Financing Development: Private Capital Mobilization and Institutional Investors

Abstract

This report discusses key issues around the mobilization of private capital for development. Investment requirements are huge, especially for infrastructure, climate and other SDG-related investments. External finance for developing countries stagnated in the years before the pandemic, followed by a major setback in 2020/2021. The focus is in particular on institutional investors, whose exposure to less-developed countries is still very low, even more so in unlisted assets and projects. There is a potential for progress as asset owners seek new diversification opportunities in growth markets. The main burden is on governments to create favourable business conditions for investable long-term assets. Policy makers, development finance institutions and investors should utilize the full spectrum of investment vehicles - commercial, impact and blended finance.

Keywords: development finance, private capital, institutional investors, emerging markets, blended finance, infrastructure investment, asset owners, impact investment, SDG investing, multilateral development banks, development finance institutions

JEL Classification: F21, F3, G15, G18, G2, H54, H57, J32, L9, M14, O16, O18, 019, Q01, Q5