Davos report: corporate sustainability ‘can unlock $12 trillion’

Sustainable business advocates identify 60 opportunities for cost savings and calls for “blended finance” solution for infrastructure projects

Switching to more sustainable business practices could unlock $12 trillion of extra funds for corporates by 2030 – that’s the message of a high-profile report launched at the start of this year’s World Economic Forum (WEF) in Davos.

Published by the Business & Sustainable Development Commission – co-founded by Unilever boss Paul Polman – the Better Business, Better World report identifies 60 sustainability “hot spots” with the potential to grow two to three times faster than average GDP over the next 10 to 15 years.

Spread across the industrial areas of…

  1. food and agriculture;
  2. cities;
  3. energy and materials; and
  4. health and wellbeing

…the hot spots include micro-irrigation, reducing packaging waste, restoring degraded land, autonomous vehicles, durable and modular buildings, green chemicals, mine rehabilitation, advanced genomics and remote patient monitoring.

But on a much wider scale, the report also calls for a dramatic, global upsurge in infrastructure investment.

That effort, it says, should be achieved via a “blended finance” model, comprised of cash from development finance institutions (DFIs), multilateral development banks (MDBs) and sovereign wealth funds (SWFs).

According to the report, the total, estimated infrastructure-investment needs across the world amount to $90 trillion over the next 15 years: approximately $6 trillion per year.

It notes that more than 70% of the projected investment “will be needed in emerging and developing economies”. But such large infrastructure investment “could have the additional benefit of reigniting global growth”.

Based on current levels of investment from public and private sources, the report says, there will be a $2-3 trillion shortfall in infrastructure investment over the next 15 years.

Making good the shortfall – and, in the process, ensuring that sustainability-based infrastructure projects are fully financed – will require a significant overhaul in global financing mechanisms.

The report points out: “The current architecture of public and private financing for core infrastructure is not yet up to the task.

“Historically, there has been a sharp distinction between, on the one hand, public-sector projects funded by governments, MDBs and overseas development assistance and, on the other hand, private-sector growth funded by commercial banks and private investors.”

One solution, the report says, is to make greater use of the ability of DFIs – which encompass both MDBs and SWFs – to mobilise greater private finance, including through blended finance.

That emerging practice involves the strategic use of public capital to leverage multiple amounts of private capital.

“Specifically,” the report adds, “blended finance entails public funders using market-driven risk-mitigation tools to mobilise multiples of additional private capital, as outlined in the work of the Redesigning Development Finance initiative, led by the WEF and the Organisation for Economic Co-operation and Development.

“It is a striking example of the concept of ‘billions to trillions’ coined during the 2015 Spring Meetings of the World Bank Group and IMF. The concept envisages converting billions of official development assistance into trillions of private capital supporting investment in developing countries.”

Signatories to the report include blue-chip corporations Mars Inc, Ericsson and Merck & Co, plus the International Chamber of Commerce.

Read the full report here.

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