Mobilizing Private Capital for the Sustainable Development Goals

This paper summarizes evidence on financial instruments and regulatory approaches to spur private investment in pursuit of the 2030 Sustainable Developments Goals. Starting from a theoretical framework demonstrating that raising the marginal product of capital is the key to crowding in private investment, it uses Robert Merton’s functional approach to financial intermediation to assess the track record and prospects for five types of instruments/regulatory approaches: guarantees, public-private partnerships, syndicated loans, sustainable financial contracts, and climate and banking regulations and policies. Despite considerable gains in the amount of private investment mobilized by these vehicles, the volumes still fall short of the trillions of dollars estimated to be necessary to achieve the Sustainable Developments Goals. Efforts to share relevant data, encourage more academic research, and publicize and demonstrate the effectiveness of these approaches, much of which is already being undertaken by the World Bank and other multilateral development banks, could be crucial to scale up private capital mobilization.