Financing the Future
Designing public funds to mobilize private investment in sustainable development
Estimates of the level of investment needed to achieve sustainable development goals are staggering. Public finances alone will not be sufficient to close the funding gap. As governments implement national policies and consider ways to drive investment in sustainable development, they will find it critical to define the role of private capital. The challenge to attract private investment at the necessary scale is significant. Achieving better sustainable development outcomes often involves accepting lower returns on investment, which private investors are seldom willing to do.
Yet there is increasing evidence that the private sector has begun to scale up its involvement in sustainable development. National stimulus packages have unlocked investment in green infrastructure, low-carbon policies have catalyzed clean energy deployment, and multilateral development banks have helped create new investment structures to attract private finance, particularly in emerging markets.
Governments planning new funding initiatives to drive sustainable development thus have an opportunity to mobilize private capital. This paper describes an array of current and planned national funding programs and suggests some important design features of new government funding mechanisms, based on experience working with governments and input from private sector financial professionals.