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/