

“Pix has transformed the Brazilian economy; it expanded financial inclusion, formalized part of the informal economy, and gave the government greater visibility into transactions,” explains Reginaldo Nogueira, national director at the Brazilian Institute of Capital Markets (Ibmec).

“It’s not just a payment innovation; it’s a structural reconfiguration of how money circulates and how the state collects revenue,” he adds. According to the Brazilian Banking Federation, there were 68.7 billion Pix transactions in 2024 alone, a massive 52% increase from the prior year, reaching roughly $5 trillion in value.

The massive uptick was due to increasing person-to-business transactions via the system, which recorded a 90% year-on-year jump in 2024, according to a study by Matera Research.

Pix recorded its largest one-day volume on December 20, 2024, when the system handled 252.1 million transactions.

“The central bank’s digitalization agenda, led by Pix, is in full swing and transforming how Brazilians make payments,” said Rodrigo Teixeira, director of administration at the central bank. The central bank aims to expand PIixs functionalities into the credit side, incorporating features such as installment payments and enabling future Pix transactions to be accepted as collateral in lending transactions.

Pix is also growing on the stablecoin side, with the central bank recording a massive increase in Tether (a stablecoin pegged to the US dollar) transactions over Pix this year. Courtnay Guimarães, head of Digital Assets at Bradesco Bank, explains, “With a crypto account and Pix, anyone can convert funds in real time, gaining access to up to 180,000 assets globally.”

“Illicit trade threatens public safety, undermines intellectual property rights, and hampers economic growth, and the risks could increase as counterfeiters leverage new technologies and techniques to avoid detection,” said OECD Secretary-General Mathias Cormann.

More recent national data for the US confirms the trend. According to US Customs and Border Protection, the total number of goods seized at the US borders for intellectual property rights violations more than doubled from 2020 to 2024, and the total manufacturer’s suggested retail price of these goods increased by 415%.

The OECD/EUIPO report describes increasingly sophisticated assembly, logistics, and distribution methods. Counterfeiters are adopting “localization” strategies to place final assembly closer to target markets, using international waterways such as the Danube River. With their reduced oversight, free trade zones “play a pivotal role in this trend,” the authors added.

Product diversification runs hand-in-hand with greater reliance on e-commerce for distribution. Designed to combat the illicit trade in pharmaceuticals, vaccines, medical devices, and everyday consumer products that pose risks to health and safety, the World Customs Organization’s Operation Stop III, conducted last December by 111 customs administrations, found that 71% of cases involved parcels ordered over the internet, “confirming how easily unsafe goods bypass normal import checks,” said David Gammill, founder of Gammill Law Accident & Injury Lawyers, a California-based law firm.

China leads the production rankings, accounting for 45% of all reported seizures in 2021. Additional major players hail from elsewhere in Asia, the Middle East, and Latin America.

In the US, tech giants like Google and Meta lead the change, scaling back large campuses and embracing flexible, remote-friendly work models. Salesforce sold its iconic San Francisco headquarters in 2023, shifting its focus to regional hubs. Financial firms in New York, including JPMorgan Chase and Goldman Sachs, are redesigning offices to prioritize collaboration over individual desks.

Across Europe, companies such as Siemens, SAP, and Nestlé are adopting networks of smaller offices or dual headquarters in cities like London and Munich to support regional flexibility Similarly, UK banks have invested in flexible office solutions to meet evolving employee expectations.

In Asia, Samsung is decentralizing its Seoul headquarters, creating innovation hubs closer to employees, while Alibaba is experimenting with remote-first teams. Japanese firms like Toyota and Sony are balancing their traditional office culture with hybrid practices.

This decentralization is reshaping urban real estate markets worldwide. Major finance centers such as New York and London are seeing declining demand for large office spaces, with vacancy rates rising. Meanwhile, secondary cities, including Austin and Singapore, are attracting companies seeking lower costs and a higher quality of life.

Ultimately, the corporate headquarters will become a flexible network shaped by evolving work cultures and technology. Companies are investing heavily in collaboration tools and virtual meeting platforms to maintain productivity across dispersed teams. As this shift continues, businesses and urban planners must adapt, setting the stage for a reimagined future of work and city life.

The new model’s success will hinge on how well firms balance flexibility with connectivity. Embracing digital tools alone isn’t enough; companies must foster a strong culture that keeps remote and in-office employees engaged and aligned. Those companies that navigate this hybrid future effectively will redefine productivity, innovation, and employee satisfaction in the years to come.

For its part, Banco BPM recently acquired asset manager Anima for over $2 billion.

“When the wave of consolidation rises, there is almost always a domino effect, with the banks trying to defend their competitive position. In Italy, it was triggered by Intesa’s merger with UBI in 2020, which widened the market share gap with smaller players. In particular, it put pressure on UniCredit—the second largest domestic bank—to strengthen their competitive position,” says Paola Biraschi, managing director, European Banks Credit Research, at CreditSights, a FitchSolutions company.

In a highly competitive context, many other Italian banks have recently made headlines.

Earlier this year, Monte dei Paschi, Italy’s oldest bank, took the country by surprise when it proposed a $14 billion all-share merger offer for private investment bank Mediobanca.

Meanwhile, Mediobanca announced a voluntary public exchange offer for 100% of Banca Generali, a deal worth $7.1 billion, to create an Italian leader in wealth management.

In January, Banca Generali completed its all-cash buyout acquisition of broker Intermonte for $112 million.

Another important deal is BPER Banca’s $5 billion, all-share exchange offer for its competitor Banca Popolare di Sondrio. The European Central Bank recently cleared the bid.

“We already know that economic growth in the first quarter of 2025 was very strong. That’s a solid starting point,” says Miguel Cardoso, chief economist for Spain at BBVA Research. First-quarter GDP, published at the end of April, was 0.6%, quarter on quarter.

Over the past five years, Spain has drawn international attention for its robust growth compared with neighboring countries. A combination of strong domestic demand—driven by tourism, immigration, and public spending—has fueled a much-needed expansion while the country’s standard of living has edged closer to that of wealthier European nations.

Since 2021, when Spain began recovering from a steep contraction, GDP growth has consistently outpaced the broader eurozone. Last year, it notched 3.2% compared to 0.7% for the eurozone.

The International Monetary Fund (IMF) projects Spain’s growth will remain above the eurozone average at 2.5% in 2025, 1.8% in 2026, and a medium-term potential of around 1.7% for subsequent years, but warns of downside risks including escalating trade tensions, increasing domestic political uncertainty, and demographic aging.

Early on, some economists predicted that Spain’s streak of outperformance would be short, citing structural challenges such as a limited infrastructure capacity, persistently high unemployment, an aging population, and a shortage of innovation-driven, highvalue jobs. So far, however, those forecasts have proven incorrect.

In late April, a power blackout occurred across the Iberian Peninsula, demonstrating one aspect of weak infrastructure in both Spain and Portugal. Spain has poor connections to the European grid, which make it difficult to share power and balance supply and demand, especially when renewable energy generation fluctuates.

The day-long blackout “will probably subtract between 0.1% to 0.2% from GDP growth in second-quarter 2025,” Cardoso predicts, “depending on whether firms can recover anywhere between 75% to 90% of lost production.”

Most economists express cautious optimism, anticipating that the impact on Spain of the Trump tariffs and global trade tensions, while not negligible, will remain relatively contained.

“Spain’s direct exposure to US tariffs is very limited. Exports of goods to the US represent just 1% to 1.5% of Spain’s GDP,” Cardoso notes. “That’s three to four times less than Germany’s exposure.”

Exports to the US are concentrated in specific products such as olive oil. According to the EU, Spain exported over 118,000 metric tons of the liquid to the US during the 2023-2024 crop year, with higher volumes expected in the current season thanks to increased availability and lower prices.

The bigger concern lies in the economy’s indirect exposure to a potential recession in Germany, Europe’s economic powerhouse. “A recession in Germany would be very bad for Spain’s tourism sector,” Cardoso warns.

In recent years, tourism has been one of the key drivers of Spain’s economic growth. In 2024, the country welcomed a record 94 million international visitors, narrowing the gap with France, which remains the world’s top destination with 100 million. For economists, the question has been when the supply of tourism-related services—such as hotels, bars, and restaurants—would begin to show strain under rising demand.

So far, however, tourism continues to expand, stretching into off-peak seasons and reaching less traditional destinations.

“Data through March show that foreign spending in Spain is still growing at double-digit rates. Credit card spending by foreigners rose 12% to 13% year-on-year in the first quarter,” Cardoso notes.

Tourism patterns are also shifting, he says, as travelers take shorter, more frequent trips rather than the traditional, fixed-period family holidays. The change is enabling a more efficient use of tourism infrastructure, he says.

But growth in demand could still hit a limit in the number of hotels, restaurants, and other structures available.

“There are already signs of price pressures, and infrastructure will soon reach its limits,” says Sergi Jiménez-Martín, professor of Economics at Pompeu Fabra University in Barcelona. “I wouldn’t mind seeing a negative shock to tourism, as it could ultimately benefit the economy by encouraging more semi-skilled youth and immigrants to shift into other industries.”

Tourism is a low-productivity, lowvalue-added sector, he argues, and redirecting employment toward other areas could lead to a more efficient and healthier economy.

Another element behind Spain’s recent outperformance is immigration.

“The Spanish economy expanded significantly, partly because the Covid-19 shock was so severe but also because of strong population growth, with about 2 million new residents, mostly from Latin America,” Jiménez-Martin says. Shared language and cultural ties have helped make immigration a net benefit for the economy, he adds, and while the new residents have often been low- or middle-qualified workers, a more promising expansion would be in different high-value growth sectors.

The pharmaceutical industry stands out as a success story. Accounting for some 1.5% of GDP and employing about 170,000 people in high-value jobs, it plays a still-small but promising role in the economy.

Spain is already one of the world leaders in clinical research. Since last year, it has ranked first in Europe, conducting nearly 1,000 clinical trials annually and surpassing Germany for the first time. Coming as countries like Germany and Belgium are seeing declines, this growth is driven by tax incentives, a cost-effective and skilled workforce, and a relatively fast regulatory process.

“Spain has some of the world’s fastest approval times,” says Oscar Salamanca, CEO of Ápices CRO, which provides support for clinical trials, and president of the Spanish Association of Contract Research Organizations (ACRO). “The time to treat the first patient is usually 90 to 100 days, compared to up to 300 in other countries. Costs are also much lower: up to five times less than in the US and two to three times lower than in much of Europe.”

These advantages have attracted global pharmaceutical giants like Novartis, Roche, and AstraZeneca, to establish research centers in Spain: particularly in Madrid and Barcelona, with additional hubs in Valencia, Seville, Málaga, and Santiago de Compostela.

While tourism and pharmaceuticals, each in its own way, point toward future economic growth, a relatively low level of investment—mostly due to regulation and uncertainties—has many economists worrying that high public debt and an uncertain political landscape will cause Spain to hit its infrastructural limits in the coming years.

The government of Prime Minister Pedro Sánchez is a coalition between the socialist PSOE and other political forces to its left, including the main Catalan nationalist party. A new general election is to be held by August 2027.

Public debt level as a percentage of GDP was 101.8% at the end of last year. According to the latest IMF report, Spain’s debt remains vulnerable to growth and financing cost shocks.

“Given still-high debt and the economy’s strong cyclical position,” the IMF recommended in its April report, “there is a case for frontloading the authorities’ planned adjustment, strengthening the national fiscal framework to ensure that regions contribute to the consolidation effort, and adopting employmentfriendly measures to address the projected growing gap between pension expenditures and social security contributions.”

Among the IMF’s suggested moves are harmonizing VAT rates and strengthening green taxation: measures that could replace a less effective banking tax that was introduced three years ago and could now be phased out.

The IMF praised Spain’s financial system and the stability of its banks. BBVA’s plan to merge with smaller rival Banco de Sabadell moved one step forward on April 30, when the National Authority for Markets and Competition (CNMC) approved the deal under certain conditions, although other authorizations are still required.

While Spain has undoubtedly been a post-Covid success story, the IMF stressed that to stay on this positive trajectory, maintaining sound fiscal and regulatory policies and avoiding missteps that could derail progress will be essential.

A clear indicator of this shift is the growth in insurers’ investment in alternative capital. Aon Securities calculates that global alternative capital lept from $24 billion in 2010 to $115 billion in 2024: a clear sign of the industry’s pivot toward broader capital strategies. The cost of damage from systemic threats such as ransomware is forecast by Cybersecurity Ventures to exceed $275 billion a year by 2031. Reflecting the impact of climate change, global inflation-adjusted insured losses from natural catastrophes grew almost 6% a year between 1994 and 2023, according to Swiss Re.

Across the entire property and casualty (P&C) space, carriers are wrestling with the need to protect profitability and capital in the light of spiraling claims costs while keeping their product affordable. This is especially true in personal lines, says Sean O’Neill, head of Bain & Company’s global insurance practice.

“Commercial P&C carriers have benefited from a hard market [a period when premiums increase, coverage terms are restricted, and capacity for most types of insurance decreases] the past few years,” he notes, “and are now increasingly focused on managing through earnings volatility as the market softens. In life insurance, the issue is often more one of accessibility: how to increase relevance and make it easier for non-affluent customers to understand and buy the product.”

Carriers are increasingly turning to insurance-linked securities (ILS), including collateralized reinsurance and sidecars, to improve risk-adjusted returns and increase capacity.

“There will be more cyberrelated losses as the economy becomes increasingly connected.”

Sean O’Neill, Head of Global Insurance, Bain & Company

These concerns are also visible in headline capital figures. According to Aon, global reinsurer capital reached a record $715 billion in 2024, driven by strong retained earnings and an expanding catastrophe bond market that saw outstanding bond limits grow to nearly $50 billion as of first-quarter 2025.

“Reinsurance capital continues to grow and keep pace with increasing demand,” observes George Attard, CEO, Reinsurance Solutions, Asia Pacific at Aon. “Heading into the mid-year renewals, we expect over $7.5 billion of additional US property catastrophe limit demand, mostly due to a healthier Florida market and the depopulation of the state windstorm insurer Citizens. We also anticipate some additional reinsurance purchasing from US national carriers looking to mitigate further major net losses during 2025.”

Available capital does not eliminate risk or uncertainty, however. Attard highlights the continuing impact of geopolitical and macroeconomic volatility on exposure modeling, inflation assumptions, and investment returns. Further, catastrophe losses during the remainder of 2025, including the Atlantic hurricane season, may yet impact future market conditions beyond the US.

Aon’s April 2025 Reinsurance Market Dynamics Report anticipates that this year is likely to record the highest firstquarter losses from natural catastrophes in over a decade. At between $11 billion and $17 billion, ceded losses from the Los Angeles wildfires have absorbed 25% to 33% of major reinsurers’ annual catastrophe allowances, which could affect how some come to the market at mid-year.

“June and July are key renewal dates for insurers in the US, Australia, and New Zealand, which along with Japan, are among the world’s largest markets for property catastrophe reinsurance,” the Aon report notes. Despite early-year losses, the broker expects broadly stable renewal dynamics, driven by continued capital inflows and unfulfilled reinsurer appetite.

Much of this capital flow is occurring through structured and alternative mechanisms. Growth in sidecar capital has contributed to broader buoyancy in the ILS market, with strong investor returns matched by persistent demand from originating insurers amid inflationary pressure and changing views of risk. Sidecars, however, are expected to post negative first quarter returns due to the Los Angeles wildfires.

The Asia Pacific region represents a particular opportunity for capital innovation. With low insurance penetration and material catastrophe exposure, the region is attracting increasing policy support and capital interest. Aon’s April renewals report notes that Hong Kong and mainland China are actively promoting the catastrophe bond market and more sophisticated regional sponsors are exploring sidecar structures to access third-party capital. In 2021, Aon structured and placed a $30 million catastrophe bond for China Re, the first to be issued from a Hong Kong-based special-purpose insurer.

In parallel, facultative reinsurance—coverage purchased by a primary insurer to cover a single risk or block of risks—has grown markedly. Recent renewals in Asia-Pacific and elsewhere have seen oversubscription and improved pricing as both new entrants and incumbents expand their appetite. The market is experiencing active competition from London and Singapore, Aon suggests, alongside growing capacity from managing general agents, consortiums, and facilities. Aon’s own Marlin APAC facultative facility, launched recently, offers up to $15 million per risk and is targeted at property and renewable energy exposures in the region.

Parametric policies also continue to receive attention, although the size of the market remains limited.

“Despite its long history, parametric insurance has yet to reach any significant scale in the industry,” Bain’s O’Neill explains, adding that climate change and associated perils may boost demand and that AI could be a powerful catalyst.

“This construct has the simplicity of getting payments paid faster through a dramatically simplified claims process,” he says.

“AI has the potential to reduce basis risk, or the difference between the actual loss and the stipulated value rate in the parametric construct. The more data that can be ingested and managed by AI, combined with the declining cost and increased power of computing, the more the potential to increase the fidelity of the models that underlie a parametric policy.”

Cyber has similar loss-pattern challenges to those caused by climate, according to O’Neill: “There will be more cyber-related losses as the economy becomes increasingly connected; some will be small, some large, and the range of possibilities is endless.”

The industry’s pool of capital is growing alongside an even steeper escalation in underlying risks. Climate volatility, cyber threats, geopolitical instability, and inflationary uncertainty are all expanding in scale and complexity, and despite growing capital availability, fundamental challenges persist; chief among them, price-to-risk misalignment.

In some regions, particularly those exposed to flood or wildfire risk, O’Neill notes, homeowners are exiting the insurance system altogether, threatening to create “insurance deserts” with broader economic consequences including risk to mortgage-backed securities.

In certain flood- or fire-prone regions, and for specific perils like terrorism and cyber, greater collaboration between public entities and insurers may be needed in the future, he argues.

“Given the affordability and accessibility challenges across many jurisdictions, the increasing size of the protection gap, which is approaching $2 trillion, and the increasing role the insurance industry needs to play in prevention, greater collaboration between insurers and public entities will be required,” O’Neill explains. “Participants walk a fine line to get the right balance in publicprivate partnerships and matching price to risk, without increasing moral hazard into risk-taking by businesses or consumers.”

There are other fine lines to walk in the current environment, with geopolitical uncertainty a key risk vector. President Donald Trump’s trade and policy stance, for instance, may continue to significantly influence global risk transfer dynamics. To navigate these pressures, some insurers are pursuing mergers and acquisitions as a means of reshaping their capital and risk portfolios.

Says O’Neill, “As insurers contemplate the need for a broader range of scenarios given market uncertainty, we are seeing aggressive M&A moves to re-shape their portfolios, such as Japanese life [insurer] acquisitions in the US, increased tie-ups and scale building in asset management in the US and Europe, and greater activity by private equity-backed consolidators: especially in distribution and insurtech.”

Heerkens cautions that while his firm’s overall experience has been positive, Malaysia has a conservative business culture and decisions often take longer than foreigners may be accustomed to: “Business development, in particular, requires a greater emphasis on building strong relationships—guanxi—and this more deliberate approach is something to be aware of and to factor into your planning.”

Heerkens advises companies considering investment in Malaysia to adopt a longer-term—three to five years—perspective, plotting it as a second-or third-stage expansion in Asia after setting up a regional headquarters in a more established hub like Singapore.

“While your investment will go further in Malaysia compared to Singapore,” he cautions, “it’s essential to recognize that it requires a greater on-the-ground presence.”

That said, Akshiya’s Santhirasthipam expects the economy to keep on its current growth trajectory.

“Malaysia will remain strong in services, manufacturing, and digital economy for the next 20 years or longer,” she predicts, underscoring the high level of foreign direct investment in the Johor- Singapore Special Economic Zone as well as the island of Penang and Sarawak in northern Borneo. Enterprises that have recently attracted attention in these regions are a longish list: medical tourism, eco-tourism, speciality hotels and hospitality, lifestyle commercial centers, digital economy and data centers, premium assisted living and retirement residential developments, life sciences and biotechnology, green economy and energy transition, agro-processing industries, and innovative farm-to-table solutions.

“Any investment in manufacturing projects should be close to the best infrastructure locations of Penang, Johor, and Selangor,” Santhirasthipam advises.

As a small and open economy, officials are equally confident in the country’s near future, despite the roiling global trade picture.

“Malaysia is not insulated from these global developments,” says Ghaffour. “Nevertheless, our diversified economic structure and policies accord us the resilience and agility to navigate headwinds. Overall, we are confident that the economy will remain on a steady growth path.”

Rouven Bergmann: The balance of managing long term and short term is always the biggest struggle for the CFO. You have to create the capacity to invest in the long term, but you also have to manage performance quarter to quarter. Certainly, 2024 was a difficult year, because of volatility in the end markets. There was a lot of geopolitical instability in the world and in Europe. Think back to the European elections and the uncertainty in France. This really has been a headwind in terms of decision cycles.

The timing of decision-making is becoming a bit less predictable for our customers. It’s not that they’re deciding against us or for the competition—that’s not the case. We are winning market share from the competition. But managing the cycle of transactions and deals has become really something that’s more difficult to predict.

To give you an example, we signed a strategic agreement with Volkswagen in December of last year; the first discussion started two years ago.

GF: What’s the impact of the new US tariff policy?

Bergmann: Clearly, 2025, with the situation that the US administration has started with tariffs, is creating a lot of uncertainty for our customers. Now they need to invest and adapt to the new world. I’m not worried about our future, but for sure, there could be short-term volatility and noise.

GF: There is a sort of academic debate over how the role of the CFO has changed: becoming more an ally and business partner of the CEO and less an accountant. What do you think?

Bergmann: I have been in this role for 10 years at different companies. For me, I don’t think it has changed. I think there are three types of CFOs. There is more of an accountant, who comes from the audit function, which I think is more about compliance and implementing standards but has less business interaction. Then there is the CFO who comes from an investment bank, who is more about capital and markets and investor communication. And then there is the operational CFO, who is deeply connected to the company’s value creation cycle. I think today you need to find the right mix of the three.

GF: What do you suggest to someone who is young and wants to become a corporate CFO?

Bergmann: Gain as much experience as you can with a company, in and out of finance. The CFO role is much more than finance; you have to understand the finance function, but also understand how the business works.

For example, when I was already at a very senior level at a software company, I left finance and worked as COO of product development. It was a role that was a combination of operational planning and financial planning. I had to find the right resource allocation mix, maintaining and optimizing what exists, while freeing up enough capacity to develop new products.

At the same point in time, we all know that there are constraints to resources. You cannot hire as many people as you want, so you really have to find productivity, move people around, and create that flexibility in your workforce. The company where I did that was one of the largest software companies in the world. There were 20,000 engineers in software development. So, I really learned the operational part of the company, and now I can combine that with finance.

AI’s insatiable appetite for computing power, coupled with the current demand/supply conditions for cloud-based AI workflows/use cases, has supercharged the pace of investment and development of data centers. A data center is a facility housing cloud computing and storage resources that enable the delivery of software applications, the training of AI, and any number of additional processing and production applications.

Currently, the US is leading the AI power race, having built the largest number of data centers in the world. Statista reports that as of March, the US was home to 5,426 facilities, followed by Germany with 529, the UK with 523, and China with 449. By 2030, these numbers are expected to increase by about 30-40%. Globally, investment in data centers is forecast to reach $7 trillion.

How does the investment needed to build a data center break down?

“If someone owns a land parcel where data-center development is feasible, then the value of that land is significantly higher than it would be absent that demand,” says Tim McGuire, senior director of Project Finance at Rowan Digital Infrastructure, a developer and builder of data centers in the US. “For example, we see land in core markets like Northern Virginia exceed $2.5 million an acre, and to fit a hyperscaler development—Amazon Web Services, Google, Microsoft—we’re typically buying a hundred acres plus.”

Energy and water are both crucial cost components, and energy has been the gating issue in most geographies, McGuire adds.

“Data centers are very energy intensive,” he notes, “and even if the energy infrastructure is there to power them, building an interconnection can take months if not years. The cost of building those interconnections can be high. We’re therefore seeing more and more utilities—particularly utilities where the data center boom has really put strain on them—require some form of security for them to undertake the interconnection work.”

Well-capitalized developers that can afford to meet those requirements, have the advantage he says.

The dynamics related to power availability are different for data centers, observes Gordon Bell, principal at EY-Parthenon Digital Infrastructure. “Europe is particularly challenged with respect to power availability, given some of the local regulatory hurdles around expanding the power infrastructure,” he says. “The same thing is also true in North America, whereas in Asia it is relatively fast to build out that infrastructure.”

Graphic processing units (GPUs) are essential for all things AI, and some countries face further restrictions to data center development depending on how many GPUs they can import at any one time, Bell adds.

“Countries like Canada, Japan, Australia, and many in Europe don’t have restrictions on GPU imports,” he says, “which has created another catalyst for growth in the market in those regions.”

Also, different countries will offer specific incentives around the development of data centers. Some Middle Eastern countries, including the United Arab Emirates, are aggressively incentivizing data center development within their borders, he adds.

Because building a data center is extremely capital intensive, backers are typically global companies like Blackstone, notes Claus Hertel, managing director at Rabobank, an active lender in the space and developer of its own green data center in the Netherlands. A lot of investors and lenders have relationships with these big firms and have assembled large project finance teams that are active in renewables, clean tech, and digital infrastructure.

“At the basic level, you have project financing, which incorporates construction, financing, and term financing,” Hertel says. “Once the data center is complete, you have a certain amount of time—typically a three- to four-year period—where the sponsor can decide how to access permanent capital or permanent financing. That could be in the form of asset-backed securities, commercial mortgage-backed securities, or a private placement to long-term investors. So there are different pockets of capital, short-term or longer term.”

Like many of its peers, Rowan Digital Infrastructure is sponsored by a private equity firm, Tim McGuire says.

“Typically, a private equity investor will front some of the pre-development costs, which could include acquiring the land parcel and doing some of the horizontal development,” he notes. “Rowan doesn’t put debt financing in place for projects until we have a signed lease, because at that point, we’re able to obtain very attractive terms. The hyperscaler customers are large, well-capitalized, profitable public companies with high investment-grade credit ratings. After signing a long-term lease with them, it opens low-cost debt capital that provides 80% to 85% of the capital needed to build the project.”

“The context for all of this is that the industry has grown tremendously over the last couple of years, and it’s expected to accelerate going forward,” says Gordon Bell. “That just requires more and more capital—more capital than a lot of the existing owners of these assets originally underwrote. They’re looking for ways to raise new capital as well as recycle capital.”

One of the possible solutions that is starting to percolate in the market, he says, is the introduction of dedicated funds that hold a portfolio of stabilized assets.

“That would then provide some diversification of risk and allow various investors looking to get exposure into the space to invest in a fund that holds a portfolio of assets across different markets and different customer,” he says.

“Typically, the stabilized asset deals that we’ve seen are for individual facilities or a handful of individual facilities,” he adds. “Those facilities provide exposure to very specific markets and within each of those facilities there’s oftentimes only a single customer. So, you’re placing a concentrated bet on a single customer and a single market. The private equity deals that have been made thus far have been more one off in nature, a handful of assets, or single assets. It’s not been anything that can programmatically scale globally, which is really what the industry eventually needs—a fund that would hold all these stabilized assets. Investors looking to get exposure into stabilized assets would then just be able to invest into this fund.”

Whatever the mechanism that gets it done, McGuire sees continued strong demand for data center development going forward, driven by continued investment from hyperscalers. AI will be a catalyst, but so will demand for cloud services.

“There’s a lot of support for the data center business for the foreseeable future,” he predicts.