The Principles for Responsible Investment has recently published a very interesting report “Who Invests and How? Unlocking and mainstreaming institutional flows to EMDEs.” It is one of the clearest maps of who actually invests in emerging market and developing economies (EMDEs). Yet there is a curious absence in this report—private equity and private debt. Here I will focus on why I think they have a very important role but first let me summarize foundational framework of the report. In a step to improve the understanding of ‘nstitutional investors the framework classifies them into five archetypes based on their mandates, constraints, and realistic capacity to deploy capital in EMDEs.

1. Domestically focused institutional investors: Institutions whose main business is their home domestic market, or where they collect and manage assets from members and clients in a domestic market.
2. Commercially global institutional investors: Institutions with a broad international client and operational footprint with a global mindset.
3. State-aligned large-scale institutional investors: Institutions that manage substantial public or national institutional capital with a global investment reach.
4. Highly regulated retail-focused institutional investors: Institutions that are usually nationally or regionally focused. Their operating model services and reflects the needs of retail investors.
5. Nimble entrepreneurial institutional investors: Bespoke investors with the strongest risk and liquidity tolerance. They have a strong service and values-oriented approach.

This typology matters because it sharpens a fundamental question: when policymakers talk about mobilizing the roughly $2.4 trillion a year needed for climate and infrastructure investment in EMDEs by 2030, are we even talking to the right parts of the investor universe? Estimates from the IEA and World Bank put annual EMDE clean energy and related infrastructure needs firmly in that range.

Andrea Webster, Consultant to PRI and Ambassador at the World Benchmarking Alliance

Andrea Webster

Speaking to Andrea Webster, who advised the PRI on these archetypes, I asked her how realistic she thought it was that these numbers were achievable. She is surprisingly optimistic against what is usually a pessimistic backdrop. “The money exists in the system, but it needs clearer mapping on which type of investors, assets, and channels the money can flow through. That way we move from sweeping statements to much more targeted actions and incentives. Tapping into the herd mentality within mainstream finance is how we hit these big numbers.”

Her optimism is further supported if one looks beyond the public markets and into private equity and private debt. Data from the Global Private Capital Association (GPCA) show that private capital investors deployed on the order of $90–100 billion into emerging-market private equity and venture capital across Asia, Latin America, Africa, Central & Eastern Europe, and the Middle East in 2023, with additional capital flowing into infrastructure, private credit, and real assets. That’s material, even if still modest relative to the total need. Private credit investment in those markets has been growing even faster. Recent GPCA and Bloomberg figures put emerging market (EM) private credit deployment at around $11 billion annually, nearly doubling year-on-year from a low base as specialized managers scale up their platforms. Globally, private credit assets have climbed from around $1 trillion in 2020 to roughly $1.5 trillion today, with forecasts from Preqin and others pointing toward $2.5 trillion or more by 2030. Private markets are hardly niche anymore.

Yet much of the official-sector conversation still revolves around public markets—tweaking MSCI index weights, issuing more green and sustainability-linked bonds, and designing partial guarantees to coax benchmark-constrained investors into listed EM securities. Meanwhile, a growing share of risk-taking capital for EMDE projects is moving through private equity (PE) and private credit (PC). If we are serious about financing EMDEs at scale, we need to treat private markets as central, not peripheral.

Where Private Capital Actually Sits

When you map private equity (PE) and private credit (PC) onto the PRI archetypes, a clear pattern emerges: these strategies cluster precisely where the “able and willing” money resides.

Private equity is strongest among commercially global investors, firms such as KKR, Blackstone, Carlyle, Brookfield, and Actis that run dedicated EM funds with mandates suited to illiquid, hands-on investing. It also plays a major role for state-aligned investors: sovereign wealth funds and large public pensions often serve as anchor limited partners in EM funds and increasingly co-invest directly in platforms and projects. There is growing but still constrained activity among domestically focused investors where regulation permits local PE funds to raise capital from home-market pensions and insurers. Nimble entrepreneurial investors—family offices and impact funds—are often early movers, even if their aggregate scale is smaller.

Private credit follows a similar but even more dynamic pattern. It is expanding rapidly through commercially global platforms that provide corporate, project, and sometimes quasi-sovereign lending. In many EMDEs, domestically focused private credit managers and non-bank financial institutions are filling gaps left by constrained banks. State-aligned investors are beginning to allocate to EM private-credit strategies and blended-finance vehicles.

Notice who is largely absent: highly regulated retail-focused investors. Asking daily-liquidity mutual funds to hold long-dated loans to infrastructure projects in Indonesia or Nigeria is structurally incoherent. The mandate simply doesn’t fit. Yet much of the policy debate still implicitly assumes that incremental changes to public-market benchmarks, creating hybrid private market structures and guarantees will unlock these pools for EMDE infrastructure. This remains in the realm of make-believe and given the structural stress in pockets of private markets, ought to stay there for this investor group.

The crucial point is that PE and PC are purpose-built for what many EMDE projects actually require when matched to the right investors—patient capital, bespoke structuring, hands-on governance, and tolerance for complexity.

The Performance Case—With Realism

Earning returns in EMDEs is not the primary problem. Research from the International Finance Corporation (IFC) analyzing decades of emerging-market PE investments finds that its private equity portfolio has outperformed the MSCI Emerging Markets Index by roughly 16 percentage points on a public-market-equivalent basis over long timeframes. On an aggregate public market equivalent basis, diversified EM private equity portfolios such as IFC’s have delivered strong long-run performance—though realized results still depend heavily on vintage, region, and fund manager.

Private market capital is designed to price and manage idiosyncratic risk, engage directly with portfolio companies, and structure deals with covenants, foreign exchange hedging, and legal protection. PE can take control to build renewable-energy and digital-infrastructure platforms. PC can step in with flexible, long-tenor capital when banks retrench. In contrast, traditional institutional investors lack the internal capacity to manage complex risk exposures due to liquidity rules, benchmark constraints, and capital adequacy requirements which leave little room for illiquid EMDE allocations.

Climate Infrastructure—and Where Private Markets Already Operate

Recent climate-focused transactions provide concrete evidence for my argument about the role of private capital. TPG’s Global South Initiative (GSI), which raised $1.25 billion in initial commitments including anchor capital from UAE-backed ALTÉRRA and a $100 million commitment from IFC, explicitly targets climate solutions in emerging markets through private-equity structures. One of its early moves involves acquiring and scaling parts of Siemens Gamesa’s South Asian onshore wind business—assets that can be reconfigured into a regional platform to accelerate renewable deployment across India and neighboring markets. These deals don’t fit neatly into listed equity benchmarks or sovereign bond indices, and no amount of tinkering with MSCI weights will change that.

Private credit funds are similarly active in financing renewable-energy platforms in countries such as Brazil and Chile, where long-term dollar-denominated or inflation-linked loans allow developers to match financing costs to revenue streams in ways local banking systems struggle to accommodate at scale. In markets where banks face capital or risk-weight constraints, private credit platforms are providing the bespoke project loans that enable grid modernization, distributed solar buildouts, and sustainable transport infrastructure.

None of this is to suggest that private markets are a panacea. The IMF and others have raised legitimate concerns about opacity and leverage in global private credit, and about systemic risks if the asset class grows unchecked. The shadow of unchecked debt triggering the global financial crisis still haunts finance even today and the lessons from it cannot be forgotten. Governance and political-economy risks in some EMDEs are real and sometimes underappreciated. But these are arguments for better data, smarter regulation, and stronger supervision, not for ignoring the channels where capital is actually moving.

When discussing how the mapping of investors to EMDEs would better help capital mobilization in EMDEs, Webster was clear on the main driver. “We need to move away from generalizations; not all EMDEs are equal, and neither are all investors. The list of barriers that are repeatedly drummed out do not apply to all equally. Knowing at the outset which investors can invest, co-designing policy and investments, means better scaling of private capital so public and multilateral finance to used where it is most needed.”

The Policy Disconnect—and a Better Agenda

When I asked Tamsin Ballard, Chief Investor Initiatives Officer at PRI, about their pivot to capital mobilization in EMDEs, she told me:

The financing gap has clear implications for the PRI and our signatories who understand the enormous opportunity in emerging markets and their importance to a successful global transition. We’re working to bring investors and policymakers around the same table to address the barriers to investment. What our report shows is there’s no one size-fits-all solution for scaling up finance to emerging markets. Policymakers need to tailor their approaches to institutional investors’ varied needs, mandates and the specific barriers they face. More granularity, nuance and understanding makes for better policy to attract capital.

If you take the PRI archetypes seriously, much of today’s capital-mobilization effort is aimed at the parts of the system least suited to providing patient, illiquid EMDE capital. Multilateral development banks and climate-finance initiatives still design many products for public markets and bank syndicates. Those efforts have value, but they underweight the fastest growing and most structurally compatible channels: private equity and especially private credit.

A better agenda would start with the archetypes where most PE and PC capacity actually sits—commercially global and state-aligned large-scale investors. That means co-designing co-investment platforms, risk-sharing mechanisms, and blended-finance structures that fit with private-fund economics and governance—not bolting concessional layers onto transactions designed for public bonds.

It also means enabling domestically focused investors to play a stronger role. Local pensions and insurers can be anchor limited partners in regional PE and private-credit funds if regulations are updated to allow thoughtful allocations to alternatives. Domestic capital can help build track records that attract additional international money.

Finally, policymakers and development banks need to keep investing in the basics: credible dispute-resolution systems, predictable regulation, contract enforcement, and, where feasible, local-currency solutions that reduce FX mismatches for borrowers and lenders.

None of this argues for abandoning public markets. Listed equity and debt will remain essential, and in absolute terms public-market and bank-intermediated flows into EMDEs still exceed private-market volumes. But if the goal is to accelerate flows of large-scale, flexible, patient capital capable of building platforms and backing complex projects in EMDEs, private equity and private credit are already demonstrating they can deliver. They are surely the lowest hanging fruit.

The question is whether policy will understand this nuance and catch up to where the money is actually moving—or continue designing solutions for yesterday’s investor landscape.