The challenge: financing the SDG development gap
The financing gap to achieve the United Nations Sustainable Development Goals (SDGs) in developing countries is estimated to be US$2.5 trillion per year, of which climate-resilient and sustainable infrastructure accounts for the largest gap in funding*. Traditional sources of funding are insufficient to meet these goals, requiring innovative financing approaches to attract new sources of capital.
The solution: blended finance
Blended finance is the strategic use of development finance for the mobilization of additional finance towards sustainable development in developing countries**.
- Uses public or philanthropic money to improve the risk-return profile or commercial viability of projects for private investment
- Designed to make development capital more catalytic, with the aim that one public or philanthropic dollar mobilizes multiples more from the private sector
- Currently estimated to be a US$50 billion market, which has doubled over the past 5 years***
The World Economic Forum and the OECD, through the ReDesigning Development Finance Initiative (RDFI), have been actively engaging public, private and philanthropic organizations since 2014 to facilitate and scale blended finance.
The Blended Finance Toolkit is a product of the RDFI, and is designed to provide a helpful overview of the Blended Finance ecosystem and its benefits, while offering solutions for adopting this approach to finance and investment in emerging and frontier markets.
Launched at the UN Conference on Financing for Development in July 2015 in Addis Ababa, the goal of SDIP is to mobilize the use of blended finance in sustainable investments in developing countries.
The secretariat is housed at the World Economic Forum and OECD, with three clear objectives:
- Address financing challenges in emerging and frontier markets
- Adopt a practical approach to applying blended finance to real-world projects to reach financial close
- Deliver scale, speed, efficiency and risk mitigation through coordination of public and private interests
* Adapted from UNCTAD, World Investment Report 2014. Current annual investment of US$1.4 trillion includes both public and private investments, defined as capital expenditures. The estimated annual investment gap is based on the average of the low and high estimates.
** OECD definition, January 2018
*** Blended Finance Taskforce Report, January 2018