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A Sustainable Development Certificates Framework: How Securitization Can Enable DFIs and MDBs to Utilize Capital Markets To Deliver On Their Sustainable Development Objectives

Eighteen East, The Rockefeller Foundation

This paper proposes, and recent transactions have demonstrated that:

  1. Development finance institutions can transfer risk from their balance sheet to private investors through the use of synthetic securitisation. This in turn allows them to manage their exposure to address regulatory constraints or adjust their own risk appetite.
  2. They thus retain ownership of all underlying investments, thereby ensuring there is no mission drift, and the process does not create a conflict with their absolute deployment objectives.
  3. Such transactions have thus far involved specialised institutional investors but tried and tested structured notes issuance techniques mean the resulting exposure can in turn be transferred to a wide audience of investors.

This paper and the SDC Framework propose that a market for development finance securitisation instruments can be created at scale. The SDC Framework, and other such initiatives, have the potential to combine the unique expertise of development finance institution with the power of financial institutions and capital markets to deliver on the United Nations’ SDGs.

    Date
    20 Mar 20
    Region Focus
    Global
    Sector Focus
    General