Private Sector Crucial to Future of Global Development

Geopolitical tensions — from intensifying rivalries between major powers to regional conflicts — have placed significant pressure on the international development agenda. Development assistance from major funders is declining, and the world is becoming increasingly unpredictable.

Today, capital is not flowing to where sustainable and development finance is most needed. In developing markets, the sustainable development financing shortfall is estimated at around USD 4 trillion annually, particularly in areas such as basic infrastructure and access to clean water.

To address this funding gap, all stakeholders must come to the table, recognizing that global challenges — including poverty, pandemics, and social inequality — transcend borders. Collaboration is now more critical than ever. Among this year’s key convenings, the UN’s Fourth International Conference on Financing for Development (FFD4), to be held in Seville, Spain, from June 30 to July 3, will play a vital role in fostering cooperation across the public and private sectors.

The private sector has a vital role in delivering capital at scale. Public-private partnerships can significantly amplify the impact of development funding — whether through co-investments in clean infrastructure or by delivering essential services in underserved areas. Yet, private capital often remains sidelined in global development funding.

The reasons are well known. As World Bank President Ajay Banga recently noted, “Private investment flows only where the right conditions exist and where there’s a clear probability of return.” Reforms are urgently needed to create those conditions and to make opportunities investable.

On the demand side, more must be done to translate high-level national ambitions and global agendas into concrete, investable projects that attract private capital into developing markets.

Innovative tools, such as project pipeline development funds and investment platforms that pool resources across multiple projects, can scale private capital mobilization. These tools make more projects bankable and offer predictable returns to institutional investors.

Innovative financing models — such as Indonesia’s green sukuk bonds and Barbados’ debt-for-climate swaps — should also be embraced.

On the policy front, regulatory reforms are needed to address prudential regulations that currently misprice the benefits of guarantees and overstate the risks of infrastructure investments in emerging markets, thereby creating artificial barriers to investment.

Exchange rate risk is another key issue. More can be done to mitigate local currency risk, especially when investments are made in hard currencies while revenues are generated in more volatile local ones.

Such reforms, along with the adoption of technology to bridge financing gaps for small and medium-sized enterprises in emerging markets, can help unlock private capital at scale.

FFD4’s International Business Forum — which we co-chair — presents a landmark opportunity for global stakeholders to chart a new path for public-private partnerships. This initiative aims to implement practical solutions to unlock investment in developing markets.

We invite you to join us and global leaders in Seville at FFD4 to shape negotiations and advance actionable solutions. The private sector has both the resources and the incentive to lead — and if it does, it can help forge a more sustainable and equitable future.

The authors are Co-Chairs of the FFD4 Business Steering Committee. Mr. Denton is Secretary-General of the International Chamber of Commerce and a board member of IFM Investors. Mr. Viñals and Ms. Kamdani also co-chair the Global Investors for Sustainable Development Alliance. Mr. Viñals formerly served as Group Chairman of Standard Chartered, and Ms. Kamdani is CEO of Sintesa Group.