Posted on December 13, 2018 | Updated at 11AM

The moral and economic imperative of private equity to contribute to development

The United Nations has designated October 24 World Development Information Day to improve the dissemination of information and the mobilization of public opinion, to increase awareness of the problems of international development, and to thus promote greater efforts in the sphere of international cooperation.

 

Video about the importance of partnerships for the goals recorded for the #Act4SDGs day

 

The current state of development financing attests to a stark contrast between the budget required to eliminate poverty and protect our planet through to 2030 and the financial resources allocated to these issues.

Current public and private financing for the Sustainable Development Goals (SDGs) totals approximately $1.5 trillion annually. With needs estimated at between $4 and $7 trillion annually, however, there is an annual investment deficit of more than $2.5 trillion to achieve the SDGs.

 

The challenges pertaining to poverty and mitigating climate change in the developing world are too extensive for governments to be able to resolve alone.

 

How—and by whom—will this deficit be met? 

Governments, which have a large portion of the resources required to achieve the SDGs, can certainly do more by increasing their Official Development Assistance budget and better managing their finances. But the challenges pertaining to poverty and mitigating climate change in the developing world are too extensive for governments to be able to resolve alone. 

We must encourage more local and international private-sector actors to contribute to development efforts and spur innovation, business growth, the creation of decent jobs—particularly for the most marginalized members of society, women and young people—and the creation of wealth that benefits the majority.

Private equity represents an enormous potential for growing development financing budgets. Beyond the moral imperative to take action to further SDGs, not to mention the high cost of inaction, investing in emerging markets to achieve SDGs opens up great business opportunities. But this economic imperative is not widely known and is underestimated; despite the fact that the impact investment movement is gaining in popularity in OECD countries, the vast majority of investors are not prepared to put their money in more risky developing markets.

We must innovate and change our approaches and mindsets to transform equity markets, reduce the constraints and mitigate the risks in order to unlock the resources needed to go from billions of dollars to the trillions of dollars required to achieve the ambitious development program of which we are all a part.

FinDev Canada is determined to leverage its technical expertise, its financial tools and its in-depth knowledge of the context of emerging countries to mobilize a large spectrum of partners—investors, cooperation agencies, local and international organizations, private companies—to increase impact investments in emerging countries.

We are proud to be a member of the Canadian Forum for Impact Investment and Development (CAFIID), an association of Canadian organizations dedicated to impact investing in development to increase Canadian equity flows towards development.

And we are past the 2X Challenge: Financing for Women, an ambitious project of the G7 development finance institutions (DFIs) that encourages DFIs to mobilize their own funds and private equity to help women prosper as entrepreneurs, business leaders, employees and consumers of products and services that support their economic participation.

We hope to see more of these bold and sound partnerships, in order to mobilize the private sector to contribute to development efforts and create more prosperous, sustainable and equitable communities. Will you join us?

What are your thoughts? What innovative and sustainable solutions should be put in place in order to increase private equity flow to promote development and fight climate change? Comment below or on Twitter using the hashtag #FinDevCanada.