The clock is ticking. The end of 2020 means we have less than a decade to deliver the 17 Sustainable Development Goals adopted by all United Nations member states in 2015. What was always an ambitious target for a better world by 2030 has now been seriously disrupted by the coronavirus pandemic.
And even with a vaccine in sight, we face both immediate challenges and long-term consequences.
Across parts of the world, the global Covid-19 death rate is continuing to rise. Health services are stretched to the limit and the pandemic has been a global economic shock like no other. How can multilateral development banks, such as the European Bank for Reconstruction and Development (EBRD), help? How do we keep money flowing to sustain economies and ensure that countries build back better? How do we equip and support governments to make sound policy choices in the face of competing demands?
The immediate challenge in 2020 has been to provide emergency liquidity support. Multilateral institutions have stepped up their interventions: we have collectively delivered exceptional levels of investment in 2020, in response to this unique challenge, supporting our clients and delivering real value for our shareholders.
Looking ahead, the Covid-19 crisis has spurred us on to rethink how we can improve in the future. Overcoming the longer-term consequences of the pandemic will take money, time and relentless focus. It will also require addressing fundamental questions, perhaps with more imagination. This includes climate change, rising inequality and the future of trade in a way that makes economies more competitive, resilient, inclusive and green at the same time. Harnessing the digital revolution to promote more integration and better governance will also be a key challenge of the next decade.
Development institutions will play a crucial role by providing sustainable public financing, mobilising private capital and delivering objective policy advice that draws on decades of experience. Both political clout and economic firepower are needed to support long-term productive investments, for example in renewable energy, quality infrastructure or economic inclusion. Moving beyond the crisis phase, we need to ensure we genuinely build back better by measuring the quality as much as the quantity of what we do.
National governments and multilateral institutions must work together closely to maximise impact. The institutions need the right skills in the right place at the right time. Alongside this agility, they should monitor and rigorously evaluate the results of their investments. They must remain accountable to their shareholders.
Given the scale of investment required, development finance in the future should focus even more on crowding in the private sector. According to the Global Infrastructure Hub, the world will face a $15tn gap between projected investment and the amount needed to provide adequate global infrastructure by 2040. Only the private sector has the necessary resources to address this challenge.
Overcoming the funding gap
To rise to the challenge, collective action will also be needed. There are multiplier effects that can be gained from development finance institutions working as a system. For example, we at the EBRD have very good experience in the Western Balkans, with a Joint IFI Action Plan following the financial crisis.
In the years 2013 and 2014 alone, the EBRD, the European Investment Bank and the World Bank Group together mobilised investment equivalent to about 1.5 per cent of the gross domestic product of the Western Balkans, stabilising not only a fragile macroeconomic environment, but pioneering new approaches such as the development of renewable energy sources in one of Europe’s most environmentally stressed regions. The ERBD worked closely with the EU to support inclusive policy dialogue and give people hope for a better future.
This example also illustrates how development finance institutions can be first-movers to help overcome uncertainties and risks, clearing a path for investors to come in. Maximising development impact means focusing on the real economy and investing in innovative, high-impact projects. Development institutions cannot become start-ups; however, they can provide and mobilise the funds to let startups grow and thrive. Innovative approaches, including leveraging risk-taking capacity and strengthening equity investments, are crucial.
United we stand
Finally, maximising the impact of multilateral development finance also means better coordination of the work performed by the various institutions and agencies that exist in the field. Never has the demand for their contribution been stronger. What is needed is a united agenda and a coordinated approach where the strengths of the multiple players can complement each other. It is essential to go beyond isolated initiatives. Global problems require global responses.
Multilateralism has been under great strain in recent years, but the Covid-19 crisis may have made a reset both timely and more likely. Recent political developments inspire hope for a renewed dynamism in bolstering a global development finance system, which will be in high demand for many years to come.
Following the recent US elections, there are clear signs that the new administration wants to re-engage with multilateral partners for shared goals such as tackling climate change. For its part, the EU has stated its firm commitment to multilateralism and international partnerships, alongside raising its development impact and playing a more geopolitical role.
Multilateralism is all about making the whole greater than the sum of its parts. Leveraging the renewed spirit of multilateralism and building on its strong track record of operational delivery, the EBRD is ready to do its part to shape a better future.
Odile Renaud-Basso is the president of the European Bank for Reconstruction and Development (EBRD). The EBRD invested €10.1bn through 452 projects in 2019 (Source: EBRD)
This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.