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Unlocking Private Capital to Emerging Markets & Developing Countries in a time of crisis:

Private sector capital flows are crucial for achieving Sustainable Development Goals (SDGs) and addressing climate change. Despite the doubling of concessional financing in the last two decades, the availability and cost of capital remain a key constraint due to geopolitical events and crisis factors such as the COVID-19 pandemic and Russia’s invasion of Ukraine. Despite these challenges - which have been especially felt by emerging markets and developing economies  - there is an opportunity to encourage and facilitate cross-border resource flows to Emerging Market & Developing Economies (EMDEs), particularly as countries are designing green growth strategies.

Executive summary

The executive summary paper, “Unlocking Private Capital to Emerging Markets & Developing Countries in a time of crisis”, explores a number of instruments and measures available to support the flows of capital to investments into emerging markets that can accelerate growth and transition to a sustainable future. This paper includes an overview of:

  • More effective policy measures to support capital flows, including supportive policies by the G20, International Monetary Fund (IMF), and Multilateral Development Banks (MDBs) during crisis periods
  • Prudential measures to support Emerging Markets (EM) cross border investments
  • Governance strengthening through improvements in Credit Rating Agencies’ (CRA) methodologies
  • Mobilising resources though development of EMDE capital markets and addressing market access barriers
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Unlocking EM Flows  

The paper “Unlocking Private Capital to Emerging Markets & Developing Countries in a time of crisis”, explores a number of instruments and measures available to support the flows of capital to investments into emerging markets that can accelerate growth and transition to a sustainable future. These include:

1. Policies by Central Banks, the G20, IMF and MDBs including anticipatory monetary policy by EMDE central banks;

2. Prudential regulations to support EM cross border investments through proportionality, consultation and addressing how capital ratios, and climate risk is treated in prudential regulations;

3. Improvements in Credit Rating Agencies’ methodologies to bring more accountability, transparency, better treatment of climate risks, and strengthened governance processes; and

4. Developing and improving EMDE capital markets so they offer and have access to the same menu of instruments available to AE (Advanced Economies) markets in a timely and cost-effective manner.

Laying out the context of each, the paper establishes a set of ‘no regret’ policy recommendations which policy makers can implement to support the stability and growth of EMDEs through the current geo-political, ecological and economic uncertainty they face.

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Call for feedback

We welcome feedback on these materials. Contact us at ssdh@naturefinance.net