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Oecd webinar on blended finance principles


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Slides used for the Blended Finance Principles Webinar held on Monday 11 December 2017
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Oecd webinar on blended finance principles

  1. 1. OECD BLENDED FINANCE PRINCIPLES Webinar Paris, 11 December 2017 Paul Horrocks and Irene Basile Private Finance for Sustainable Development Development Co-operation Directorate, OECD
  2. 2. • OECD work on Private Finance for Sustainable Development • OECD Blended Finance Process • Blended Finance: OECD’s definition • OECD DAC Blended Finance Principles • Questions? Agenda
  4. 4. • The vision underpinning the 2030 Agenda is broad and ambitious, calling for an equally broad and ambitious financing strategy • Indispensable role of Official Development Assistance (ODA) in financing the Sustainable Development Goals (SDGs) • International community acknowledged the need for significant additional development finance – and accorded a prominent place to private sector participation • The OECD Development Assistance Committee (DAC) agreed in 2016 to develop ‘an inclusive, targeted, results-oriented work programme’ on blended finance The rationale for blended finance
  5. 5. OECD Development Cooperation work Policy research and advice Tracking Private Sector Investment Social Impact Investment Blended Finance Green Investment Mobilisation ODA reform, incl. TOSSD Private Philanthropy
  6. 6. Increasing private capital flows to developing countries Source: OECD forthcoming based on OECD statistics and World Bank remittances data - 200.00 400.00 600.00 800.00 1,000.00 1,200.00 1,400.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 USDBillion Official Development Assistance Other Official Flows Private Grants Private Capital Fows, including FDI Personal Remittances USDbillioncurrentprices
  7. 7. Increasing interest in blended finance No. of blended finance facilities launched 0 5 10 15 20 25 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: OECD and EDFI surveys in OECD (forthcoming)
  8. 8. …not reaching the countries most in need Unallocated, 11.3 LDCs, 5.5 Other LICs, 2.2 LMICs, 27.4 UMICs, 34.6 Guarantees Syndicated loans Shares in CIVs Direct investment in companies Credit lines Middle-income countries (77%) Private Finance mobilised in 2012-15, USD billion Source: 2016 OECD-DAC Survey
  10. 10. 2017: Three major processes shaping the blended finance market Operators Donors Private sector OECD DAC: Blended Finance Principles for unlocking commercial finance BSDC: Blended Finance Recommendations EDFI/IFC/EBRD: Enhanced guidance on use of concessional finance in private sector ops. Getting blended finance right
  11. 11. A highly participatory approach Scoping Survey Endorsement at DAC HLM Oct. 30th Informal discussion July 27th Webinar, Sept. 7th Discussion at DAC Sept. 29th DAC External stakeholders (Southern Partners, MDBs, DFIs, Private sector, CSOs) 1st Senior Advisory Group, May 5th 2nd Senior Advisory Group, July 7th Coordination meeting, Sept. 11th 3rd Senior Advisory Group, Sept. 12th 30 participants 16 participants, 12 countries 36 answers (30 DAC+6 MDBs) 23 external participants 192 participants 47 participants 44 participants Written consultation 20 comments 17 comments 10 comments
  12. 12. The OECD Senior Advisory Group
  14. 14. The OECD definition ‘The strategic use of development finance for the mobilisation of additional finance towards the SDGs in developing countries’ where additional finance refers primarily to commercial finance not currently addressing development objectives
  15. 15. • Blended finance is deployed with the aim of 'increasing the pie' of financing for development • Development finance catalyses the additional investment • Finance is distinguished by purpose rather than source • Concessionality is not a pre-requisite for blending • Blended finance is closely related to but does not replace private sector development The Building Blocks
  16. 16. Financial instruments at play
  18. 18. OECD Blended Finance Principles for unlocking commercial finance for the SDGs PRINCIPLE 1: Anchor Blended Finance use to a Development Rationale For DAC Members To complement private & DFI work To enable more donor engagement To help with broader development constituency support PRINCIPLE 2: Increase the mobilisation of Commercial Finance PRINCIPLE 3: Tailor Blended Finance to the Local Context PRINCIPLE 4: Focus on Effective Partnering for Blended Finance PRINCIPLE 5: Monitor Blended Finance for Transparency and Results
  19. 19. Principle I Anchor Blended Finance use to a Development Rationale All development finance interventions, including Blended Finance activities, are based on the mandate of development finance providers' to support developing countries in achieving social, economic and environmentally sustainable development. 1.a) Use development finance in Blended Finance as a driver to maximise development outcomes and impact. 1.b) Define development objectives and expected results as the basis for deploying development finance. 1.c) Demonstrate a commitment to high quality.
  20. 20. Principle II Design Blended Finance to increase the mobilisation of Commercial Finance Development Finance in Blended Finance should facilitate the unlocking of commercial finance to optimise total financing directed towards development outcomes. 2.a) Ensure additionality for crowding in commercial finance. 2.b) Seek leverage based on context and conditions. 2.c) Deploy Blended Finance to address market failures, while minimising the use of concessionality. 2.d) Focus on commercial sustainability.
  21. 21. Principle III Tailor Blended Finance to Local Context Development finance should be deployed to ensure that Blended Finance supports local development needs, priorities and capacities, in a way that is consistent with, and where possible contributes to, local financial market development. 3.a) Support local development priorities. 3.b) Ensure consistency of Blended Finance with the aim of local financial market development. 3.c) Use Blended Finance alongside efforts to promote a sound enabling environment.
  22. 22. Principle IV Focus on Effective Partnering for Blended Finance Blended Finance works if both development and financial objectives can be achieved, with appropriate allocation and sharing of risk between parties, whether commercial or developmental. Development Finance should leverage the complementary motivation of commercial actors, while not compromising on the prevailing standards for development finance deployment. 4.a) Enable each party to engage on the basis of their mandate and obligation, while respecting the other’s mandate. 4.b) Allocate risks in a targeted, balanced and sustainable manner. 4.c) Aim for scalability.
  23. 23. Principle V Monitor Blended Finance for Transparency and Results To ensure accountability on the appropriate use and value for money of development finance, Blended Finance operations should be monitored on the basis of clear results frameworks, measuring, reporting and communicating on financial flows, commercial returns as well as development results. 5.a) Agree on performance and result metrics from the start. 5.b) Track financial flows, commercial performance, and development results. 5.c) Dedicate appropriate resources for monitoring and evaluation. 5.d) Ensure public transparency and accountability on Blended Finance operations.
  24. 24. QUESTIONS?