Scaling Sustainable Investing in Emerging and Developing Economies: Frictions and Opportunities

Caroline Flammer, Thomas Giroux and Geoffrey M. Heal
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Caroline Flammer: Columbia University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)
Thomas Giroux: ETH Zürich - Department of Management, Technology, and Economics (D-MTEC)
Geoffrey M. Heal: Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

No 26-10, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Mobilizing private capital at scale is critical for financing sustainable development, particularly in emerging and developing economies (EMDEs), where capital is most needed. We conduct a global survey of senior investment decision-makers across a broad spectrum of capital providers, including asset managers, pension and sovereign wealth funds, development finance institutions, philanthropic investors, and others. The survey provides novel evidence on investors’ risk-return expectations, risk perceptions, and investment practices in EMDEs and in blended finance structures. We document four main findings. First, conditional on investor type, return expectations in EMDEs are comparable to those in developed markets, suggesting that categorical exclusions of EMDE assets might be inefficient. Second, investors’ dominant risk perceptions—particularly currency and political risks—are poorly aligned with the de-risking tools commonly employed in blended finance. Third, prevailing approaches to evaluating blended finance rely on both input- and outcome-based metrics, yet with limited measurement of financial and impact additionality. Fourth, our results highlight organizational and informational frictions, rather than unattractive financial fundamentals, as key barriers to scaling sustainable investing in EMDEs.

Keywords: sustainable finance; blended finance; catalytic capital; impact investing; EMDEs; Global South; sustainable development (search for similar items in EconPapers)
Pages: 122 pages
Date: 2026-01
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