White Paper Risk Reallocation Tools for Infrastructure Development in Frontier Markets

The report analyzes the lifecycle of infrastructure projects in frontier markets, identifying key risks—country, project, and financial—and the tools available to mitigate them. It argues that while the private sector provides various insurance and financing products, the public sector must bridge market gaps, particularly at early stages, to make projects bankable. The document warns against public sector interventions that crowd out private investment or create dependency, and suggests new tools such as subsidizing private insurance premiums and providing legal capacity building for host governments.

• Infrastructure projects in frontier markets face a global pipeline estimated at $9 trillion, with over 60% located in these markets and a significant portion in the energy sector.
• Risks are categorized into three broad types: country risks (macroeconomic, political, legal, labour, and institutional), project-specific risks (site acquisition, social, environmental, technical, and profitability), and financial risks (modelling, sponsor/borrower health, and revenue sources).
• The public sector's role is to bridge the gap between commercially available risk pricing and project needs, but it must avoid 'crowding out' the private sector or creating dependency through excessive grants and subsidies.
• Early-stage capital is highly effective for de-risking; for example, a small investment of $1-2 million per project can significantly reduce risk for projects valued at hundreds of millions of dollars, making them more attractive to later-stage equity and debt financing.
• Technical risks in sub-Saharan Africa include the ability of small grids to absorb the intermittency of renewables; for instance, adding 200 MW of solar power to Botswana's grid (which produces less than 1,000 MW) could create intermittency issues.
• The report suggests new public sector tools to leverage private capital, such as subsidizing private insurance premiums for high-risk activities like geothermal drilling or using a 'first loss tranche' in insurance pools to attract private insurers.
• Capacity building for host governments is essential for sustainable deals, as seen with Power Africa and the African Development Bank's African Legal Support Facility, which provide international legal counsel to train local lawyers in negotiating Power Purchase Agreements (PPAs).

APA

World Economic Forum (2015). White Paper Risk Reallocation Tools for Infrastructure Development in Frontier Markets. http://www3.weforum.org/docs/WEF_Risk_Reallocation_Tools_Infrastructure_Development_report.pdf

Chicago

World Economic Forum. White Paper Risk Reallocation Tools for Infrastructure Development in Frontier Markets. 2015. http://www3.weforum.org/docs/WEF_Risk_Reallocation_Tools_Infrastructure_Development_report.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=White Paper Risk Reallocation Tools for Infrastructure Development in Frontier Markets |date=May 2015 |url=http://www3.weforum.org/docs/WEF_Risk_Reallocation_Tools_Infrastructure_Development_report.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2015white, author = {{World Economic Forum}}, title = {{White Paper Risk Reallocation Tools for Infrastructure Development in Frontier Markets}}, institution = {World Economic Forum}, year = {2015}, month = may, url = {http://www3.weforum.org/docs/WEF_Risk_Reallocation_Tools_Infrastructure_Development_report.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }