G20 Blended Finance Principles for scale and impact by OECD

In times of mounting global challenges, the SDG financing gap in developing countries has widened further to USD 3.9 trillion (forthcoming Global Outlook on Financing for Sustainable Development 2022). To bridge this gap, more policy action is needed to mobilize resources. However, private finance mobilization remains modest and behind expectations. The latest OECD data shows that private finance mobilized by official development finance interventions reached USD 51.3 billion in 2020, mainly for projects strengthening economic infrastructure and services (e.g. banking, business services and energy) in middleincome countries. In 2018-20, only 18% and 1% of total mobilized private finance targeted LDCs and SIDS respectively.

There is hence a need to devise policies that lead to systemic and transformational approaches and to more mobilization and alignment of resources, that reach those most in need. This means targeting blended finance to local contexts and harnessing blended finance to catalyze finance in the last mile. It means supporting domestic financial systems and market development and for developing countries to ensure that a pipeline of projects stands ready to attract blended finance.

The G20 Principles to Scale up Blended Finance in Developing Countries, including in Least Developed Countries and Small Island Developing States (‘G20 Principles’) are therefore very timely. They reflect a common strategic direction and aspiration for scaling up blended finance implementation in developing countries. The principles are embedded in and complementary to existing policy frameworks – such as the Tri Hita Karana Roadmap for Blended Finance, the OECD DAC Blended Finance Principles, and evidence, including the OECD stocktake report on ‘Scaling up Blended Finance in Developing Countries, Least Developed Countries and Small Island Developing States. Additionally, to make the G20 Principles more actionable for developing countries, the OECD has started to prepare, at the request of Indonesia, a Blended Finance Guidance for developing countries.

We need to move from innovative but piecemeal transactions to true scale. As the OECD stock take report highlights, a three-fold approach is needed: (i) developing stable pipelines of bankable projects, (ii) increasing the use of so-called “portfolio approaches and (iii) ensuring efficient and continuous coordination across different blending partners to match demand and supply. Similarly, a lot of work remains ahead in terms of ensuring rigorous and transparent account of the impact of blended finance transactions, through strengthened impact measurement and management, as laid out by the OECD -UNDP Impact Standards for Financing Sustainable Development. Building up knowledge through targeted capacity building and technical assistance will be crucial.

Indonesia has also shown leadership in developing The Global Blended Finance Alliance (GBF), which will support the implementation of the G20 Blended Finance Principles. The GBF promises to advance policies on blended finance, could offer to be a marketplace for innovative projects, and can help to advance knowledge sharing, capacity building and training for developing countries. The alliance could ensure that recommendations developed by G20 policy-makers are put into practice by governments, municipalities and the private sector across developing countries. The OECD stands ready to support the implementation of the G20 Principles, to continue to enable an exchange among policy makers, practitioners and partner countries, as well to support the Global Blended Finance Alliance.

Haje Schütte

1. See more at https://www.tossd.org/docs/Infographic_ Mobilised_Private_Finance_TOSSD.pdf and in a forthcoming report to be posted at https://www.oecd.org/development/ financing-sustainable-development/development-financestandards/mobilisation.htm