Greenfield Investment: Demystifying Incremental Risks

A significant percentage of equity investors choose not to deploy capital to greenfield projects, preferring instead the greater perceived security of operational brownfield investments. However, if the unknown risks for such projects can be systematically identified, quantified, and successfully managed, the result will most likely be a successful investment, with no greater real level of investment risk than that of already operational infrastructure.

Marsh & McLennan Companies’ insights paper on greenfield investment risk examines the incremental risks impacting investors. The risks fall into a number of different categories, particularly:

• Construction.
• Commercial.
• Capital availability.
• Geographic.

The paper explores measuring and managing greenfield risks, including the practical strategies for achieving a greenfield premium, government support, and structuring projects for investment return during the construction and ramp up phases of a project.