The Missing Piece When Aligning Finance With the SDGs
In the run up to next week’s OECD Private Finance for Sustainable Development conference we ask whether ten years from now, when progress against the Sustainable Development Goals (SDGs) is tallied, we’ll be able to measure the contribution made by Development Finance Institutions (DFIs) and the private finance they’ve mobilised.
Aligning finance with the SDGs
It’s January so that means we’re packing our warm socks and heading to the OECD in Paris for the Private Finance for Sustainable Development (PF4SD) conference. We’ll be there to talk with policy makers and representatives from DFIs, foundations, research centres and corporations about our newly announced DFI Transparency Initiative. Through the initiative, we aim to work collaboratively with DFIs and other stakeholders to increase transparency on the use of public funds for private sector investments. The collaborative research that underpins the initiative will be kicking off in the coming weeks.
The theme of this year’s conference is “aligning finance with the SDGs”. The conference materials paint a compelling picture of a future where private finance transforms the lives of the poorest and most vulnerable in economically developing countries. The conference website explains that “every decision we make, every dollar we spend, every product and service we provide can be better aligned with sustainable development outcomes”. And it’s true — whether it is ensuring that funds focus on low income countries or aligning development and commercial finance towards socially and environmentally sustainable projects, how and where these funds are invested makes a real difference. Likewise, ensuring that investee business operations contribute to the SDGs through their employment, supply chain, and other policies can deliver change at a very practical level. Extrapolate these opportunities by the hundreds of billions of dollars of public money which bilateral and multilateral DFIs will commit in the next decade, alongside the ever greater quantities of private finance, and the potential is extraordinary.
It also means that there is a lot riding on the shoulders of DFIs to produce the results that are necessary to meet our global development goals. This is now coupled with the increasing trend of utilising scarce public money, including Official Development Assistance, for private sector investments. All of this translates to more scrutiny to demonstrate that this development money is having the desired impact.
Where’s the impact?
The potential of DFIs to create jobs, increase tax receipts and promote economic growth – either directly or catalytically by mobilising private sector funding – can be positive. But the current lack of transparency around issues such as ex-ante investment objectives (and the information used to make them), development impact, and evaluations – means that it is very difficult to measure the contribution of these public-private investments. We recognise that measurement isn’t easy – as demonstrated by the many efforts by a broad range of stakeholders to agree on solutions. We commend efforts to “align” investments with the SDGs. But it is unclear how that can happen when there is so little information regarding the process, terms, and outcomes of these investments.
Alignment vs contribution
Over the next ten years, billions will be invested in projects that, in one way or another, will be aligned to the SDGs. Yet if our collective approach to impact transparency doesn’t change it will be near impossible to calculate the contribution of these investments in attaining the SDGs. Impact transparency is likely to be one of the core areas on which our new DFI Transparency Initiative will focus. We’re looking forward to working with the leading players in the DFI and private finance space to understand what opportunities exist for improved disclosure, harmonisation of reporting practises, and ultimately to ensure that the contribution of these investments is understood, shared, and used for learning and improvement in future.
So, if you or your colleagues are in Paris next week, come and find the Publish What You Fund team to hear more about our plans and share your ideas.
 Recent research by Runde and Milne states that for 2017 alone DFIs committed $87 billion in non-sovereign, private sector development financing: https://www.csis.org/analysis/development-finance-institutions-plateaued-growth-increasing-need