Blended Finance In The Least Developed Countries 2020

The least developed countries (LDCs) are the furthest from achieving the Sustainable Development Goals (SDGs). They are also likely to be hit the hardest by the COVID-19 crisis and badly need the additional private finance that blended finance can unlock. Yet evidence shows that too little private finance is mobilised for investment in LDCs. How can this be fixed?

The least developed countries (LDCs) are the furthest from achieving the Sustainable Development Goals (SDGs). They are also likely to be hit the hardest by the COVID-19 crisis and badly need the additional private finance that blended finance can unlock. Yet evidence shows that too little private finance is mobilised for investment in LDCs. How can this be fixed? The Blended Finance in the Least Developed Countries 2020 report is the third edition and second joint UNCDF-OECD report. It builds on UNCDF research and transactional experience, OECD data and analysis on private finance mobilized by official development finance, and a series consultations with and contributions by blended finance experts, LDC governments, UN missions, donors, civil society and research institutions. The report provides an update on the deployment of blended finance in LDCs. It also analyses its potential role in helping those countries recover from the COVID-19 crisis, and provides an Action Agenda for unlocking capital for the achievement of the SDGs in LDCs, as called for in the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda.

The least developed countries (LDCs) are the furthest from achieving the Sustainable Development Goals (SDGs). They are also likely to be hit the hardest by the COVID-19 crisis and badly need the additional private finance that blended finance can unlock. Yet evidence shows that too little private finance is mobilised for investment in LDCs. How can this be fixed? The Blended Finance in the Least Developed Countries 2020 report is the third edition and second joint UNCDF-OECD report. It builds on UNCDF research and transactional experience, OECD data and analysis on private finance mobilized by official development finance, and a series consultations with and contributions by blended finance experts, LDC governments, UN missions, donors, civil society and research institutions. The report provides an update on the deployment of blended finance in LDCs. It also analyses its potential role in helping those countries recover from the COVID-19 crisis, and provides an Action Agenda for unlocking capital for the achievement of the SDGs in LDCs, as called for in the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda.

What are the trends in blended finance for LDCs? What can it achieve and how? The OECD and UNCDF are working together to shed new light on these issues. Building on a 2018 publication, this edition presents the latest data available on private finance mobilised in developing countries by official development finance, extending the previous analysis to cover 2016 and 2017 as well as longer-term trends from 2012 to 2017.

The global economic recession and financial turmoil from Covid-19 are derailing implementation of the Addis Ababa Action Agenda and achievement of the Sustainable Development Goals (SDGs). Even before the pandemic, this report of the Inter-agency Task Force noted that there was backsliding in many areas. Due to the Covid-19 crisis, global financial markets have witnessed heavy losses and intense volatility. Particularly worrisome is the prospect of a new debt crisis. The report highlights both immediate and longer-term actions, including arresting the backslide, to respond to the global pandemic.

A large financing need challenges climate-adjusted infrastructure in developing Asia, estimated at $26 trillion till 2030. This necessitates crowding-in private sources to meet financing, efficiency, and technology gaps. However, a lack of bankable projects is a major hurdle. This publication suggests one possible innovative financing approach. The Green Finance Catalyzing Facility (GFCF) proposes a blended finance framework for governments and development entities to better leverage development funds for risk mitigation, generate a pipeline of bankable green infrastructure projects, and directly catalyze private finance. The GFCF provides useful inputs for the current debate on mainstreaming green finance into country financial systems.

In 2023, the combined GDP of the LDCs was 10 per cent below the level it would have reached had the pre-pandemic (2010-2019) growth trend been sustained. As a result, at least an additional 15 million people in LDCs are now living in extreme poverty, with their governments severely constrained in their ability to sustain adequate investments in public services or invest in advancing development progress. The Report highlights the urgent need for concerted action to restore fiscal space in LDCs through the lasting resolution of the debt crisis, reform of the international financial architecture, and the mobilization of climate finance to enable needed investments towards low-carbon transition and green structural transformation. Without which, the SDGs and sustainable development cannot be realised. The Report advances several recommendations aimed at advancing the reform of global development finance, which in its current state, is deficient in terms of its quantity, quality, structure, cost and ease of accessibility. The Report also contains a detailed analysis of the possible role of central banks in shaping the financing of sustainable development and green structural transformation in LDCs. While the contribution of central banks to dealing with climate change has been discussed in developed countries, this is the first time this type of analysis is done in the context of the LDCs.

This report explores evidence-based action areas to increase and accelerate the mobilisation of private finance for climate action in developing countries, and the role of international public finance providers in doing so.