Risk Mitigation Instruments in Infrastructure: Gap Assessment
This report is designed to help policy-makers, multilateral and bilateral financial institutions and the private sector to navigate and understand the current state of affairs of Risk Mitigation instruments and jointly develop a compass for action in the future. For policy-makers, the report provides a guide to the issues that the providers of Risk Mitigation instruments need to consider in the future structuring of instruments, such as more standardization and complementarity. For investors, the report provides an aggregate assessment of the market of risk mitigation in infrastructure in emerging and developing markets and offers a means to enter into an effective dialogue on the problems and potential solutions in the complex field of infrastructure risk mitigation.
This report is not an exhaustive, detailed assessment of all Risk Mitigation instruments and products that are used both in infrastructure investments and other investment classes. Instead, it focuses on those products that are used to mitigate one type of these risks that make infrastructure a distinct investment class, namely, political risks. – A framework was developed to assess gaps in the provision of Risk Mitigation instruments in the emergingmarket geographies of Asia, Africa, emerging Europe and Latin America and the ability of the respective IFIs to provide risk mitigation. – The survey results confirm that the current array of instruments is too complex, has too little standardization and, as a result, is burdensome and costly for the private sector to use. – The survey points to deficiencies among IFIs in their technical capacity to execute Risk Mitigation instruments and, importantly, to process issues even for those IFIs that seem to have the required capacity to deliver (See appendix, page 32). – To allow for a significant scale-up, the survey findings and consultation process point to the following key recommendations: 1. IFI: Review existing instruments with the goal of arriving at a limited number of common, standardized products that are available globally through the relevant local/regional partner 2. Create a tradable infrastructure debt asset class by increasing standardization in the underlying debt instruments 3. Establish a harmonized dispute resolution mechanism 4. Establish a global/regional risk mitigation facility with(out) direct participation of international financial institutions
WEF. 2016. Risk Mitigation Instruments in Infrastructure: Gap Assessment. Geneva: World Economic Forum. [#4661]
