Blended finance facilitates sustainable investments
22 November 2023 14:04
The UN development agency UNDP wants to mobilize 1 trillion dollars a year in public and private funds to achieve the 17 UN Sustainable Development Goals (SDGs). However, the need is much greater, said Kennedy Mmasi, SDG Investment Lead of the UNDP Financial Centres for Sustainability Network (FC4S) at an event organized by the Liechtenstein Bankers Association (LBA) on 21 November. The financing gap has already risen to 3.7 trillion dollars.
FC4S, a global network of sustainability-oriented financial centers, wants to facilitate investments in sustainable projects. The aim of the SDG Pipeline program is to create concrete investment opportunities for investors. FC4S has examined the needs of several sectors in eleven African countries, such as the food sector, renewable energies and healthcare, and has identified specific investment opportunities. As a result, it could present a portfolio of projects to Swiss impact investment funds. The first results are expected in early 2024. FC4S has also developed a solution to mitigate currency risks: in the package, investment opportunities are bundled across countries and the individual country risks are offset.
Maximilian Martin sees this structuring of projects into attractive investment products as an important prerequisite for sustainable investments. “If an investment is not attractive, you won't get very far with it,” commented the Head of Philanthropy at the Lombard Odier Group. The Geneva-based private bank was involved in structuring a product that was used to modernize three International Red Cross rehabilitation centers in Africa over a period of five years. State funds from countries such as Belgium and Switzerland formed the basis for a bond in which private investors could participate with a minimum return of two per cent. However, Martin points out that “blended finance” investments like this, with a mixture of private, philanthropic and public funding, fell by 45 per cent in 2022 compared to the previous year.
Nevertheless, LBV Managing Director Simon Tribelhorn sees blended finance as an innovative instrument for financing sustainability goals. The LBV was one of the first members of the FC4S, which now includes over 40 financial centers worldwide. ce/stk