Reducing the Infrastructure Gap through Pension Fund Investments
This paper deals with the question of how the PIDG (Private Infrastructure Development Group) could incentivize pension funds to invest in infrastructure projects in developing countries and therefore contribute to close the infrastructure gap.
First of all, the importance of infrastructure will be high-lighted. In a second step, the characteristics of infrastructure investments, pension funds and PIDG are elaborated. In a third step, two best practices examples of Sweden and Nigeria are analysed.
This exhaustive analysis demonstrates that on one hand pension funds are rather risk-averse and on the other hand some opportunities for infrastructure investment would exist. Therefore, the challenge is to match and convince pension funds of the relevance of infrastructure investments in developing countries.
These insights lead to three recommendations for the PIDG. So,
- first, PIDG could use different communication channels, as an investor brochure,
- second, it could establish a fund with the concept of blended finance and
- third, it could provide various de-risking mechanisms.