The Case for Capital Alignment to Drive Development Outcomes

Editor's Note: This brief is part of the 2013 Brookings Blum Roundtable Policy Briefs, which details the role of the private sector in the post-2015 development agenda. Read the full policy brief here.

EXECUTIVE SUMMARY

The emerging markets have largely emerged. According to the International Monetary Fund, the combined GDP of the emerging markets will overtake that of developed economies within the next two years. Foreign direct investment in emerging economies now outpaces investment in developed countries and, between now and 2030, some 2 billion people, largely in emerging markets, will join the global middle class. Today, private capital investment is the major driver of growth and improvements in quality of life around the world. In the past few years, private investors have begun to express a new and growing interest in investments in sustainable economic development that contribute to addressing global development challenges. But to date, hundreds of billions of dollars in potential private investment remains on the sidelines because it also requires other, complementary capital to accompany it. At the same time, both philanthropic capital and the new breed of double-bottom- line impact investors are increasingly focused on how to connect with and leverage more commercially focused private capital. Thus there is now a unique opportunity to align the tools, resources and energies of philanthropic and private capital in pursuit of targeted development challenges in such a way that crowds in private investment capital—both from impact investors and more commercial investors. Development finance institutions are uniquely positioned to be the connector that helps align these groups. The products already exist to deliver on this potential. What is now needed is a process innovation.