Infrastructure is a resilient asset class, with market analyses showing that it offers lower-risk and stable returns even in turbulent markets. Between 2016 and 2022 alone, infrastructure funds saw average annual returns of 11.3%. This resilience likely contributed to the notable rise in private investment in infrastructure projects in 2023, which exceeded the five-year pre-pandemic average according to the World Bank’s Infrastructure Monitor.
However, this growth has been uneven. While developed economies continue to attract capital for their energy transition and digital infrastructure, investment in emerging markets – where the need for better electricity grids is more urgent – lags behind. Emerging markets and developing economies (EMDEs) currently receive less than 15% of global clean energy investments, despite housing more than half of the world’s population. This disparity in investment widens the gap between developed economies and EMDEs.
While governments and regulators have a role to play in closing this gap, there is an opportunity for private finance to step up.
The landscape so far
To understand where private finance fits, it’s important to recognise who’s already active.
Multilateral development banks, philanthropies, development finance institutions (DFIs)and NGOs have been instrumental in funding grid projects across emerging markets such as Haiti, Mozambique, and Uzbekistan, to name a few.
Current efforts by philanthropies, DFIs, and NGOs have proven what is possible and de-risked the early stages of grid development – but they fall short of the scale of capital required to achieve universal energy access.
This is where private finance has a critical role to play.
Private finance can build on the foundations already laid, leveraging market intelligence and lessons from early projects to attract capital at a level only commercial investors can bring. For private investors, the opportunity is twofold: delivering measurable social and environmental impact by enabling reliable, affordable energy access, while also tapping into long-term, resilient investment opportunities in fast-growing economies.
