Consistent Flow Of Catalytic Capital Can Drive Rapid Social Development, Build Economic Resilience

The Covid-19 pandemic has taken us back decades in the progress towards the global development agenda. The crisis, felt by all nations, has reiterated the need for transformative action if we have any hope of achieving the 2030 goal post for the United Nations' Sustainable Development Goals (UN SDGs). In the lead up to the UN General Assembly, the G20 in Indonesia and COP27 in Egypt, there is an urgent need to elevate the voice of the Global South, the region most impacted by the pandemic, in these global leadership convenings. Earlier this summer, a group of impact leaders, predominantly from the Global South and representing public, private, and philanthropic sectors, met at The Rockefeller Foundation’s Bellagio Center, to curate new ways of thinking about development in the Global South in a post-pandemic world. The group, now called the Global South Impact Community, has made a call to G20 Leaders to enable catalytic finance and global collaboration towards a green, just, and resilient recovery. Brought together by The Rockefeller Foundation and the International Venture Philanthropy Center (IVPC), which represents a family of global social investment networks in Asia, Africa, Latin America, and Europe. AVPN is the largest of these networks and has been helping to drive forward the recommendations of the GSIC through our partnership with the Indonesian Presidency for the G20. 

The Indonesian Government has led the world in its efforts to position the voice of often unheard communities at the forefront of its G20 leadership, There has been a major focus on ensuring that the most vulnerable communities who are suffering from the worst effects of the climate crisis and the covid-19 pandemic are at the forefront of  the deliberations and ultimately the commitments that are made at the G20 leaders meeting in November. Of course, investing in climate adaptive innovation and building resilient health care systems involves a lot of risk and a lot of time. When governments are faced with crisis after crisis, it is not surprising that investment in the longer-term systems changes that are required are tough. Tools like blended finance and catalytic capital are emerging as the most promising opportunities to meet short term development goals while maintaining the trajectory towards the long-term vision of the UN SDGs. 

The OECD has estimated an annual $2.5T financing gap for achieving the UN SDGs, a figure that has increased by $1T since the pandemic. The Global South has faced disproportionately, the wrath of this global socio-economic crisis, which is manifested in grossly inadequate healthcare infrastructure, lack of clean water and sanitation, increasing economic inequality and poverty across the region. Emerging economies remain at the periphery within the world’s multilateral institutions, financial flows, and commercial relationships, further exacerbated by the pandemic. Nations in the Global South require an urgent infusion of catalytic capital across a multitude of development projects, both from domestic and international sources. To achieve the trillions needed, all forms of capital are needed - public, private, and philanthropic. Philanthropic capital can be especially powerful as it is more intentional about impact and can help fund innovation, de-risk early-stage investments, and unlock mainstream capital flows at later stages. 

Emerging collaborative platforms within the Global South have never been more important, as they provide an opportunity for knowledge sharing and trust-building across these various sectors and along emerging market corridors that can accelerate critical reforms in global development institutions. The IVPC community, for instance, consists of philanthropists, impact investors and a whole range of organizations that are experimenting with a host of new and innovative approaches to how they use capital to invest in these higher risk climate solutions or how they can invest for the long term in strengthening local healthcare systems.

It is critical now, more than ever, to put the Global South at the center of a green, just, and resilient recovery and enable these emerging economies to drive the solutions in their own backyards. This will require knowledge sharing and trust-building between public, private, and philanthropic sectors across North and South.  We need immediate opportunities to unlock catalytic capital and stimulate global collaboration that can tackle the existential challenges we face around a range of themes like climate change, energy transition and health security. Catalytic capital has great virtue in that it is investment capital within which investors accept reduced financial expectations to bring about a greater social or environmental impact. The sustained generation and deployment of catalytic capital will transform the Global South and embed resilience into economic recovery, against future shocks.

The GSIC has outlined four actionable areas: Mobilization of catalytic finance to the Global South, Support for capacity development to enable the absorption of catalytic capital, mainstreaming of decarbonization, and a strengthened response to global health crises. AVPN has been pioneering in this area, already with the launch of several pooled funds which are focused on deploying funding to support organizations to strengthen their core capabilities. So far, we have launched funds that focus on strengthening local health care systems and  leveraging technology to support climate adaptation to name just two. Providing the oxygen for organizations operating at the frontline and addressing some of these critical issues will be a crucial part of the journey to net zero and the broader SDGS goals by 2030.   

With the Global South representing over 80% of the world’s population, and the region with the highest expected population growth in the coming decade it is imperative to not only protect our immediate interests but also guard our long-term sustainability needs. For such goals to be achieved, it requires an equal voice as well as advocates in leading institutions and platforms that tend to guide global policies. There is a need for policies that will not only support the Global South but also enable the region to lead global recovery in the post covid era. Currently, there is a global imbalance which could prove detrimental for areas that are bound to be more affected by issues pertaining to climate change. It is estimated that globally, climate change may drive over 350 million people into extreme poverty by 2030.

The G20 Summit in Indonesia comes at a critical time and could prove to be a watershed moment for the Global South. Followed by the G20 Presidencies in India, Brazil and then South Africa this could be the turning point needed to prioritize Global South needs and champion the systems change needed to make global financial institutions more equitable and innovative to meet the challenges at hand.  As we emerge from the pandemic, world leaders, financial institutions and the private sector  must come together to build this new inclusive future that positions the emerging economies of the Global South as the flag bearers of this new era of sustainable development.

By Naina Subberwal Batra, CEO, Asian Venture Philanthropy Network (AVPN)