As prepared for delivery.

I am delighted to join you today to launch the report “Blended Finance in the Least Developed Countries 2019”.

I am also pleased to see that UNCDF and OECD have continued their productive partnership and have produced this update to last year’s report, looking at how blended finance works for LDCs.

This ongoing work is giving us a much clearer understanding of what is happening, what works, and what can be done better to make blended finance support SDG achievement in LDCs.

As we meet this week to take stock of our SDG progress, shining this spotlight on LDCs is important. In many ways, the progress made in LDCs is a litmus test for whether we can deliver on our promise to leave no one behind.

There is no shortage of capital in the world economy. However, currently the global financial system is not channeling those vast sums effectively towards investments for sustainable development.

Reorienting even a fraction of the global stock of financial assets would accelerate sustainable development. And this is in part why blended finance is generating such excitement – for its ability to crowd-in private finance to deals it would otherwise overlook.

Yet, in those countries where resources are most scarce, blended transactions are not mobilizing private resources at the scale needed.

Of $153.9 billion of private capital mobilized by official development finance in 2012–2017 for all developing countries, the data suggests that 6% was for LDCs, whereas over 70% went to middle-income countries.

Gaps in the data mean it is unclear whether this represents a fall relative to the 7% of private finance mobilised for LDCs observed for 2012-2015. Yet, when we look at recent declines in FDI flows, at recent declines in ODA flows, and now data from this report, the picture that emerges is one of a financing architecture not yet delivering for the LDCs.

To be sure, there is room for improvements to business and regulatory environments in LDCs to make them more attractive to more private investors.

Still, we cannot be satisfied with how current flows of public and private finance are reaching LDCs and poor and vulnerable communities.

In reading this second report, I am struck by five thoughts:

First, blended finance is an exciting option to mobilise private finance, but there are risks involved which need to be carefully managed.

If we look at the concentration of blended transactions, the top five recipients - Angola, Senegal, Myanmar, Bangladesh, and Zambia - together received 44% of the total volume of private finance mobilised in 2012-2017. And while some LDCs do not benefit at all from blended finance transactions, they do receive ODA.         

Moreover, energy and banking and financial services are the largest, and growing, sectors, for blended transactions.  But we know that ODA plays a critical role in expanding access to essential health and education services, in building infrastructure, protecting biodiversity, and in providing support to policies – all issues that may be national priorities.

This means that even as we expand our financing options, we need to approach blended finance solutions as a complement to purely public or purely private financing options that, deployed judiciously, can help catalyse much-needed additional resources for the SDGs.

Second, we need more development partners, development finance institutions and multilateral development banks to expand even further their investments in LDCs.

Several DFIs are indeed stepping up their involvement in riskier markets, and we see innovative solutions that should be explored and scaled up.

Still, focusing on LDCs may require a shift in incentives and approaches. As we focus on moving from “billions to trillions”, we must not lose sight of making sure the resources mobilized have demonstrable SDG impact and support.

In other words, there is a need also to focus on the quality of resources mobilized and how they reach those being left behind – and this means not just LDCs as a group but more specifically, under-served populations within LDCs.

Third, we need more partners to focus on getting more finance flowing to the missing middle.

SMEs promote innovation; help to diversify economic activity in local economies beyond capital cities; and can be a powerful force for integrating women and youth into the economic mainstream.

Yet, the transaction costs or perceived risks of directly supporting SMEs can be too high for some investors.

Despite ongoing work in this space, there is a huge missing middle finance gap that blended solutions can potentially help fill. This is a frontier where investments are so important, including from entities such as UNCDF that do the heavy lifting preparing small-scale projects.

Finally, we need to do a much better job when it comes to monitoring and measuring SDG impact, sharing lessons and knowledge, and generating additional evidence of blended finance impacts in LDCs.

Despite all the talk of SDG additionality, we know in practice it can be difficult to assess exactly whether a project produces enough development impact to justify the use of concessional resources. Metrics and methods to measure development differ—often widely—across organizations.

For its part, UNDP has launched SDG Impact, which aims to provide investors, businesses and others with unified standards, tools, and services required to authenticate their contributions to achieving the SDGs. It will also identify SDG investment opportunities in emerging economies and developing countries.

By focusing on blended finance, and what it takes to get this approach working for LDCs, this updated report also underscores the broader opportunities and challenges LDCs face in getting the finance they need.

If this work on blended finance has one message, it is that we cannot get comfortable: we need to forge those partnerships, take those risks, and challenge ourselves to mobilize sufficient financing for the LDCs and other vulnerable countries.

I commend UNCDF and OECD for laying down that challenge for us.