Not all insurance companies and pension funds have the capacity to invest in EMDEs. Therefore, the addressable market for mobilising capital into EMDEs is smaller than often assumed in the financing for development discourse. However, we estimate that, with increased ambition, that involves, a doubling of current combined investment flows of Europe’s top 35 largest asset owners would yield an annual EMDE flow of around $120 billion in five years.
However, these flows are likely to be highly concentrated in publicly listed and investment grade assets in large emerging markets. Regulation does not constrain pension fund EMDE investment, but does limit EMDE investment by insurance companies. For pension funds, the barrier to increased EMDE investment allocation appears to be more behavioural in nature.