Globally, infrastructure has emerged as one of the fastest-growing asset classes, attracting significant capital from institutional investors. Currently valued at approximately USD 1.4 trillion, the global infrastructure market has seen private infrastructure assets under management increase more than fivefold over the past decade. Projections suggest that this figure could reach USD 2.3 trillion by 2029.

However, within this rapidly expanding landscape, infrastructure investment in emerging markets (EMs) remains disproportionately small, accounting for less than 10% of global infrastructure assets. This underinvestment is especially apparent in sectors that are essential for sustainable economic growth and social inclusion, including renewable energy, transportation, and digital infrastructure. The mismatch between supply and demand in these areas is stark. Despite the growing need, EM infrastructure continues to face a financing gap estimated at more than USD 750 billion per year. Addressing this gap presents both a substantial commercial as well as an impact investment opportunity, particularly as EMs experience accelerating economic and population growth, urbanisation, and an urgent need to adapt to climate change.

While large amounts of capital were raised for infrastructure investments in recent years, fundraising momentum has recently slowed. This is due in part to high levels of unallocated capital—commonly referred to as “dry powder”—which needs to be deployed before new funds could be raised. Now, as dry powder levels begin to decline, a new fundraising cycle is expected to emerge once it falls below the 20% threshold relative to total assets under management.

Investor interest in EM infrastructure is also evolving. A recent survey by Preqin revealed growing appetite for infrastructure debt strategies, particularly in regions such as India, Southeast Asia, and South America. India, for example, attracted interest from 47% of surveyed investors and 35% of managers, while Southeast Asia drew attention from 37% of investors and 29% of managers. South America also featured prominently, with 28% of investors and 19% of managers targeting the region. Africa, despite its high development need, showed a notable divergence, with only 12% of investors expressing interest compared to 26% of fund managers.

Historically, banks were the primary financiers of infrastructure projects in EMs. Regulatory changes however, such as Basel III, have reduced banks’ capacity for long-term lending, leading to a decline in their share of infrastructure financing. Alternative lenders are thus in demand as bank funding is constrained by saturation, regulation, and tenor limits. According to various reports, approximately 65% of infrastructure projects are currently financed by banks, whereas this share used to be 90%. The market for investable EM infrastructure debt products for investors remains nascent. Very few products are available only through closed-ended pooled funds, Collateralized Loan Obligation (CLOs) (such as those issued by Bayfront) or bespoke segregated mandates (often sleeves within global mandates), limiting access for many institutional investors. The scarcity of standardized, scalable debt instruments continues to hinder broader capital mobilisation.

We see clear patterns in investor sentiment regarding EM Infrastructure and climate finance.

• The appetite for illiquid EM investments remains constrained, largely due to geopolitical concerns, a high-interest rate environment making investment in DM attractive, and a general unfamiliarity with EM dynamics.
• Most institutional investors from developed markets (DMs) tend to focus at best on countries ranked DAC 4 and above, reflecting a preference for more established EMs. Frontier markets—those falling into DAC 1–3 classifications—often fail to register on their radar. Africa, for example, is widely perceived as uninvestable, except for a few markets such as South Africa, Mauritius, Egypt, Morocco, and Nigeria.
• Further, institutional investors exhibit a low tolerance for greenfield/construction risk and favour stable operational, income generating infrastructure assets.
• Diversification—both geographical and sectoral—is another key requirement, as concentrated portfolios are often penalised by credit rating agencies.
• Most EM infrastructure loan assets are sub-investment grade, while many investors require investment-grade (IG) rated propositions.

The Emerging Africa & Asia Infrastructure Fund (EAAIF) is one of the longest-established blended-finance debt vehicles, founded in 2001 to help close the infrastructure financing gap across Africa and later expanded to the Levant, South and South-East Asia, and the Pacific.

As a Private Infrastructure Development Group (PIDG) company, managed by Ninety One, the fund provides long-tenor, commercially structured loans that enable impactful private infrastructure projects to proceed in its target markets. Over its 24-year history, EAAIF has built an active loan portfolio of roughly US$1.65 billion, committing more than US$3.25 billion to over 135 projects across 30+ countries and 10 infrastructure sectors.

The fund benefits from an A2 (Stable) rating from Moody’s, underpinned by its disciplined risk management and resilient capital structure. EAAIF has also demonstrated strong capital-raising capacity, having secured over US$2 billion of debt financing across nine rounds, leveraging donor-backed equity injections from PIDG shareholder governments to create a scalable and sustainable blended-finance platform.

EAAIF’s long-term credit experience is characterised by a loss rate of less than 15bps per annum, achieved while maintaining an average internal portfolio rating of B. This combination show that, despite the rating profile, the asset class exhibits low volatility, stable cash flows and low realised loss rates when supported by disciplined structuring, ongoing monitoring and generally solid recovery outcomes.

This resilience has contributed to solid financial outcomes and fund profitability. Beyond financial returns, the fund has mobilised more than US$16 billion of private-sector capital and enabled improved or new access to essential services for over 150 million people, while advancing sustainable development goals across energy, water, digital infrastructure, transport, and social sectors.

EAAIF’s blend of stable returns, disciplined credit management, and measurable development impact underscores its continued relevance as a leading provider of long-tenor infrastructure finance in frontier and emerging markets.

EAAIF at work

Improving road safety and reducing congestion with sustainable public transport in Senegal

Dakar is home to nearly a quarter of Senegal’s population, but underdeveloped and expensive transport options leave 70 per cent of people reliant on walking as their primary mode of transport. On the busy streets of African cities such as Dakar, Lagos, and Kinshasa, it is not uncommon to see urban dwellers in long queues, competing for a place on overcrowded public buses. Road-related infrastructure designed around the needs of motorists can prove dangerous to pedestrians. Commuters are impacted by a lack of mobility solutions as businesses and economies are equally constrained by gaps in public infrastructure that prevent the efficient movement of services and goods.

In March 2022, the Government of Senegal (GoS) signed a 15-year bus rapid transit (BRT) concession agreement with Dakar Mobilité S.A. to procure, maintain and operate electric buses / coaches and associated equipment and systems as well as to operate and maintain the BRT project in Dakar.

The project revolutionises Dakar’s public transport system, reducing emissions while easing traffic congestion and improving road safety. Through PIDG’s investment of EU 46m through its debt fund, Emerging Africa & Asia Infrastructure Fund (EAAIF) in 2024, the project will roll out a new fleet of 121 buses operating across 13 municipalities and an 18.3km route. The public transport system will eventually carry 300,000 passengers daily between the suburbs and the city. This landmark project signifies a first for Africa as the continent’s only all-electric public bus network, designed to reduce travel time across the city by 50 minutes and carbon dioxide emissions by 59,000 tonnes annually. PIDG provided a further USD 10m of viability gap funding through technical assistance to support the project’s viability and affordability.

The project required a total investment of approximately USD 128 million (including grant), with senior debt funding of USD 93 m (approximately). EAAIF, together with Proparco, is providing senior debt funding on a 50-50 basis. Meridiam provided 100 per cent commercial equity. The construction of the ‘hard infrastructure’ was funded by EIB and the World Bank and does not fall in the scope of this project. Dakar Mobilite will also benefit from a grant from the European Union (EUR 6.97 m ~ USD7.565m), arranged/facilitated by Proparco. IBRD is also providing a subsidy that will feed directly into Dakar Mobilite’s revenue to allow for 17 per cent of BRT users to benefit from half price social tariff tickets to ensure vulnerable people have access to the system. The project is now operational.

Additional link: Dakar Bus Rapid Transit – PIDG Portfolio