The Business and Sustainable Development Commission says goodbye as it highlights blended finance

DAVOS, Switzerland — It started as an idea in an airport lounge in Cape Town, South Africa, and was launched in Davos two years ago. But on Tuesday, the Business and Sustainable Development Commission did something a bit unusual — it held a dinner at Davos to say goodbye.

Designed to last for just two years, the commission produced a flagship report in 2017 highlighting the $12 trillion business opportunity in the Sustainable Development Goals in several key sectors and set out to try to change the way CEOs think about their responsibility to invest in social and environmental challenges.

The commission’s 37 commissioners spoke with some 1,500 CEOs and reached about 75,000 more through the report. The effort was designed to be short term in order to have consistent, high-level participation, a clear timeline for achieving objectives, and not to lose its impact slowly over time, said Lord Mark Malloch-Brown, the chair of the commission who is also a former United Nations deputy secretary-general and a former U.K. government minister.

“It’s all about expanding business, creating opportunities, and, for development, creating financially sustainable models,” he said. “We seeded the idea and now it needs to take off.”

The work of the commission will continue through a number of avenues. Those include spin-off initiatives, such as the Blended Finance Task Force, which is working to mobilize large scale private capital to invest in the SDGs, and the Food and Land Use Coalition, which seeks to define global targets for food and land use systems and find ways to achieve them. The commission’s ethos will also live on in the World Benchmarking Initiative, which is trying to create publicly available ways for companies to report on the SDGs so it can be used in investment decisions.

The Blended Finance Task Force was in the spotlight Tuesday as it released a consultation paper examining blended finance, the opportunities for growth, and the barriers that prevent further mobilization of private capital for the SDGs.

The blended finance market has roughly doubled in the last five years to more than $50 billion, and the market could double again in the next 3-4 years, if there is “a dramatic scale-up in the size of blended finance vehicles, moving from many fragmented $100 million funds, to a growing number of vehicles, each with $1-10 billion of capital,” according to the report.

One of the big barriers in the past that has held back blended finance — which is the strategic use of public or philanthropic development capital to mobilize commercial finance for SDG-related investments — has been that most deals have been bespoke, and starting from scratch each time is time-consuming and difficult, Malloch-Brown said. The task force is working to develop a framework that would allow for replication and scale, he said.

“Blended finance has been rumbling down the runway and now it may be ready for take off,” he said.

There is certainly an opportunity, including for attracting private institutional investors, but multilateral development banks and development finance institutions will also need to step up. MDBs raise less than a dollar of private funds for each public dollar it spends, and those ratios need to more than double in the next decade if financing targets are to be met, according to the report. Bilateral DFIs also need to improve their ratios.

In order to do that, MDBs and DFIs might look to infrastructure investments and more stable middle-income countries, which would certainly concern actors in the development community, but it’s a strategy that could free up additional funds for frontier, low-income projects, according to the report.

The problem in this situation is not the availability of capital; in numerous conversations in Davos Tuesday, World Economic Forum attendees talked about an abundance of capital. Developing countries with high quality infrastructure investment opportunities will find funding, countries that put in place the right policy and institutional mechanisms will benefit, while those that don’t may lag behind, the report says.

“There is a major opportunity for the world to increase its underlying rate of growth, deliver the Sustainable Development Goals (including climate) and strengthen long-term returns for savers. Scaling up blended finance could be the game-changer which makes it possible to capture this prize,” the report said.

What’s needed is leadership from those who provide capital, those who can put together blended capital deals and from developing countries, it said.

Companies are thinking and talking about the SDGs, said Paul Polman, Unilever CEO and a member of the commission, with more than half of companies saying they are under pressure to report on environmental social and governance factors, he said.

“I think the work has only started,” Polman said, adding that the commission was a group of business people who understand they will not be judged only on profits but on their contributions to society.

More than just calling on companies to change the way they view their purpose and address the SDGs as a matter of good business, Polman said that those on the sidelines will be complicit to the hundreds of millions around the world who go to bed hungry, die of preventable disease, or don’t get an education.

“I’ve always believed and continue to believe that by serving citizens, we’ll be rewarded with successful businesses,” Polman said.

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