Sustainable investment benefits from “blended finance.”
Public-private financing can drive sustainable investment in Asia that benefits U.S. investors while protecting local environments and global climate, according to a panel of experts convened in August by the Center for Strategic and International Studies (CSIS).
“Blended finance as a tool to attract private investment and mitigate risks, particularly in least-developed regions,” is a powerful strategy, moderator Erin Murphy, a CSIS Senior Fellow, explained to the panel.
There are good reasons to invest in Asia, according to panelist Dany Khy, a Senior Advisor at Chemonics who works in engaging the private side of public-private partnership.
“Asia is pivotal to US foreign policy. Our own security and prosperity depend upon an economically vibrant Asia that’s underpinned by democratic institutions and civil society,” said Khy. “Although the region is grappling with some really tough development challenges, from climate change, from poverty and other causes, Asia makes up 60% of global GDP, so it presents enormous opportunities for its people and also for the United States.”
Chemonics, a global sustainable development company with 50 years’ experience, has an extensive Asian portfolio cutting across health, climate, education, and governance. Khy is leading partnership efforts in this area and established Chemonics’ Private Sector Engagement Practice, an innovative center working to mobilize the private sector toward sustained development impact.
U.S. DFC a ready public partner
Khy noted that public private partnerships bringing in a known partner like the U.S. government have a good chance of succeeding.
One ready public partner is the U.S. International Development Finance Corporation (DFC), which works with private partners, including local and international banks, to invest in sustainable development, according to panelist Agnes Dasewicz, CEO of the DFC. She said DFC seeks to support projects that assist U.S. foreign policy and have a development impact in foreign countries. “We do this in partnership with the private sector. Our main mission is to catalyze private investments to the countries and the sectors where we’re working.”
DFC has contributed with loans to help companies diversify and strengthen the supply chain, for example in India with First Solar, Dasewicz said. While direct foreign investment from the U.S. government faces constraints, many beneficial projects can be facilitated more easily through U.S. partnerships with private entities, she said.
Investing in resilience; harmonizing regulation
Sustainable development around climate issues tends to focus on mitigation efforts, such as reduction of carbon emissions, but climate adaptation and resilience are also key areas for investment, according to Chuck Chaitovitz, SVP and Director of Operational and Strategic Management; Coalition Building and Sustainability at the U.S. Chamber of Commerce.
The U.S. Chamber recently released a paper modeling impact ahead of the next crisis in 25 communities across the U.S, according to Chaitovitz. The paper found investing before a crisis can save money and speed recovery.
“The bottom line is that for every dollar invested in pre-disaster mitigation, communities will receive $13 in savings and reduce losses and cleanup costs,” he said. “For instance, for $10.8 billion investments in resilience for a category 4 hurricane striking Miami, we would prevent losses of around 184,000 jobs, save about $26 billion in production and $17 billion in income.”
A current trend toward protectionism and away from globalization is driving governments to establish diverse regulatory regimes, creating “regulatory fragmentation,” said Anum Malkani, Financial Services Policy Lead, Asia Pacific at Amazon Web Services (AWS).
“That’s a pretty big concern when it comes to catalyzing private sector investment across the globe,” she said. “We all need to work together to establish regulatory interoperability, and the U.S. government can play a leading role in ensuring regulatory barriers don’t hamper U.S. investments in Asia.”
