Rom: Instituto Affari Internazionali
Innovative financing for development can contribute to closing the financial gap by mobilising new funds for sustainable development and leveraging existing scarce public concessional resources (ODA). In addition to domestic resources and traditional external financial resources, innovative financing mechanisms can mobilise further financial resources for LDCs. In view of the LDCs’ enormous sustainable investment needs, mobilising private financial resources is both crucial and inescapable. Blended finance represents an important instrument to combine ODA with private finance, thereby leveraging scarce concessional public financial resources. The G20 should consider promoting the adoption and implementation of the OECD Blended Finance Principles in LICs to enhance blended finance in these countries. As many LDCs do not have sufficient institutional capacity. To adopt blended finance instruments the G20 should support LDC in developing institutional capacity to effectively implement blended finance tools and to lower risks associated with blended finance. An additional instrument to enhance external financial resources to LDCs is to allocate the recently approved new SDR allocation to LDCs exceeding LDCs quota. The G20 should take on a leading by example/frontrunner role and donate as well as lend a percentage of their allocations, discuss establishing a special purpose fund (i.e. a green or health fund), support allocating a large amount of SDRs to LDCs exceeding their quota and discuss proposals how to allocate them among LICs and discuss how these financial instruments can be used to ensure a sustainable and inclusive recovery from the covid-19 crisis. As the fragmented architecture of sustainable bond standards represent one main challenge in mobilising financial resources for attaining the SDGs by issuing sustainable bonds the G20 should discuss and promote harmonisation of sustainable bond standards. Moreover, the G20 countries should provide capacity building for LDCs for developing the sustainable bond market in these countries.
This paper was also published as one chapter in UNCTAD (2021), Bringing the Voice of Least Developed Countries into the G20 Policy Agenda, a special issue to celebrate the 50 years of LDC category, Geneva 2021, pp. 27-35, https://unctad.org/system/files/official-document/aldcinf2021d4_en.pdf.