In order to transform economic systems and reverse unsustainable global trends, the private sector will need to play an essential role. A number of private sector leaders have responded to the call and have started to take actions. They have taken the call for action not only from a risk perspective but also to pursue business opportunities.
According to a landmark report from the Business & Sustainable Development Commission, pursuing sustainable and inclusive business models could unlock economic opportunities worth at least $12 trillion a year by 2030 and generate up to 380 million jobs, primarily in developing countries. However, real leadership will continue to be needed to create partnerships between private sector, government, and civil society to transform the key economic systems.
What We Do
The GEF has a long history of engaging business and catalyzing private sector investment and the current GEF CEO Vision Statement makes clear that in order to bring transformational change to the global environment, the public and private sectors must identify new ways of working together.
Building on this experience, the GEF is moving towards a more holistic approach that will mainstream private sector engagement across GEF focal area strategies and integrated approach pilots. We draw on five different interventions to promote private sector engagement and with the Non-Grant Instrument Program the GEF supports innovative financing models.
- Transform policy and regulatory environments, including feed-in tariffs for renewable energy, incentives that guarantee markets for new approaches and encourage long-term investments.
- Deploy innovative financial instruments, including demonstrations and incremental financing for low-emission, climate-resilient investments, enabling private sector investment to flourish.
- Convene multi-stakeholder alliances to develop, harmonize and implement sustainable practices, creating alliances to promote environmental objectives.
- Strengthen institutional capacity and decision-making to improve information, participation, and accountability in public and private decisions.
- Demonstrate innovative approaches, including validation of a technology, a policy measure or an approach to address environmental degradation that can spur broader adoption.
In GEF-7, the GEF’s work with the private sector is based on two pillars:
- Expand the use of non-grant instruments
- Mobilize the private sector as an agent for market transformation
This strategy addresses several barriers by offering greater access to non-grant instruments and explicitly creating opportunities to involve the private sector in new programs under the GEF-7, notably the Impact Programs.
Expand the use of non-grant instruments
Key GEF stakeholders are increasingly attracted to the use of non-grant instruments for blended finance, which uses scarce public resources to unlock large multiples of private sector finance. In GEF-6, the Non-Grant Instrument Pilot attracted more proposals than could be funded and resulted in 11 innovative projects that included $99.5 million in GEF funding while attracting $1.8 million in co-financing. The pilot demonstrated that non-grant projects can provide high leverage of GEF investment, and that innovative financing solutions for natural resources management have increasingly emerged as economically viable.
Under GEF-7, the GEF expanded the envelop of blended finance to $136 million under the Non-Grant Instrument Program (NGI Program) to accelerate the participation of the private sector in GEF projects. The NGI Program seeks to catalyze investments from capital markets at global and national levels aligned with focal area objectives. The call for proposals invited GEF Partner Agencies to submit proposals and investment opportunities. The GEF partnership will continuously innovate, keeping track of global trends in blended finance and seeking increased number of projects in the area of natural resources management.”
Mobilizing the private sector as an agent for market transformation
There are numerous barriers to expanded private sector engagement in GEF projects, including countries’ lack of interest or capacity in involving the private sector, and a lack of entry points for private sector stakeholders at the global or national level to address environmental challenges and opportunities across the entire value chain. But there are several examples of success:
- The GEF has enlisted the support of major palm oil producers who have committed to “zero-deforestation” palm oil production, facilitating training and capacity building for small-holders that form the foundation of the supply chain. In Paraguay McDonalds has joined this initiative to support zero-deforestation beef production.
- Major appliance and equipment manufacturers such as Philips, Osram, ABB, MABE are supporting the Sustainable Energy for All effort to accelerate energy efficiency and leapfrog developing markets to more efficient equipment;
- The Maritime Trading Organization and major shippers committed voluntarily to an international regulatory framework which reduces the spread of invasive species through the Globallast Program, leading to formal adoption of the approach in the Ballast Water Management Convention (BWM) in 2017;
- The GEF Gold partnership which aims at taking mercury out of the supply chain, builds a bridge between suppliers and corporate consumers of gold, such as computer, high end jewelry, as well as financial sector, enabling new approaches to reduce harmful mercury emissions across the full supply chain;
- GEF’s early support for water funds in Latin America fostered partnerships between public and private, urban and rural, to provide protection for vital catchment zones.