The SDGs’ Bland Blend Recipe
The September UN General Assembly hosted further meetings and reports on financing the 2030 Sustainable Development Goals after a special summer session, with tepid reviews of public-private “blended” and bilateral and multilateral lender contributions. Official/commercial facilitator Convergence, founded after the 2015 Addis Ababa summit calling for partnerships, issued an annual update of transaction, investor and thematic trends. Its database covers $150 billion in funds and projects, at median $65 million size, concentrated regionally in Africa. Energy and financial services are the leading industries, with concessional debt or equity the main instrument. Goal focus is on Economic Growth (8) and Infrastructure (9), and commercial banks are more active than local and foreign institutional investors. Agriculture and health and low-income and small island states are drawing new interest, but volume is still only $15 billion/year, and only “scaling up” to close an estimated $2.5 trillion gap in the next decade will boost living standards as agreed. Bonds and notes have been used in just one-tenth of deals, and Asia is catching up with Africa with a 30% share, half in India. Latin America had more leverage at 5 times and an average $115 million commitment.
Renewable energy is popular in that sector accounting for 40% of the total, and addresses the separate Climate Change goal (7). Financial industry priorities have shifted to capital markets and small business access from broader inclusion. Guarantees and risk insurance apply in one-third of cases, while technical assistance has fallen as a tool. Entrepreneurs are the chief target across traditional and social enterprise, micro-finance and family farms, and only 10% have reached completion stage with final evaluation. Public and philanthropic sources are respectively 40% and 15% of the total, with USAID and the World Bank among the top in their cohorts. The EU and Canada have announced new multi-billion dollar facilities, and big emerging markets like Indonesia and South Africa are also sponsors. Impact investors including Calvert and Blue Orchard have been stalwarts, and European and Japanese banks dominate the commercial ranks versus asset managers, insurers and pension funds with “limited” participation, Convergence finds. “Better blending” initiatives through the OECD and other bodies have gained momentum the past year, but different definitions and practices continue to thwart “billions to trillions” ambitions, it concludes.
A separate Center for Global Development paper criticizes the seventeen development lenders involved on a Blended Finance Task Force as “marginal, not transformational,” and points out that private investment cannot deliver the range of infrastructure, health and education demands with consumers earning a few dollars daily. A decade ago, the World Bank’s IFC arm pledged half of operations in the poorest countries, but its recent portfolio peak was 25% and has since slipped. Official institution guarantees, loans and equity back just half a percent of developing economy total allocation, and the catalytic leverage effect is less than 1:1 under strict methodology. Pilots like the African Development Bank’s Infrastructure Fund and USAID’s Power Africa show “little success” in terms of the bankable project pipeline, and few deals can be identified where subsidies ensure viability. The missing piece is marked expansion of traditional aid to meet another elusive goal as a portion of donor national income, CGD suggests.
