Emerging markets are set to become the new frontier for global investments, requiring approximately $1 trillion annually above current spending levels, according to recent market analyses and investor reports. Infrastructure and renewable energy sectors represent particularly promising areas within this broader investment landscape.
As interest rates decline and global economic conditions improve, investments in high-growth emerging economies are positioned for substantial growth. These markets are expected to contribute over 60% of global GDP growth in 2025, creating unprecedented opportunities for investors willing to navigate these complex but promising territories.
“We’re witnessing a perfect storm of opportunity in emerging markets,” said Harrison Brown, an associate at Loewen Partners, an investment firm that focuses on investments in the emerging renewable energy and infrastructure markets. “The combination of falling interest rates, increasing policy support for development including renewable energy, and the urgent need to close infrastructure gaps is creating a uniquely favourable environment for investors.”
The investment landscape in emerging economies shows promising signs of recovery after challenging market conditions in previous years. Capital reserves have reached record levels, indicating that fund managers have been cautious about deploying resources but are now positioned to take advantage of improving conditions.
By 2040, the world faces a significant infrastructure investment gap of approximately $15 trillion, with emerging markets accounting for nearly two-thirds of that requirement. Current capital flows to developing countries remain insufficient to meet development requirements, highlighting the substantial gap between available and needed financing.
“Investment patterns have shifted significantly in recent years, with developing countries attracting an increasing share of global capital,” Brown said. “Private sources provide the bulk of direct investments—with project developers and institutional investors accounting for the largest portion of private capital.”
Regional hotspots for investment include Latin America, where Brazil is expanding its economy through $15 billion in new projects across multiple sectors, including significant renewable energy developments. Additionally, Chile and Argentina are positioned to become key players in the global supply chain for critical minerals by 2025, driven by increasing technological demands and the global energy transition.
In Africa, countries like South Africa and Kenya are leading the continent’s economic transformation. South Africa is implementing ambitious development plans including expanding its renewable energy capacity by 20%, while Kenya continues to pioneer innovative solutions across financial technology and sustainable energy.
Southeast Africa is also experiencing growth, with investments in transportation infrastructure and natural resources creating opportunities for regional trade and economic integration. Tanzania, for instance, is enhancing its connectivity through strategic infrastructure projects, which will improve trade flows and attract further investment.
Southeast Asia presents another significant opportunity, with Indonesia’s $34 billion capital relocation effort creating numerous investment possibilities across construction, technology and infrastructure sectors.
However, substantial challenges remain. The mobilisation of private investment through primary market transactions remains low at around $100 billion per year and has been declining over the past decade. Private investment has been dominated by high-income countries, accounting for approximately 67% of the total over the last decade.
“The risk-return profile for many emerging market projects remains challenging,” said Brown. “Weak public investment management, inconsistent power supply and policy uncertainties all contribute to investor hesitation. But those who can effectively navigate these risks stand to gain significantly.”
To address these challenges, multilateral development banks and financial institutions are implementing innovative approaches to mobilise private finance. Various platforms have emerged to help emerging economies quantify their financing needs and share best practices to create a conducive environment for investment.
Some experts suggest establishing new financial institutions to provide additional channels through which developing country governments could borrow to finance economically productive assets while remaining within prudent debt levels.
For investors seeking exposure to these markets, several vehicles exist, including specialised funds, ETFs and direct investments. Despite underperforming in 2023, many emerging market assets present compelling valuations and are expected to see earnings growth in 2024 and beyond, aided by structural growth drivers and demographic advantages. Infrastructure and clean energy funds, in particular, offer targeted exposure to these growing sectors.
While additional investment is needed to ensure sustainable development, the net economic effect due to efficiency improvements and wider benefits, including energy security, technological leapfrogging and reduced risks, can be strongly positive.
“The transformation of emerging markets represents one of the most significant investment opportunities of the coming decades,” Brown said. “Those who move now to build expertise and relationships in these markets, particularly in essential sectors like infrastructure and renewable energy, will be best positioned to capitalise on their growth.”
As emerging economies continue to drive global economic expansion, strategic investments across diverse sectors will play a crucial role in shaping their development trajectories and creating a more sustainable and inclusive global economy.
