Unlocking Early Stage Financing to Accelerate Achievement of the SDGs - what’s really needed to deliver on the ambition
In 2020, the World Resources Institute (WRI) released a report titled ‘How Partnerships Accelerate Sustainable Development Goals: A Time for Transformative Partnerships’ that was the first instalment of WRI’s research series on SDG-focused partnerships.
The report offered insight into multi stakeholder partnerships that focus on accelerating progress on the UN Sustainable Development Goals (SDGs) and ways to maximise their effectiveness. It featured Energise Africa, amongst several impactful organisations, as best-in-class examples. They looked at how our pioneering match funding partnerships with organisations such as UK aid, Virgin Unite and Good Energies Foundation, paired with our enabling funding partnership with P4G helped us successfully attract committed retail investors who have played a significant role in the early years' growth of our business.
On Friday 9th September 2022, WRI released its highly-anticipated second instalment in the research series. The latest report ‘Unlocking Early-Stage Financing for SDG Partnerships’ WRI builds on the findings of the 2020 report, looking at how these transformational partnerships can attract the right kind of investment they need to help them accelerate the achievement of the SDGs.
Bridging the Climate and SDG Finance Gap
Climate finance is a subject that was widely discussed and debated at COP26 in Glasgow last year. It refers to the funding that developed countries provide to emerging economies to help them achieve their climate-related goals. The gap of US$4.2 trillion per annum that exists to reach the funding that’s needed is a major barrier to achieving the UN Sustainable Development Goals (SDGs) by 2030. But the Glasgow Financial Alliance for Net-zero has identified the potential of multi stakeholder partnerships for catalysing private finance to tackle this problem and this latest WRI report looks at practical solutions to help to bridge the gap.
Partnerships facing a funding crisis
According to WRI research, partnerships are struggling to meet their potential having become mired in the “missing middle”- the transitory period in which they have outgrown grant funding but are considered too young for commercial investment.
The report features Energise Africa as one of a group of compelling global P4G Partnership case studies that prove that true impact is achievable when funders are encouraged to ‘act beyond the status quo.’
Energise Africa is featured within this report to highlight how partnerships can achieve their full potential thanks to the innovative approaches of funders like UK aid, P4G, Good Energies Foundation and Virgin Unite. These approaches include:
- Innovation around the use of donor grants to support the testing and learning of new and potentially transformational approaches to blending finance for a retail investment audience
- A layering approach that enables Energise Africa to accelerate impact through the combined application of multiple sources of funding
- The development of new financial products utilising high-impact capital from governments and foundations in pioneering ways including match funding, co-investment, technical assistance, subordinated debt, first-time investor guarantees and product development focused on hedged currency products and de-risking using credit guarantees.
The impact issue
One of the core findings of the report is the issue of grant funders’ and investors’ attitudes to the demonstration and prioritisation of impact investing to help achieve the SDGs.
The report firmly places funders (this includes global governments and government-backed public institutions, philanthropic organisations and private investors) as central to creating the system-wide change that is needed to support sustainable business models to grow and thrive to create a better tomorrow.
The findings and suggestions for funders can be distilled into 5 key areas
- grant funders, providers of concessional finance and investors should look to adopt approaches to financing that stretch beyond their current comfort level. The report recommends that donor governments should expand their toolkit of financial instruments in a way that will crowd in private investment; for example, as a first-loss guarantor or insurer or as a founding member of a co-investment fund.
- grant funders need to be more open in how they make investment decisions and more flexible with their funding requirements.
- investors should be more transparent and increase their accountability to better optimise impact
- partnerships should look to focus on building a high-quality funder and incubation network.
- Development Finance Institutions (DFIs - which are specialised development banks or subsidiaries set up to support private sector development and include institutions like the European Investment Bank, British International Investment, World Bank, Asian Development Bank and African Development Banks) should expand to new approaches for pipeline development and investment; for example, by establishing end-to-end facilities and early-stage ventures. To help overcome the perceived lack of investable projects, DFIs should set up end-to-end facilities that develop projects from early-stage ideas to investable business opportunities.
Energise Africa’s view
In this crucial decade of delivery, we strongly encourage donor Governments and Foundations to take on board the recommendations made in this report to accelerate the achievement of the UN SDGs and deliver on the international community's broader climate change ambition. For example, the report's recommendation for donor Governments to expand their use of first loss and guarantees and sector-focused solutions, if implemented would be of significant potential catalytic benefit.
As Energise Africa looks to scale up and diversify into new impactful sectors such as electric vehicles, clean cooking, agriculture and landscapes across Africa and other emerging economies, innovative approaches to risk mitigation and currency hedging are needed to enable us to deliver on our ambition of mobilising $billions from retail investors for highly impactful SDG and climate finance over the next 5 years
Energise Africa has only been able to demonstrate that our transformational approach to mobilising people-powered finance works thanks to the unique approach taken by UK aid, P4G and Good Energies Foundation. We’ve been lucky enough to have this contribution recognised by global awards in 2021 from the UNFCCC for climate-friendly finance and from Keeling Curve.
With the UN General Assembly and COP 27 meetings just around the corner, it’s imperative that all funders take on board the findings from this report and we would encourage these organisations to join us for the report launch.
Download the report and watch the launch webinar
Energise Africa CEO Lisa Ashford was on the panel at the launch event in September and you can watch a recording
of the discussion to learn how we are able to successfully connect partnerships that accelerate the SDGs and a sustainable economy with the funders that are vital to achieving the successful and impactful outcomes we are all looking to attain. You can view and download the full report here