The United Nations estimates that the world will have to contribute over $4 trillion annually to finance the Sustainable Development Goals. It is clear that official development assistance from public coffers will not be enough to meet this daunting financing challenge. Private investment will not only be welcome, but indispensable for moving from “billions to trillions” in development finance.
Recognizing the much-needed role of business in this effort, OECD governments agreed last week at the High-Level Meeting of the OECD Development Assistance Committee (DAC) to enable greater private-sector investment in developing markets.
“The successful implementation of the Sustainable Development Goals will hinge to a large extent on the mobilization of private investment,” commented Marie Gad, vice chair of the BIAC Development Committee. “And to make that happen, the DAC is breaking new ground to create an enabling environment and help mitigate the risks facing foreign and domestic businesses investing in developing markets.”
Key elements agreed by OECD DAC member governments include:
- A new OECD DAC work program to focus on good practices for providing concessional public international finance (such as loans, guarantees, equity holdings, and mezzanine finance) to investment projects in developing economies in order to attract international private capital.
- A set of principles for the measurement of official development assistance designed to reflect the effort of donors in providing the right incentives and removing disincentives for instruments that engage private-sector investment.
- A new measure that will track the Total Official Support for Sustainable Development (TOSSD), which will be agreed by October 2016, after which initial data collection will get underway in 2017, leading to a report to the UN 2030 Development Agenda implementation review in 2019. TOSSD will measure – and help encourage – private-sector financial flows generated through donors’ actions.
- DAC engagement in the Global Partnership for Effective Development Cooperation will seek to expand the application of the OECD’s Policy Framework for Investment, as well as other OECD tools and analyses, aimed at strengthening the enabling environment for businesses in developing economies.
A number of steps now taken by the DAC correspond with a paper by the Business and Industry Advisory Committee to the OECD released in 2014 “Private Sector Perspectives on Private Sector Financing for Sustainable Development.“