According to several estimates, financing the infrastructure gap in developing countries will take more than an additional USD one trillion a year. In the last few years, policy-makers have been turning their attention to ways to mobilize, to that purpose, part of the USD 85 trillion reportedly held by institutional investors such as pension funds, insurance companies and private equity funds.
This push to increase the funding from institutional investors that goes into infrastructure increasingly is taking the form of a model with some distinct characteristics. For instance, the emphasis on an “enabling environment” — legislation and regulations to attract and protect the interests of private investors– in the country hosting the infrastructure, and a penchant for large-scale infrastructure projects (e.g., energy, transportation, water) as opposed to the small- or medium-scale infrastructure that oftentimes is associated to meeting the needs of the poorest.
Issue No. 8 of a series of primers prepared by RightingFinance explains what are the characteristics of this new trend on financing infrastructure, what issues it raises from a human rights perspective. It argues that, while human rights law creates obligations for all parties involved in an infrastructure project, the involvement of institutional investors in the financing or operation of the infrastructure entails additional consequences for financial regulation, and formulates recommendations.