Financial Returns to Equity Investments in Infrastructure in Emerging-Market and Developing Economies

Despite the scarcity of infrastructure in emerging-market and developing economies (EMDEs), in the absence of readily accessible data on the historical performance of EMDE infrastructure as an asset class, private investors are reluctant to finance infrastructure projects in these countries. We begin to fill this information gap by computing the financial returns from equity investments in primarily unlisted firms in EMDEs made by the International Finance Corporation, the private-sector arm of the World Bank Group. The public market equivalent of 266 equity investments in core infrastructure by the IFC, with starting dates from 1961 to March 2020, was 1.17 using the S&P 500 as a benchmark, and 1.26 using the MSCI Emerging Markets Index. On average, over the past six decades, equity stakes in emerging-market infrastructure backed by the IFC thus delivered higher returns than investments in portfolios of publicly listed equities. Data from the full sample of IFC equity investments reveal that, on average, a diversified portfolio of investments in infrastructure-related sectors, and indeed, in all sectors more generally, generated significant positive financial returns, albeit with variation across decades.