Finance for Sustainable Development Program Concept note

The FSD Program addresses the funding gap for the Paris Agreement and Sustainable Development Goals by shifting focus from the supply side of finance to the demand side. By analyzing firm-level investment decisions in low- and lower-middle-income countries (LLMICs), the program identifies the enabling conditions and blended-finance instruments—such as guarantees and risk mitigation—necessary to make sustainable projects attractive to private investors. This micro-level evidence is then used to inform macro-level global and regional policy frameworks.

• There is a significant gap between the investment required to meet the Paris Agreement and Sustainable Development Goals (SDGs) and the actual capital provided, particularly in low- and lower-middle-income countries (LLMICs).
• Blended finance has failed to mobilize private capital at the necessary scale; in 2021, the private finance mobilized for sustainable development through blended finance was only USD 40 billion, representing approximately 1% of the required amount.
• Private investment in LLMICs is hindered by macroeconomic conditions, including weak formal institutions, lack of infrastructure, and vulnerability to external shocks, which lead to higher risk premia and increased costs of capital.
• The FSD Program argues that existing research overemphasizes the supply side of finance (availability and accessibility of capital) and neglects the demand side, specifically the capacities and constraints of firms seeking to develop sustainable economic activities.
• The program utilizes a two-pronged approach: generating micro-level insights on project viability to inform macro-level policies on climate and development finance.
• Blended-finance instruments, such as guarantees, insurance, and currency risk instruments, are identified as critical tools to realign risk and reward parameters to attract private investment in sustainable projects.

APA

Duma, D. (2024). Finance for Sustainable Development Program Concept note. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2023/05/finance-for-sustainable-development-program.pdf

Chicago

Duma, Daniel. Finance for Sustainable Development Program Concept note. Stockholm Environment Institute, 2024. https://www.sei.org/wp-content/uploads/2023/05/finance-for-sustainable-development-program.pdf.

Wikipedia

{{cite report |last1=Duma |first1=Daniel |title=Finance for Sustainable Development Program Concept note |publisher=Stockholm Environment Institute |date=June 2024 |url=https://www.sei.org/wp-content/uploads/2023/05/finance-for-sustainable-development-program.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{duma2024finance, author = {Duma, Daniel}, title = {{Finance for Sustainable Development Program Concept note}}, institution = {Stockholm Environment Institute}, year = {2024}, month = jun, url = {https://www.sei.org/wp-content/uploads/2023/05/finance-for-sustainable-development-program.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }