This week asset managers, impact investors and financial professionals gathered in the headquarters of the Organisation for Economic Co-operation and Development (OECD) in Paris, to discuss with the development finance community how to make private finance work for sustainable development. Participants were gathered under the heading ‘Mobilising private finance towards 2030 and beyond’, by the OECD’s Development Assistance Committee’s Community of Practice on Private Finance for Sustainable Development (CoP-PF4SD), which ‘aims to advance the mobilisation of private finance for sustainable development’. 

As the Fourth International Conference on Financing for Development (FfD4), a UN led process with full member state representation and a key milestone for the international development finance community, approaches, does the CoP-PF4SD have anything to offer? This is a particularly important question given that the global south perspective was in limited supply at this conference and that reality has not matched the high expectations placed on leveraging private finance to support the Sustainable Development Goals (SDGs).

The basic premise of the conference was that private finance and sustainable development are compatible, or at least can be brought into alignment with the right incentives. This is a very big assumption, with origins that can be traced to a ‘billions to trillions’ narrative, developed by the World Bank and others, that has often been repeated over the last decade in venues across the globe. The core of this idea is that public money in the billions could be used to attract private money in the trillions. 

The trillions have not come, and even the World Bank’s Chief Economist has admitted recently that ‘it all turned out to be a fantasy’. The financing gap remains and evidence that private finance would support the SDG agenda remains scant, as many at the conference were willing to acknowledge. Indeed, over the years the level of enthusiasm about the potential of private finance to deliver sustainable development outcomes, seems to be a bit more tempered, as more realistic expectations have emerged. While there was still the typical jargon repeated throughout around “finding scalable solutions for development impact and filling the SDG financing gap”, there was also some refreshing honesty that we do not often encounter in these settings. 

For instance, one reflection at the outset of the conference that “money is amoral and mostly concerned with making more money” was particularly candid and perhaps telling of where the discourse is moving. Institutional investors, especially those being courted in this space, are not naturally inclined to be concerned about development impact and approach these investments with the same mindset as they approach any investment: "will this maximise returns for our shareholders?” If that’s the case, then: how is this acknowledgement to be squared with an agenda that is very unlikely to deliver the returns that investors are pursuing? 

The conference heard that businesses are not charities and should not be asked to do more - they will go where the market opportunities and conditions can produce the best return on investment. Is it really a good idea then to continue to court businesses whose ‘investment thesis’ may not align with two of the three pillars (social, economic, and environmental) of the sustainable development agenda?   

With this in mind, the discourse around blended finance was also attention-grabbing. Questions like what is the point of blended financing? were put to the conference, and more precisely whether its purpose is to mobilise more private finance for the SDGs. The mostly rhetorical questions were followed immediately with the refrain that if this is its purpose then it’s not doing a great job.   According to the most updated figures from the OECD, ‘the levels of private finance mobilised by public interventions remain insufficient to match the increasing needs’ of countries in the global south: in 2023, official development finance providers mobilised nearly US$ 70 billions of private finance.

The answers to many of the questions often landed on more and better data. For an institution like the OECD, that has built its reputation as a clearing house for valuable development finance data, this is a very plausible proposition. While the discussion around increasing transparency and granularity of data should continue, especially when it comes to the operations of the development finance institutions, this is far from what is required to deliver in the current context in which the world is far off track to deliver on the SDGs. More data alone wont get us on track.

Also part of the context are recent developments in donor countries. The most extreme example being the United States, the world’s largest donor, where something unprecedented and unexpected is happening with the overnight dismantling of the US Agency for International Development (USAID). This has the possibility to turn the entire development agenda on its head. However, it is not the United States alone, and there have been alarming cuts to aid budgets across Europe, in France, Germany, the Netherlands and the UK. 

If there is one thing that the conference should have tried to impress upon its participants, but did not, it is the developmental and regulatory role for the state. Without such a call it is difficult to see how private finance can align with the broader development agenda. The unquestioning pursuit of private finance across the SDG pillars is not the answer. 

The UN Financing for Development process can provide the space where global economic and financial matters like these are discussed in a transparent and inclusive forum where all countries participate on an equal footing. FfD4, taking place in July in Sevilla, is the place to address the pitfalls of private capital mobilisation. As the conference this week showed, nice narratives, unbridled enthusiasm and business as usual are not working. What is needed at FfD4, is the creation of an inclusive and transparent intergovernmental process that will make it possible to build a comprehensive toolkit of policy measures that can regulate private sector financing in the public interest and towards the achievement of the SDGs.