Working Paper-Trillions or Billions

How big a contribution can we expect European institutional investors to make to financing the investment needs of emerging markets and developing economies (EMDEs)? The United Nations estimates that these economies need to make investments on the order of $4 trillion a year. In comparison, European institutional investors collectively manage $25.7 trillion (BCG, 2021). Hence, at first glance it seems that even shifting a small share of this capital towards EMDEs could make a big contribution to financing critical investments.

This argument has been played, and replayed, since 2015 when the Financing for Development agenda was launched by the UN, World Bank, and International Monetary Fund (IMF) alongside the establishment of the Sustainable Development Goals (SDGs) and Paris climate goals. But since then, little additional capital has flowed towards EMDEs from institutional investors – and in some areas, net capital allocations are now lower.

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