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19 July, 2018

Blended finance takes centre stage at UN High-Level Political Forum

Blended finance takes centre stage at UN High-Level Political Forum

Each year, the United Nations High-level Political Forum (HLPF) brings together governments, civil society, private sector, and other SDG stakeholders to review progress towards the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs). At this year’s forum (July 9-18) the theme was “Transformation towards sustainable and resilient societies”, with a particular focus on a sub-set of the 17 SDGs:

SDG selection

Overall, good progress has been made towards the SDGs. Deputy Secretary-General Amina Mohammed highlighted important progress in certain key areas, including maternal and child mortality (Goal 3); tackling childhood marriage (Goal 5); addressing global unemployment (Goal 8); and cutting the rate of forest-loss around the globe (Goal 13). The forum also concluded that science and technology have been paramount in advancing progress towards the goals, with innovations in renewable energy, healthcare, and affordable housing being especially critical as they have provided more people with access to basic human necessities.

‘Better Financing’ Needed

However, progress towards the SDGs isn’t fast enough to realize the full set of ambitious targets by 2030. In the discussions this week in New York, delegates acknowledged positive momentum as the global financial system strengthened, but “better financing” is an urgent priority. Delegates continued to emphasize the effectiveness and sustainable development impact of multi-stakeholder partnerships and approaches, including blended finance.

Blended finance was a recurring theme across the wide spectrum of events and discussions during the week-long forum. Some of the key blended finance messages from the week include:

  • There is an urgent need to accelerate analytical work and policy dialogue on blended finance that aligns with country priorities and brings about sustainable development.
  • The risks and benefits of blended finance should be shared in a fair manner, such as structuring first-loss guarantees in a way that compensates the public provider with a share of returns if an investment performs well.
  • The parameters of blended finance partnerships should be clearly established for issues such as technology transfer, employment and income generation, and linkages to domestic production chains.
  • Development actors must ensure respect for country ownership and other principles of effective development cooperation where ODA is used to leverage private financing.
  • As the use of blended finance increases, development partners should ensure that concessional funding is not diverted from least developed countries.

Blending for Clean Water and Sanitation

Blended finance was an important theme in discussions around Goal 6: Clean Water and Sanitation. The first synthesis report on SDG 6, launched at the forum, concluded that water and sanitation require a “new financing paradigm”, and identified three financial challenges: 1. lack of finance for strengthening the enabling environment and service delivery, 2. untapped use of repayable finance, including blended finance, and 3. resources inadequately targeted towards the poor and vulnerable.

Addressing these challenges will require increasing the efficiency of existing financial resources and mobilizing additional ones in the form of domestic public finance and domestic and international finance (ODA, loans, grants, etc.). Blended finance can offer more affordable access to critical goods and services (e.g., access to clean water and sanitation), while enticing lenders into the market. There are many benefits of raising commercial finance in the WASH sector, including longer term sustainability, faster access to finance and lower transaction costs.

To achieve the SDGs by 2030, new partnerships are needed between the public, philanthropic, and private sectors. The HLPF meetings in New York reflected the growing recognition of blended finance and the role that blended finance approaches can play in mobilizing additional sources of finance for development. However, for blended finance to reach its potential there is a need to (i) embrace innovation and smart technologies; (ii) address data gaps, especially around the sustainable development impact of blended finance, and (iii) encourage governments to strengthen the enabling environment and enforce a strong and binding regulatory framework for the private sector. Despite its growing popularity, blended finance will not be able to scale and help us progress towards achieving the SDGs until these conditions are met.

About the Author
Justice Johnston

As a Senior Associate, Justice is responsible for Convergence’s data and research activities, including building out Convergence’s database of historical blended finance transactions, documenting blended finance case studies, developing blended finance trends analysis and benchmarks, and coordinating webinars and workshops. Prior to joining Convergence, she worked at the MasterCard Foundation as Program Coordinator for the Financial Inclusion team. While there, Justice was responsible for contributing to new project development, managing current projects, updating project records and preparing strategic reports, as well as managing team organization and coordination. Prior to joining the Foundation, Justice was at the University of Toronto’s Munk School of Global Affairs completing her master’s thesis on Financial Inclusion and the Role of Government. She also has a variety of research and policy experience through her work at Scotiabank’s Government Communications, Policy and Research department, the G20 Research Group, and the World Wildlife Fund.

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