G7 governments should use their power as shareholders in multilateral development banks (MDBs) and development finance institutions (DFIs) to enable them to be more effective in supporting the mobilisation of private investment for the Sustainable Development Goals (SDGs) and a just energy transition, according to the Impact Taskforce, a body established by the UK government earlier this year.
Published today, the Taskforce’s report also includes recommendations aimed at transforming the quality and transparency of information on the environmental and social impact of investment decisions.
In this context, the group called on governments to support and participate in upcoming consultations from the newly-announced International Sustainability Standards Board, but also for “an urgent build on this reporting baseline”.
It said it urgently called for “mandatory accounting for impact as a destination, stressing that the journey towards this goal must be underpinned by greater transparency, harmonised global standards and strong mechanisms to ensure integrity of data and analysis”.
To mobilise capital, one specific recommendation with respect to MDBs and DFIs was that governments should amend these institutions’ mandates to give as much weight to mobilising capital for the SDGs and a just energy transition as to balance sheet investment.
“MDBs and DFIs have much more potential to utilise their market position, networks and expertise to accelerate and expand institutional investor mobilisation,” the Taskforce report authors wrote.
“This combines with their ability to generate investable pipelines, provide de-risking support such as subordinated capital or guarantees, and to share years of relevant performance data.”
The Taskforce’s report comes shortly after the UN-convened Net Zero Asset Owner Alliance published a paper on scaling blended finance, which also highlighted the importance of sharing data, specifically recovery rates.
On the theme of blended finance, the Impact Taskforce did not place all responsibility on governments and MDBs, as it also said asset owners and asset managers should “increase their awareness of capabilities to engage in the new opportunities created”.
“Multilateral development banks and development finance institutions can – and must – play an even greater role expanding the flow and pace of capital to people and places too often ignored by financial markets”
Laurie Spengler, board member and lead expert, Impact Investing Institute
Active over only four months, the Taskforce brought together 120 individuals from the worlds of business, investment and public policy, including Marcus Svedberg, investment strategist at Swedish buffer fund AP4.
It split its work into two, one workstream focussed on transparency, harmonisation and integrity in impact measurement and reporting, and a second on the development of policies and investment vehicles to mobilise capital at scale to address environmental and societal needs.
“Investment decisions are being taken today with incomplete information,” said Nick Hurd, a former UK minister and chair of the Taskforce. “We need to transform the quality and transparency of data on impact. Our report presents an actionable pathway towards a world in which investments decisions are looked at through the triple lens of risk, return, and measured impact,” he said.
Laurie Spengler, member of the Taskforce and senior adviser to the second workstream, said: “Building on decades of experience and track record, particularly in emerging markets, multilateral development banks and development finance institutions can – and must – play an even greater role expanding the flow and pace of capital to people and places too often ignored by financial markets.
“That role is particularly important to help convert commitments from institutional capital to solutions that advance the SDGs into real and meaningful action.”
The full report can be found here.