Hamburg Sustainability Platform New alliances are needed to provide blended finance at scale
Copyright© Thomas Trutschel/HSC/photothek.de
Founding members and supporters of the Hamburg Sustainability Platform
Public-private stakeholder coalition kicks-off joint work to scale up private SDG investment in emerging markets and developing economies: At the Hamburg Sustainability Conference (External link), a coalition of private and public institutions announced to join forces to set up the Hamburg Sustainability Platform. This platform aims at scaling sustainable investments into emerging markets and developing economies through standardization.
The Sustainable Development Goals (SDGs), as well as the climate and biodiversity goals, cannot be achieved with public funds alone. More private investment is urgently needed, especially in emerging markets and development economies. To close this financing gap, it must become easier for private investors to invest. Blended finance provides efficient mechanisms to address this challenge. This is the aim of an alliance of public and private stakeholders, the Hamburg Sustainability Platform (HSP), announced at the Hamburg Sustainability Conference.
The German Ministry of Economic Cooperation and Development, (BMZ); the United Kingdom’s Foreign, Commonwealth & Development Office (FCDO); Global Affairs Canada; the Danish Ministry of Foreign Affairs; Treasury of the Republic of South Africa; the Secretary of State in charge of International partnerships of France; the German Development Bank KfW; British International Investment (BII); as well as Allianz and Caisse de dépôt et placement du Québec (CDPQ) are partnering to jointly develop the Hamburg Sustainability Platform. The Organisation for Economic Co-operation and Development (OECD) acts as an advisory body to the platform.
Sustainable investments in emerging markets and developing economies have so far been for the pioneers in the private sector: while promising investment opportunities exist, large institutional investors such as pension funds or insurance companies rarely invest at scale. This is because implementation takes a long time, as preparations can take several years and financial products are often very complex. To make it easier for private investors to invest at scale, it would be necessary to pool the funds of public donors and standardize financial vehicles.
As a solution, the HSP aims at better combining public and private investments through standardized financial products as well as harmonized public strategies. The initiative thereby aims to enhance simplicity, replicability and efficiency, thus enabling considerable additional investment volume.
Standardization is a key enabler of operational efficiency. By delivering simplicity, efficiency and speed, volume becomes possible. Standardization acts like a common language, combatting fragmentation and accelerating procedures. It could therefore be an important step to help scaling private investment. This is recognized and demanded by different institutions and initiatives such as the UN-convened Net-Zero Asset Owner Alliance (NZAOA), the OECD, as well as the B20 Finance & Infrastructure Working Group. Nevertheless, standardization is currently lacking in blended finance.
The HSP was announced at the inaugural Hamburg Sustainability Conference, held on 7-8 October. Under the motto “together we co-create development”, the Hamburg Sustainability Conference challenges barriers to SDG implementation. It establishes a new global forum to speed up progress towards achieving the SDGs and deliver result-oriented solutions. The annual conference is a joint initiative of the United Nations (UNDP), the German Federal Ministry of Economic Cooperation and Development (BMZ), the Michael Otto Foundation and the City of Hamburg.
On their motivations for the HSP, the founding members have said:
Anneliese Dodds, Minister for Development and Minister for Women and Equalities, United Kingdom’s Foreign, Commonwealth & Development Office: “Meeting the Sustainable Development Goals will require trillions of dollars of additional public and private investment into emerging markets and developing economies. To get private capital moving quickly and at scale, investors need to be able to compare options and make decisions with confidence. That’s why the UK is pleased to support the Hamburg Sustainability Platform, which will focus on scaling up sustainable investment into the regions that need it most, by providing standardized investment products in a clear and simple format.”
Jochen Flasbarth, State Secretary of the German Federal Ministry of Economic Cooperation and Development: “The SDGs represent an unprecedented global consensus and as such, a joint mission of public and private stakeholders. We need to join forces to make this mission heard. Over the past years, numerous good examples of blended finance vehicles have been set up. It is now time to identify those success cases, standardize, and scale them. This is what the Hamburg Sustainability Platform stands for. It is a great example of how the German government enhances international partnerships and how development cooperation efficiently uses market mechanisms to co-create impact.”
Thani Mohamed Soilihi, French Secretary of State for Francophonie and international partnerships: “We need to boost financing capacities if we collectively want to achieve United Nations Sustainable Development Goals (SDGs), and this requires far more private sector leveraging. This is a priority for France, that we are pursuing with 66 partners through the Paris Pact for People and Planet. In that perspective, the Hamburg Sustainability Platform plays an important role and we hope it will bolster current efforts to scale sustainable investments and deliver tangible results.”
Lina Gandløse Hansen, State Secretary for Trade and Investments, Ministry of Foreign Affairs, Denmark: “We need to bridge the financing gap to deliver on the SDGs and the Paris agreement. The numbers tell a clear story: We are far off track. We need all hands on deck and the private sector must play a key role. We need to deliver scale and replicable models. The Hamburg Sustainability Platform can play an important role. Denmark is looking forward to bringing our strong focus on innovative financing to the table and explore synergies, not least with the work in the Investment Mobilization Collaboration Alliance (IMCA) which aims at mobilizing billions of US dollars in private capital in support of climate action.”
Mmakgoshi Lekhethe, Head of Asset and Liability Management at the National Treasury of the Republic of South Africa: “We need impactful solutions and investments on a global scale. And for investments to be impactful, private and public sector need to work together. Development efforts can only be sustainable in the long run if we succeed in mobilizing private markets for our goals. The Hamburg Sustainability Platform can become a key lever on this mission.”
Patricia Peña, Associate Assistant Deputy Minister, Global Affairs Canada: “Setting up the Hamburg Sustainability Platform involves learning from and working with existing solutions, ensuring what we put forward and how we work together adds value and avoids duplication. Recognising the need to cooperate more efficiently with other donors and private investors from an early stage, the Hamburg Sustainability Platform could become a key tool to enhance donor cooperation and address existing challenges in blended finance.”
Claus Stickler, Global Co-Lead at Allianz Investment Management: “Speed and scalability are key success factors in achieving sustainable change globally, including for example accelerating the deployment of renewable energy in emerging markets. The Hamburg Sustainability Platform can help simplify the creation and management of blended finance vehicles, thereby increasing their investability. Let's work together to create this important platform for real action.”
Vito Dellerba, Managing Director, Sustainable Investing at CDPQ: “Templates and standardized frameworks for financial returns and impact – initiatives highlighted by the Hamburg Sustainability Platform – facilitate timely and knowledgeable decisions by providing streamlined and consistent information. In addition, it has the potential to boost market efficiency by enhancing risk management practices, lowering transaction costs and increasing liquidity.”
OECD Deputy Secretary-General Mary Beth Goodman: “The OECD supports the Hamburg Sustainability Platform in an advisory role. Promoting innovative approaches to scaling up private capital mobilization in Emerging Market and Developing Economies is core to the work of the OECD. As a convener, we will be a partner in driving this initiative forward. Based on the OECD’s work in harmonising blended finance approaches, and with standardization featuring prominently in the current update of the Blended Finance Principles Guidance, the OECD can be a key contributor of this initiative.”
Christiane Laibach, Member of the Executive Board of KfW: “We have all learnt valuable lessons from the past twenty years of blended finance and impact investment. But to reach scale, we need to join forces, agree on common models based on these lessons and roll them out in a predictable and standardized manner. This is the objective of the Hamburg Sustainability Platform.”
Liz Lloyd, Chief Investment Officer at BII: “Unlocking private capital is critical to meet the twin challenges of development and the climate emergency. One important way to do that is through innovative blended finance, using concessional public finance to encourage private investment to achieve the SDGs. We are pleased to collaborate with others to reach a common approach to blended finance, to help mobilize private capital into sustainable investments at scale.”