The Private Sector at Seville

Ten years after the 2015 Addis Ababa Conference on Financing for Development, the finance development doctrine of “Billions to Trillions,” popularized by the World Bank, is alive and kicking. At the Fourth Conference on Financing for Development, taking place in Seville this week, a renewed push for private investments was high on the agenda. And no wonder: attendees at the conference from the private sector totaled 6,000; they counted for 40 percent of the 15,000 people in attendance and six times as many as those invited from civil-society groups the world over.

“Investment” has been a watchword throughout the conference. The Bank’s International Finance Corporation, the private sector lending arm of the Group, reminded an official audience at the roundtable on “leveraging private business and finance” of the words of its president, Ajay Banga: “Official Development Assistance is a rounding error compared to the trillions needed to achieve the Sustainable Development Goals.” This is the argument put forward to justify the relentless promotion of initiatives aimed at attracting private investors to development and climate-related projects.

The IFC’s representative at the conference spoke enthusiastically about private capital mobilization. “The only scalable path to sustainable development is private-sector solutions,” he said. In other words, the plan is to promote initiatives that package the SDGs up into investable opportunities.

This was again underscored by the representative of the Organization for Economic Co-operation and Development (OECD), even though it was accompanied by recognition of the fact that the amount of private finance so far mobilized has failed to live up to the expectations of its advocates. Nonetheless, “private-sector solutions” were a central theme during the week in a great number of the 130 initiatives announced as part of the Sevilla Platform for Action. At the International Business Forum, convened in parallel to the conference, private-sector actors reiterated this agenda.

Representatives of the Global Investors for Sustainable Development Alliance, a group of leaders of major financial institutions and corporations, including commercial banks, asset managers, and insurance companies from across the world, and the International Chamber of Commerce, took part in a roundtable on private business and finance. The Alliance advocated for an “expansion of de-risking tools,” among which were mentioned “political risk insurance,” a “conducive regulatory environment,” and the avoidance of imposing “undue compliance burdens on businesses.” The conference was not without its tensions, with civil society representatives voicing their criticism both in the official room and in other parallel events, but they were greatly outnumbered by the private sector.

By now, the pact between private finance and development appears complete. As Rodolfo Lahoy, from IBON International, put it: “private finance and large capital are treated as life-vests of a sinking development agenda, despite contrary evidence of corporate abuse and rights violations in the global South.” He argued that, “the development agenda is sinking because of the current development model based on extraction of environmental, social and financial resources in a system that prioritizes the power of profit.”

Through de-risking measures and regulation aimed at creating bankable investment opportunities for private actors, states delegate obligations and offer profits to entities that are not necessarily aligned with public interest and national development priorities. Civil society organizations, including the European Network for Debt and Development, raised a red flag about the outsized role of the corporate sector in what should be an intergovernmental process meant to address the structural barriers that undermine financing for sustainable development. The call was clear: we need “an evidence and rights-based discussion on the role of private finance in development, on the basis of the right to development principle.”

Indeed, an evidence-based approach to the role of the private sector in development is critical. Civil society and academics have warned against the high risks of policies aimed at attracting private investors, as they can result in negative impacts on sustainable development needs and the human-rights obligations of states. These concerns also apply to the European Union’s Global Gateway strategy, which promotes the use of development aid to de-risk private investments in the countries of the global South, while risking the diversion of scarce development resources to serve the EU’s geopolitical and commercial interests.

The Compromiso de Sevilla, which reflects the new global consensus on financing for development, recognizes the difficulties in implementing this agenda and the need for a greater focus on quality. As the document states (paragraph 31): “Despite increased attention to innovative finance instruments such as blended finance and adoption of sustainable business and finance legislation, investment in sustainable development has not reached expectations, nor has it adequately prioritized sustainable development impact.”

The Compromiso also calls for “policy frameworks and incentives for private investment, at the national and global levels, that promote sustainable development, building on lessons learned since the adoption of the Addis Ababa Action Agenda.” Yet, as civil-society organizations have stated, it falls short of concrete actions to advance on globally agreed standards and measures to regulate private investments in the public interest.

Despite the lack of evidence that the majority of development and climate projects in global South countries are bankable, Sevilla has provided a space for promoting new iterations of a failed approach. Critically, it has also provided a platform for civil-society organizations as well as scholars to set out their agenda, raising calls for public finance to be recognized as the main driver of development and not as a residual safety net for market failures. This includes calls for greater policy space for socio-economic structural transformation of countries in the global South, including the implementation of green industrial policies. Without this, the high risk of undermining rights, accountability, and exacerbating debt, inequalities, and the climate crisis cannot be underestimated.