Increase Investment from Multilateral Development Banks (MDBs) urged by European Nations
The Fourth International Conference on Financing for Development (FFD4) in Seville has emphasised the crucial roles that Multilateral Development Banks (MDBs) and pension funds play in closing the global sustainable development financing gap.
## Bridging the Financing Gap with MDBs
MDBs are central to bridging the financing gap for the Sustainable Development Goals (SDGs), with an estimated annual need of $3.9 trillion for low- and lower-middle-income countries (L-LMICs). MDBs offer long-term, affordable financing, reform international financial architecture, and provide technical assistance and capacity building.
## Pension Funds: A Vast Pool of Long-term Capital
Pension funds, representing a vast pool of long-term capital, are increasingly recognised as essential for closing the SDG financing gap. Initiatives are underway to make development finance more accessible to institutional investors, such as pension funds, by creating attractive, standardized, large-scale investment opportunities.
## Collaboration for Impact
To maximise their impact, MDBs and pension funds are encouraged to collaborate more closely. This includes supporting market development, addressing regulatory and fiscal barriers, and scaling up innovative financing.
Manfred Schepers, CEO of ILX, a Dutch-based asset manager, stated that returns on co-investment by private institutions in the energy transition of high-growth emerging markets could be at least as attractive as investment in slow-growth developed economies. He also emphasised the immensely important role the private sector has to play in meeting the SDGs.
The declaration, backed by the governments of Denmark, Finland, Iceland, the Netherlands, Norway, Sweden, and the UK, calls for the scaling up of initiatives involving MDBs, development finance institutions (DFIs), and dedicated asset managers to provide investment solutions that would engage leading global institutional investors.
## A Valuable Resource: The Global Emerging Markets Risk Database (GEMs)
The Global Emerging Markets Risk Database (GEMs) was highlighted as a valuable resource in attracting private investors to emerging markets and developing economies (EMDEs). GEMs data demonstrates that development finance investments provide attractive, risk-adjusted returns on EMDE credit investments, while generating measurable social and environmental impact.
In conclusion, MDBs and pension funds are both critical in mobilising the necessary capital and technical expertise to close the global sustainable development financing gap, especially when supported by enabling policy frameworks and market innovations.
Venture capital and development finance could be instrumental in funding the energy transition, as MDBs and pension funds collaborate to scale up innovative financing solutions. The private sector, particularly institutional investors like pension funds, holds vast amounts of long-term capital that could be directed towards the SDGs, creating attractive risk-adjusted returns while generating social and environmental impact. Following the lead of governments like Denmark, Finland, and the UK, dedicated asset managers can work with MDBs and development finance institutions to develop investment opportunities that engage global institutional investors. Tools like the Global Emerging Markets Risk Database (GEMs) can attract private investors to emerging markets, further bolstering the efforts towards closing the SDG financing gap.
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