Achieving the Sustainable Development Goals (SDGs) could generate USD 12 trillion of value across the global economy and create 380 million new jobs by 2030, according to UN estimates. This is great news for companies and investors, but why hasn’t it encouraged more business investment in developing countries?
“A key reason is that businesses and investors, big and small, do not yet see how engagement with the SDGs can be profitable,” says Santiago Sedaca, Managing Partner at Palladium. “They need to think beyond CSR and toward a bigger picture of inclusive growth that rewards them with a better workforce, a friendlier business enabling environment, and a larger consumer base.”
Ultimately, CEOs need to recognize that achieving the SDGs is just good business.
USD 2.5 Trillion Gap
At the same time, the UN is grappling with a dire need for SDG financing, citing an annual gap of USD 2.5 trillion. UN Secretary-General Antonio Guterres released a new three-year roadmap to address this at last month's UN General Assembly in New York, with a focus on collaboration and advocacy.
The roadmap is designed for high-level policymakers and regulators, but Sedaca believes that’s part of the problem.
“The UN’s strategy to catalyse private sector finance seems limited to asking global leaders to ‘call on’ business and investors, but that’s not enough,” he says. Based on his experience, the only way to close the SDG investment gap is to “help the private sector to develop new, innovative business models that not only progress the SDGs, but are attractive, digestible, and profitable to domestic and international businesses.”
Outside the Box: Barclays in Ghana
An example of one such model can be seen in Ghana, where Sedaca’s team helped Barclays Bank increase its lending to micro, small, and medium-sized agribusinesses from an annual portfolio of less than USD 1 million to USD 66 million.
“We worked with Barclays to help them come up with financial products that could best meet the needs of agribusinesses in underserved but agriculturally active parts of the country,” Sedaca explains. The products were designed to bundle clients, to better meet agricultural cycles, and to be flexible enough to adapt to growing businesses in a rapidly expanding market.
The shift didn’t come without risk for Barclays, but they’ve since built upon the model and are expanding the strategy into Kenya, Uganda, and throughout the African continent.
Barriers in Developing Countries
Creating these new business models is easier said than done. Just coming to an understanding of the consumer, market, and legal environment in developing countries can be costly up front, and few companies, including multinationals, have the expertise in-house.
Sedaca believes that strategists and policy leaders have a role to play in supporting CEOs to overcome these barriers and embrace inclusive growth. “It takes intimate knowledge of specific markets, regions, and countries to know how we can unlock that missing finance. It can’t be left out of a global roadmap for financing the SDGs, and the private sector has too much to gain to be left unsupported.”
“We need to think bigger.”
Palladium implemented FinGAP from 2013 to 2018 for USAID, which facilitated the partnership with Barclays in Ghana.
Santiago Sedaca is Managing Partner for the Americas and leads Palladium's Commercial Innovation and Economic Growth practices. He has helped businesses and governments design innovative models that profitably address development opportunities, including in the areas of value chain upgrading, agricultural development, financial inclusion, trade and investment promotion, workforce development, and policy reform. Prior to Palladium, Santiago served as President of CARANA Corp. and over the last ten years has developed practical methodologies for identifying and nurturing public-private partnerships and inclusive business models.