Innovative finance as it relates to international development assistance generally has overtones of bringing private markets, private capital and business to bear on tackling social and environmental issues in new, more effective and hopefully more sustainable ways. While this isn't always the case, it's clear from the terms below that productively engaging the private sector in working through solutions to the biggest global challenges has a very big role in the innovative financing landscape.
And it's not hard to see why.
There's a USD2.5 trillion per annum shortfall between what it is forecast will be needed to achieve the SDGs by 2030, and what has been committed. Unlocking the USD210 trillion in private capital markets is critical if we're to succeed.
It sounds obvious, so why hasn't it already happened? The truth is that there's not only a cultural divide between the public and private sectors in how they view the intersection between economic and social issues, there's also a linguistic one. Possibly more like a chasm. And while language brings us together, it can also keep us apart – particularly if the words are familiar but the meanings aren't. Highlighted in the following document are terms that epitomise this duality - terms like equity, risk, investment and even development. Until we understand what our prospective partners are trying to say, it's going to be a very rocky road.
This document is intended to act as a reference point to demystify the terms and contextualise their use in the field of innovative financing for development.