Rethinking Development Finance for the Sustainable Development Goals: A Report on the Fourth International Conference on Financing for Development (FfD4)

The “Billions to Trillions” Paradigm and its Shortcomings for SDG Achievement

The Fourth International Conference on Financing for Development (FfD4) in Seville marked a significant reassessment of the global development finance architecture, particularly the “billions to trillions” narrative established at the 2015 FfD3 conference. This paradigm proposed that limited Official Development Assistance (ODA) could be used to leverage vast sums of private investment to finance the Sustainable Development Goals (SDGs). A decade later, evidence presented at FfD4 indicates this strategy has failed to deliver on its promise. Data from the OECD Development Assistance Committee reveals that from 2017 to 2023, private finance mobilized through official interventions averaged less than $55 billion annually, a figure substantially below the trillions required to achieve the 2030 Agenda.

Analysis of Mobilization Failures and Impacts on SDG Progress

The mobilized private capital has been highly concentrated, creating significant disparities in SDG financing and undermining SDG 10 (Reduced Inequalities). The majority of financing has been directed towards bankable infrastructure projects in middle-income countries. In contrast, fragile states and Low-Income Countries (LICs) have been largely bypassed, impeding progress on foundational goals such as SDG 1 (No Poverty). In 2020, only 6% of ODA-mobilized private finance was invested in Least-Developed Countries (LDCs), a figure that has remained stagnant. The failure of the paradigm is attributed to several structural and political factors:

• Investor Priorities: Private investors’ decisions are primarily driven by risk-return calculations. Perceived political instability, weak institutions, and corruption risks deter investment, even when public funds are used for de-risking.
• Insufficient Catalysis: Public subsidies and de-risking mechanisms have not been substantial enough to shift private investor behavior at the scale needed for transformative SDG investment. In low-income countries, every dollar of public money leveraged only US$0.37 in private capital.
• Adverse Consequences: The pursuit of this model has deepened debt vulnerabilities in developing nations. Furthermore, it has often led to the socialization of risks through government guarantees, while the rewards are privatized, exposing the public sector to significant financial liabilities if projects fail and compromising long-term sustainable development.

Emerging Strategies for SDG Financing Post-FfD4

The FfD4 conference signaled a clear shift towards more pragmatic and sustainable financing strategies. Three key shifts were evident in the discussions, aimed at creating a more robust framework for achieving the SDGs:

1. Rebalancing Toward Domestic Resources: A renewed emphasis was placed on the importance of domestic resource mobilization as a primary driver of SDG financing, in line with SDG 17 (Partnerships for the Goals). This involves strengthening domestic tax systems, combating illicit financial flows, and building sovereign fiscal capacity to fund national development priorities.
2. A Selective and Mission-Oriented Approach to Private Finance: There is a move away from chasing volume towards strategically directing private investment into sectors critical for SDG achievement. This selective approach focuses on areas where private capital can be genuinely additive.
   • Renewable energy (SDG 7)
   • Digital infrastructure (SDG 9)
   • Sustainable agriculture (SDG 2)
   • Small and medium enterprise (SME) finance (SDG 8)

   This strategy advocates for a shift from “market-fixing” to “market-shaping,” where public finance is used to intentionally direct private capital towards specific, transformational SDG outcomes. This mission-oriented approach prioritizes additionality, fair risk-reward sharing, and governance mechanisms aligned with public objectives.

3. The Rise of Alternative Financing Models: The conference highlighted a growing interest in alternative models beyond the traditional ODA-private leverage framework. There is increasing recognition of the role of Global Public Investment (GPI), cooperative financing arrangements such as the proposed Borrowers’ Forum, and South-South financial cooperation in financing global public goods and advancing the 2030 Agenda.

Conclusion: A New Realism in Financing the 2030 Agenda

The FfD4 conference in Seville represented a transition from the exuberant aspirations of the “billions to trillions” era to a period of pragmatic realism. The discourse has shifted from a focus on leverage ratios to an emphasis on the structural reforms needed to create an enabling environment for sustainable development. These reforms include international tax cooperation, sovereign debt restructuring, and adaptive climate finance. While private capital remains an essential partner in achieving the SDGs, it is no longer viewed as a panacea. The central task, as articulated at the conference, is to ensure all forms of finance are effectively aligned with the objectives of the 2030 Agenda for Sustainable Development.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 17: Partnerships for the Goals
   • The entire article focuses on the mechanisms of financing for development, which is the core of SDG 17. It discusses Official Development Assistance (ODA), the mobilization of private capital (“billions to trillions”), blended finance, and international cooperation at conferences like the Fourth International Conference on Financing for Development (FfD4). It also addresses domestic resource mobilization through “strengthening domestic tax systems” and tackling “illicit flows.”
2. SDG 10: Reduced Inequalities
   • The article highlights a major inequality in the distribution of development finance. It states that flows have been “highly concentrated” in middle-income countries, while “fragile states and low-income countries have seen little benefit.” It specifically mentions that “Only 6% of ODA-mobilised private finance was invested in least-developed countries in 2020.”
3. SDG 9: Industry, Innovation and Infrastructure
   • The article points out that “Middle-income countries with bankable infrastructure projects have absorbed most of the available private financing.” It also identifies “digital infrastructure” as a key area where development actors are now focusing private investment, which is central to SDG 9.
4. SDG 8: Decent Work and Economic Growth
   • The analysis suggests a shift in investment strategy towards areas that foster economic growth. The article explicitly mentions “small to medium enterprise finance” as a sector where private investment is considered “genuinely additive,” directly supporting the goal of promoting sustained, inclusive, and sustainable economic growth.
5. SDG 7: Affordable and Clean Energy
   • The article identifies “renewable energy” as a priority sector for a more selective and effective approach to private finance. This directly aligns with the goal of ensuring access to affordable, reliable, sustainable, and modern energy for all.
6. SDG 2: Zero Hunger
   • Among the areas identified for a more focused approach to private investment is “sustainable agriculture.” This connects to SDG 2’s aim to end hunger, achieve food security, improve nutrition, and promote sustainable agriculture.
7. SDG 13: Climate Action
   • The article mentions that the emphasis at the FfD4 conference was on structural reforms, including “adaptive climate finance.” This directly relates to SDG 13’s call to take urgent action to combat climate change and its impacts, particularly through financial mechanisms.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Under SDG 17 (Partnerships for the Goals):
   • Target 17.1: Strengthen domestic resource mobilization. The article notes a “rebalancing toward domestic resources” and emphasizes the need for “strengthening domestic tax systems, tackling illicit flows and building sovereign fiscal capacity.”
   • Target 17.3: Mobilize additional financial resources for developing countries from multiple sources. The article is a critique of the “billions to trillions” narrative, which was a strategy aimed at this target, and discusses its failure to mobilize private finance at the expected scale.
   • Target 17.4: Assist developing countries in attaining long-term debt sustainability. The article mentions that “debt vulnerabilities deepened” and that “sovereign debt restructuring” is now a key focus area.
2. Under SDG 10 (Reduced Inequalities):
   • Target 10.b: Encourage official development assistance and financial flows, including foreign direct investment, to States where the need is greatest, in particular least developed countries (LDCs). The article directly addresses the failure to meet this target, stating that “fragile states and low-income countries have seen little benefit” and only a small percentage of mobilized finance reaches LDCs.
3. Under SDG 9 (Industry, Innovation and Infrastructure):
   • Target 9.a: Facilitate sustainable and resilient infrastructure development in developing countries through enhanced financial support. The article discusses the concentration of private financing in “bankable infrastructure projects” and the new focus on “digital infrastructure.”
4. Under SDG 8 (Decent Work and Economic Growth):
   • Target 8.3: Promote development-oriented policies that support productive activities… and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services. The article’s mention of focusing on “small to medium enterprise finance” aligns directly with this target.
5. Under SDG 7 (Affordable and Clean Energy):
   • Target 7.a: Enhance international cooperation to facilitate access to clean energy research and technology… and promote investment in energy infrastructure and clean energy technology. The identification of “renewable energy” as a priority for private investment supports this target.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Indicators for Target 17.3 (Mobilize financial resources):
   • Amount of private finance mobilized: The article explicitly states that “private finance mobilised by official interventions averaged less than $55 billion per year” from 2017 to 2023. This serves as a direct indicator of the volume of additional financial resources mobilized.
   • Leverage ratio of ODA: The article mentions that there is “just US$0.37 of private capital leveraged for every dollar spent in low-income countries.” This ratio is a key indicator used to measure the effectiveness of blended finance instruments.
2. Indicators for Target 10.b (Encourage financial flows to LDCs):
   • Proportion of finance directed to LDCs: The article provides a precise figure: “Only 6% of ODA-mobilised private finance was invested in least-developed countries in 2020.” This is a direct indicator of financial flows to countries with the greatest needs.
3. Indicators for Target 17.4 (Debt sustainability):
   • While no specific numbers are given, the article’s reference to how “debt vulnerabilities deepened” and the need for “sovereign debt restructuring” implies the use of debt sustainability indicators, such as debt service as a proportion of exports or government revenue.

4. Table of SDGs, Targets, and Indicators

Source: devpolicy.org