Paris 5th of December: officials from around the world agreed on a draft climate change deal. Providing additional long term funding created a lively debate that sends a clear signal: reaching SDGs by 2030 will depend on world nations and societies ability to engage in strong global partnerships. Innovative funding blending public sector funding and private sector financing allows numerous flexible financial support solutions tailored to the purpose (i.e. the 17 SDGs); the social return and financial return objectives as well as to the beneficiaries needs and requirements. But this doesn’t go without challenges which this presentation tries to address!

1. Funding or Financing Development?
building partnerships to mobilize Private and Institutional Capital
to meet the Sustainable Development Goals by 2030
Francois-Xavier Bonnevie 2015-12-06
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2. 193 member States of the United Nations met inNew York in September to adopt 17
Sustainable Development Goals (‘SDGs’) as a roadmap to end poverty and hunger,
fight inequality and conquer climate change over the next 15 years.
Heads of state and high government representatives from 38
countries gathered in Addis Ababa in July and affirmed their
political commitment to address the challenge of financing and
creating an enabling environment for sustainable development.
2015: all in for a sustainable future
… an historical year for mankind and our planet
A new climate change agreement is to be adopted in Paris in
December. This agreement, if successfully agreed to by 195 states, is
expected to adopt a binding agreement on the long-term reduction
of greenhouse gas emissions.
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3. Paris 5th of December: officials from around the world agreed
on a draft deal aimed reducing global carbon emissions and
limiting global warming.
2015: all in for a sustainable future
… a sustainable deal requiring global partnerships
Providing long term scaled up, predictable additional funding created a lively debate including a coalition of
developing countries the USA and EU to engage a larger number of countries to participate in financing the deal.
The UN Climate Change Conference
in Paris sends a clear signal:
reaching SDGs by 2030 will depend
on world nations and societies
ability to engage in strong global
partnerships
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4. Foreign aid traditionally involves a transfer of financial resources (like grants or concessional credits),
commodities (e.g., food or equipment) or technical advice and training.
The most traditional type of foreign aid is undoubtedly the official development assistance (ODA) which consists of
the assistance given by donor government agencies to promote development and to combat poverty in developing
countries (see OECD/DAC for a more detailed definition).
The effectiveness of ODA has long been debated and its impact on recipient economies is often complex to analyze.
Some argue that official assistance has harmed poor countries creating dependencies, fostering corruption, and
encouraging currency overvaluation; other pretend that aid levels have been too low, and that far more large
contributions are needed to make a real impact.
The concept of foreign aid has evolved over the past decades to involve private and institutional actors bringing new
innovative instruments to the development finance toolbox.
Funding or Financing Development?
Foreign aid evolution …
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5. Innovative finance aims at using ODA funding to mobilize private capital financing– both market-based and
philanthropic – for development through new forms of financial solutions involving for example the use of
development loans and guarantee arrangements.
This definition includes both “funding” (i.e. the provision of grants) and “financing” (i.e. debt, equity and other
financial instruments).
These differ in the sense that the latter essentially has two key characteristics:
(i) it is something that needs to be paid back, usually with a return; and
(ii) it involves a degree of risk to the finance provider linked to the economics of a given programme, project
company or vehicle.
Traditional “funding” is unlikely to involve both of these characteristics…
… but the mix of funding and financing allows numerous flexible financial support solutions tailored to:
- the purpose (i.e. the 17 SDGs);
- the public sector social return and private sector risk and financial return objectives;
- the beneficiaries needs and requirements.
Funding or Financing Development?
Latest trends …
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6. Using Billions of public money can leverage Trillions of domestic, private sector as well as institutional
resources:
The multilateral development banks (MDBs) and the IMF joint discussion note, “From Billions to Trillions:
Transforming Development Finance”, suggests the best possible use of each available grant dollar, beginning with
$135 Billion in ODA from governments and also including philanthropy, remittances, other official assistance, and
foreign direct investments.
To reach the estimated 4 Trillion per year needed to achieve the SDG goals, additional flows must come from public
domestic resources, private sector and institutional investments.
Building partnerships(Reasons)
…to mobilize Private and Institutional Capital
Private sector finance is currently estimated to excess:
- USD 17 Trillion of Equity market and
- USD 14 Trillion of Bond market resources
… compared to the World Bank commitments of approximately USD 40 Billion.
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7. Building partnerships(Reasons)
…to mobilize Private and Institutional Capital
Private sector investments in
developing economies are starting
to pick up in many sectors
including infrastructure, private
equity, real estate healthcare and
education.
Institutional investors including
Pension and Sovereign Funds,
Universities and Foundations
endowments look at emerging
markets to diversify their
investment portfolios and boost
their returns.
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8. Lack of trust to closed and unpredictable developing economies:
To attract private and institutional investors beneficiary countries need to establish:
 transparent and efficient rule of law (including open labour and free capital transfer);
 legal framework ensuring a fair and equal treatment of all investors (including dispute resolution, arbitrage and litigation);
 stable and predictable economic, political and social environment (free from political interference).
Lack of Investment opportunities:
Investment opportunities need to be:
 affordable and scalable;
 predictable transparent ethical and free from corruption.
Unattractive risk /return ratios:
Investment opportunities need to offer:
 Investment incentives with reasonable long term risk adjusted returns.
Lack of knowledge:
The offer of sustainable investment solutions is large and diversified:
 but investors and financial intermediaries often lack knowledge and understanding of the developing economies risks and
opportunities.
Building partnerships(Obstacles)
…to mobilize Private and Institutional Capital
But a lot of investment opportunities are still untapped due to several obstacles including:
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9. Beneficiary governments need to develop investment friendly regulations, trust and incentives to attract investors:
 A government special unit responsible for infrastructure/ investment projects implementation, monitoring and
accountability is desirable. In the best of cases this unit should include members of different parties to ensure long term
political support.
 Revenue is needed to pay-back long-term infrastructure investments, especially in regards to infrastructure investments
(i.e. through toll systems for roads)
 Competitive pressure is also needed to ensure efficiency and best value for money over time. Competition does help
taxpayers and customers to get better value for the investments.
 Risks related to investments need to be identified and properly managed. Local financial market, free flow of capital and
resources, inflation, foreign exchange and interest derivatives or alternatively government guarantees can be used as
mitigation to these risks for long term investments.
Several source of information are available to investors to assess the investment environment and conditions of
particular countries including:
- World bank Development indicator database
- KPMG’s change readiness index
- Transparency International index
The multilateral development banks (MDBs) can help with both their resources and knowledge to turn SDG
goals in projects tailored to asset classes that private and institutional investors could invest in.
Building partnerships(Solutions)
…to mobilize Private and Institutional Capital
Click links to access
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10. Building partnerships(Examples)
…to mobilize Private and Institutional Capital
Zurich Insurance Group recently announced a new
collaboration with the Global Resilience Partnership to create a
three-phased grant competition called the “Water Window”
which will work as an incubator to help develop water related
innovations in the Sahel, the Horn of Africa and Asia. The
Global Resilience Partnership is convened by the Rockefeller
Foundation, USAID and Sida to help millions of people in Africa
and Asia build more resilient futures. The Water Window builds
on the first round of the Global Resilience Challenge which
focused on broader resilience solutions attracting almost 500
innovative ideas developed by cross-sectoral teams from 55
countries.
For additional examples: KPMG / Global Compact SGD Matrix
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11. Francois-Xavier Bonnevie 2015-12-06
E-mail: francois-xavier.bonnevie@kpmg.se
Please consider the impact on the environment before printing this presentation
To facilitate increased awareness, the World Bank Group has launched a Financing for
Development Massive Open Online Course (MOOC) on November 16. The objective is to
familiarize more people with the new development agenda, the critical role of the private
sector and the use of finance, including innovative solutions, to fund the SDGs and meet the
Bank Group goals of ending poverty and boosting shared prosperity by 2030.
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