Unlocking Public and Private Capital with Finance Expertise Hubs in Emerging and Developing Countries

François Gemenne, President of the Sustainable Finance Observatory, is presenting a Report and Call to Action on unlocking private finance at the United Nations Financing for Development Conference – FfD4 organised in Sevilla from June 30 to July 3.  

This Report authored by Dr Barbara Samuels, Executive Director of The Global Clearinghouse for Development Finance, ambitions to bring a meaningful contribution to bridging the critical finance gap in Low- and Middle-Income Countries by deploying proven Finance Techniques and Expertise for significantly increasing the volume of bankable project pipelines that meet the requirements of financiers from both the public and private sectors. 

• The urgency to unlock 70-90% of private capital to achieve the SDGs and the Climate goals 

Estimated financing gaps for developing countries range between US$ 2.5 trillion and US$ 4 trillion annually. Of this massive requirement, the UNFCCC and IMF estimate that 70 – 90% is required to come from the private sector.[1] This priority and the need to leverage scarce public capital in unlocking access to the vast potential of underutilised private capital is a dominant proclamation of the Compromiso de Sevilla, the outcome document of the FfD4 Conference. [2]  

• The solutions set forth in the Report can be immediately deployed at scale for high impact, including in those countries constrained by high debt levels and low institutional capacity. 

The Report includes a call for action to set up country-based Finance Expertise Hubs engaging highly skilled practitioners in private finance techniques for significantly increasing the volume of bankable project pipelines.  These proven finance techniques include, among others, structured and project finance, blended finance, co-financing, and credit enhancements such as guarantees, including first loss. 

Such Finance Expertise Hubs could fill the existing huge technical capacity gap by engaging specialised experts experienced in meeting the credit and investment requirements of financiers (e.g., transaction advisors, project-finance lawyers, risk specialists, etc.).  

Given the risks associated with foreign-denominated debt, it is particularly critical to use proven finance techniques to unlock local currency investment at the country level from local banks, institutional investors, and capital markets.  

There is an opportunity to systemically integrate these Hubs into country-led platforms currently being set forth by National Governments with their development partners with the objective of leveraging limited public resources to mobilise a greater amount of private capital.  

“Given the urgency of unlocking 70-90% of private capital to achieve the SDGs and the climate goals, we must focus on solutions that can be immediately deployed and scale up in various institutional and economic contexts. Experience shows that projects that have succeeded in mobilising private capital on a large-scale benefit from financial structures and techniques that have enabled them to meet the bankability criteria required by private financiers. I believe deploying Country–Based Finance Hubs involving specialised experts with the necessary know-how and experience in private finance is a credible and operational solution to massively unlock finance to achieve the SDGs. This is particularly critical to overcome the current deadlock caused by the sovereign debt crisis and the decrease in Official Development Assistance.” François Gemenne 

• Join the conversation 

François Gemenne, the President of the Sustainable Finance Observatory will present the Report and Call to Action at the following FfD4 side events in Seville:  

• July 2 – 10:30 am-12:00 pm – Creating an Enabling Environment for Private Capital Flows to EMDEs: a Multi-Stakeholder Approach – Side Event Room 15 | Hosted by the Institute of International Finance (IIF), Boston Consulting Group (BCG)  

• July 2 – 2:30 pm-4:00 pm – Enhancing Market Access for Public Development Banks: Reducing the Cost of Capital for Sustainable Investment – Side Event Room 15 | Hosted by the Finance in Common Initiative (FiCS), International Development Finance Club (IDFC), Multilateral Investment Guarantee Agency (MIGA), Rothschild and Co