There is an urgent need to address the growing financing gap for achieving the Sustainable Development Goals (SDGs),which has expanded from $2.5 trillion to $4.2 trillion annually.1 This gap is being driven by factors including global economic fragmentation and the aftereffects of the COVID-19 pandemic. Private sector involvement is essential, as the public sector alone cannot meet these financial demands.
From left to right: Beata Javorcik, European Bank for Reconstruction and Development; Burkhard Kübel-Sorger, European Bank for Reconstruction and Development; Filippo Gori, J.P. Morgan; Jean-Jacques Barbéris, Amundi; Maria-Teresa Zappia, BlueOrchard.
3. Reevaluating blended finance
Blended finance, once seen as a panacea for funding sustainable development, is facing some skepticism. To address this, simplification and standardization are key to enhancing its effectiveness and appeal.
4. Harnessing innovative financial instruments and data standardization
A shift toward programmatic and portfolio-based approaches, such as significant risk transfers, is underway to mobilize more capital. These innovations aim to offer better risk-return profiles, thereby attracting new investors. In addition, standardizing data and improving transparency are critical to increasing investor confidence and expanding the pool of accessible capital.
5. Embracing collaboration and flexibility
Taking more risks, reducing territoriality and improving cooperation are essential to the effective mobilization of capital. Timely action is crucial to seizing market opportunities and ensuring that development finance meets its objectives. The goal is for institutional investors to develop more direct investment expertise in emerging markets, reducing the need for extensive risk mitigation measures.
As the world continues to face complex economic and sustainability challenges, these takeaways provide a strategic roadmap for mobilizing the necessary capital to drive sustainable development in emerging markets. By fostering collaboration, innovation and standardization, stakeholders can work together to bridge the financing gap and achieve the SDGs.
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