Aid donors must improve transparency before scaling up public-private finance, new report finds

A new report by international research organisation Development Initiatives finds that donors who plan to scale up aid investments in blended finance would be doing so with inadequate information on where their investments are going and what impact they are having. There is currently no common reporting system for donors to publish information on their investments in blended finance, and commercial confidentiality limits the information that can be reported on the companies or initiatives that are invested in.

The report on the use of public funds to de-risk or ‘leverage’ private investments in development also finds that, while blended finance may have a valuable role to play in helping fund the Sustainable Development Goals (SDGs), alone it is unlikely to mobilise the volumes that are required to make a significant impact on the large funding gap. The SDG funding shortfall is estimated to be as high as US$3.1 trillion annually, while at current annual growth rates private capital mobilised by blended finance would total US$252 billion by 2030.

From the limited data that is available, the report also finds that blended finance tends not to target the countries or sectors where poverty is greatest, and so its use in delivering the SDGs – in which ending poverty by 2030 and leaving no one behind is central – must be carefully considered.

Harpinder Collacott, Executive Director at Development Initiatives, said “All new financing that can be leveraged for the SDGs is vital to their success. Unfortunately, the information available about investments in blended finance is just too limited for good decision-making. We also do not know how we should be scaling up aid investments in this area, ensuring it is having the impact we need it to.

“We don’t know enough about the role it can play, particularly on poverty eradication, and we don’t have the data we need to understand the comparative advantages of this form of finance against other types or resources. We have got to get that right before scaling up aid investments in this area. With commitments from donors this should be possible.”

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Contact: Anna Abuhelal, Head of Communications at Development Initiatives

E: [email protected] T: +44(0)1179 272505  M: +44(0) 7545668378

Notes to editors:

• Download the report here
• A range of data graphics for the key findings are available.
• Daniel Coppard, Director of Research, Analysis & Evidence, is available for comment

Key findings include:

• Private investments mobilised by blended finance grew by around 20% per year between 2012 and 2014, by contrast ODA grew by 3.5% per year over that period.
• It is unlikely that blended finance alone will meet the SDG funding gap. If the current annual growth rate were continued, private capital mobilised through blended finance would total US$42 billion by 2020 and US$252 billion by 2030 – well short of the SDG funding gap.
• Many countries which face the toughest challenges in achieving the SDGs – countries with high rates of poverty and very low government revenues – receive little or no investment from blended finance. LICs that received private capital investment through blended finance each received, on average US$62 million of this type of finance between 2012 and 2014, the equivalent figures for middle-income countries were US$370 million for LMICs and US$392 for UMICs.
• Most private capital mobilised through blended finance is directed to the energy, industry, mining, construction and banking sectors. These sectors received two-thirds of the private capital mobilised through blended finance between 2012 and 2014. Some sectors, such as education, biodiversity and water & sanitation face large funding gaps in relation to the SDGs, but receive relatively little investment through blended finance.
• Improved transparency of blended finance is critical. At present, judgements on the usefulness of blended finance in development are hampered by the quality and consistency of data that is available on such investments. There are no common reporting standards for actors involved in blended finance and the data which does exist is typically in a range of disparate data sets. Much of the data is not publicly available and, where data is available, data from different actors may be inconsistent or incompatible.

About Development Initiatives

Development Initiatives (DI) is an independent international development organisation that focuses on the role of data in driving poverty eradication and sustainable development. DI’s work on global humanitarian assistance provides objective, independent, rigorous data and analysis on humanitarian financing and related aid flows.

www.devinit.org