Institutional Investors and Sustainable Infrastructure : A Global Review of Case Studies to Finance the Infrastructure Gap

Annual investments in infrastructure in 2020, combining public and private sector financing sources, were around 2.7 trillion, leaving a gap of 0.7 trillion. The gap is even larger if 2050 zero net emissions commitments are considered, as it is estimated that around 60 percent of emissions come from the energy and transport sectors. The private sector will need to play a significant role to fill this gap, given Emerging markets and developing economies (EMDEs) fiscal constraints, aggravated by the economic and social consequences of the Coronavirus (COVID-19) pandemic and the war in Ukraine. Development finance institutions (DFIs) have limited direct lending capacity. Therefore, their efforts to develop innovative structures to increase the leverage of their balance sheets and optimize private capital mobilization need to be significantly expanded and intensified. These should target more prominently global and domestic institutional investors in EMDEs whose assets under management have a negligible exposure to infrastructure in EMDEs. This report proposes several types of interventions and financial structures DFIs could lead for a greater role of global and local capital markets in financing infrastructure in EMDEs. Recommendations are informed by a thorough analysis of the most promising cases studies where DFIs could play a key role; a survey of a sample of the largest global institutional investors and asset managers; and interviews with practitioners from multilateral and domestic DFIs.