World Economic Forum: Survey Shows That Seldom Used Financial Risk Mitigation Tools Are Key To Bridge The Emerging Marketsâ $1 Trillion Infrastructure Gap

A new report launched today by the World Economic Forum calls for international financial institutions to develop new tools and products to close the infrastructure gap in emerging and developing economies. The report, Risk Mitigation Instruments in Infrastructure: Gap Assessment, offers a framework for institutions to assess gaps in the provision of risk-mitigation instruments and to mobilize much-needed long-term infrastructure investment in emerging and developing economies.
 
According to G20 estimates, the operational commitments of major regional multilateral development banks and the World Bank Group total an estimated $80-90 billion. Despite the substantial balance sheet potential, the banks’ operations cover less than 10% of the infrastructure financing gap for emerging markets, which is estimated at $1‑1.5 trillion a year.
 
“International financial institutions are important in bridging the tremendous infrastructure investment gap in developing and emerging countries,” said Michael Drexler, Head of Investors Industries at the World Economic Forum. “The report finds that those instruments are not being used broadly enough and we believe there remains great potential for further development. The views of sophisticated investors controlling over $2 trillion in assets give good direction on how to create the necessary conditions for increased investment in infrastructure.”
 
The report outlines input from more than 40 institutional and private investors with total assets under management exceeding $2 trillion, as well as feedback from project developers and construction companies, global banking institutions, insurance and reinsurance companies, international financial institutions and professional services firms.
 
Specifically, the report identifies four key areas of action – addressed to international financial institutions and the broader infrastructure investment market – to allow for a significant scale-up of risk mitigation instruments: