Investor Perspectives On Emerging Market Investments: Stage 3 Report


Research into multinational investor perspectives on Fragile and Conflict-affected States has been reported in three stages: the first report covered the key literature looking into risk and investor behaviour; the second detailed findings from a range of qualitative interviews on how investors consider the investment decision-making process.

This final report considers how to test quantitatively the impact of key investor risk factors on investor behaviour, as well as examining the typical models which investors may use to take into account the impact of risk. Accompanying this report is an appendix which shows how investment returns for new FDI can be modelled under a number of different scenarios.

The headline conclusions bear out that:

  • there are fundamental differences in how investment environments are perceived based on the types of investor – this has been borne out qualitatively and quantitatively;
  • specific improvements therefore in the business environment, or changes in the fundamentals of the market, are likely to attract differing types of investors;
  • in looking at overall modelling of the investment itself we can see that risk modelling often involves a good deal of assumption;
  • as stated in the previous report – and borne out by the investment model – investment incentives can increase overall returns, but need to be approached with caution from a “value for money” perspective.

This report and the analysis it details have further corroborated the hypothesis that investor perceptions are based on a range of characteristics internal to the firm, and therefore a clear understanding of the firm, the opportunity and the risks are key to understanding the investment attractiveness of the context in which DFID is operating.

As reflected in the investment modelling, risk is factored into a range of areas in the financial model, and is often based on rules of thumb and experience in other contexts. Similarly the subsidy of an investment by a development actor, or a tax break, can make some difference to an investment decision, but we have to be careful about simply reducing the overall investment of an investor, and subsidising a business which would have occurred in any case.


GBRW Ltd; Investment Consulting Associates (ICA). Investor Perspectives On Emerging Market Investments: Stage 3 Report. DFID, London, UK (2014) 23 pp.

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