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institutional investors

Moving the juggernaut of institutional investment in EMDEs infrastructure

Jinsuk Park's picture


Photo: cegoh | Pixabay 

In my line of work, we have a Holy Grail that many brilliant people have spoken, written, and toiled to achieve: attracting international institutional investors to infrastructure projects in emerging countries.

Yet, according to the recent World Bank Group report, Contribution of Institutional Investors to Private Investment in Infrastructure, 2011–H1 2017, the current level of institutional investor participation in infrastructure investment in emerging markets and developing economies (EMDEs) is only 0.7 percent of total private participation.

This Bank Group report estimates that emerging countries need to invest $836 billion per year, or 6.1 percent of current service level of existing assets. Meanwhile, the International Monetary Fund (IMF) estimates that more than $100 trillion is held by institutional investors—with around 60 percent of assets held by pension and insurance funds from advanced economies—making the amount mobilized for EMDE infrastructure look even more paltry.

But the siren song still rings clear—these international, long-term, liability-embedded funds could be a game changer for filling the financing gap in EMDEs infrastructure and the World Bank Group’s Maximizing Finance for Development (MFD) agenda. 

Behold the White Knights! New research on institutional investor participation in financing EMDE infrastructure

Abha Joshi-Ghani's picture


Photo: Grzegorz Zdanowski / Pexels Creative Commons

Some regard institutional investors—with their deep pockets—as the white knights filling the huge investment gaps in infrastructure development in emerging markets and developing economies (EMDEs). The IMF estimates that some 100 trillion dollars are held by pension funds, sovereign wealth funds, mutual funds, and other institutional investors. Unquestionably, the long-term nature of their liabilities matches the long-term financing requirements of infrastructure projects. So, it’s no surprise that institutional investors are seen as the white knights of infrastructure finance.