Unlocking Early-Stage Financing for SDG Partnerships

Serena Li Erin Gray Maggie Dennis Dean Hand Shrikant Avi
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Executive Summary

Mobilizing finance and multistakeholder partnerships are key priorities for the global community to accelerate the SDGs. Yet, many partnerships are not able to reach their ambitions because they cannot access early-stage financing.

This report aims to help partnerships and their funders effectively manage and mobilize finance to achieve SDG impact by: exploring partnership funding challenges and lessons learned; examining innovative funding approaches; and providing tangible recommendations to partnerships and funders on how to drive SDG impact more effectively.

Celine Lityo


  • The UN Sustainable Development Goals (SDGs) and the Glasgow Financial Alliance for Net Zero recognize the potential of multistakeholder partnerships for catalyzing private finance to meet the SDG financing gap of US$4.2 trillion annually. This report defines partnerships as informal or formal voluntary collaborations between parties whereby stakeholders agree to share resources, accountability, risks, leadership, and benefits to meet a specific SDG-related objective (UN DESA 2015).
  • Partnerships are struggling to meet their potential, becoming mired in the “missing middle”—the transitory period in which they have outgrown grant funding but are considered too early for commercial investment.
  • At the core of the issue is the prioritization and demonstration of impact. Partnership investment challenges identified through a survey of 66 partnerships indicate that grant funders and investors prioritize their own concerns (e.g., reputation, risk tolerance) over impact.
  • We recommend that (1) grant funders and investors adopt approaches to financing that stretch beyond their comfort level, (2) grant funders and investors be more open in how they make investment decisions and more flexible with their funding requirements, (3) investors be more transparent and increase their accountability to better optimize impact, and (4) partnerships focus on building a high-quality funder and incubation network.

Financing for the SDGs

An estimated $4.2 trillion will be needed to finance the work still needed to achieve the SDGs in developing countries, a mammoth amount that multilateral development institutions alone cannot fulfill (OECD 2021b). The good news is that capital to finance this radical change is available and interest in impact investment is growing substantially, even with the COVID-19 pandemic. For example, the impact investment market has grown to $715 billion as of 2020 (Hand et al. 2020). The levels of capital at play are staggering: institutional investors A financial institution, such as an insurance company or a sovereign wealth fund, that invests either directly in companies or through financial intermediaries. , for example, hold $100 trillion in assets (OECD 2021a). However, channeling finance towards high-impact, viable SDG investments remains a challenge. In this space, commercially oriented multistakeholder partnerships, with ambitions to transform a sector or market through the launch of a new business venture A type of commercially driven partnership that seeks to launch and scale a new commercial product, service, or business model. NBV partnerships are profit driven, seeking to create new markets or systematically change existing markets to better align with the SDGs. , can be one way to tap into this funding pool.

SDG 17 envisages the key role partnerships A voluntary collaboration between parties whereby stakeholders agree to share resources, accountability, risks, leadership, and benefits to meet a specific SDG-related objective (adapted from UN DESA 2015). Partnerships vary in their formality; a memorandum of understanding or similar may be involved, but it is not essential for an initiative to be considered a partnership. Also referred to in the literature as multistakeholder partnership. can play in catalyzing private sector finance to accelerate the SDGs in this “Decade of Action.” Yet partnerships are frequently mired in the “missing middle,” The funding gap for SMEs or partnerships that are too advanced for early-stage catalytic capital or grant funding and not mature enough to secure commercial investment (Crishna Morgado and Lasfargues 2017; Remes et al. 2019). the transitory period in which a partnership is too large, too close to commercialization, and/or too mature for the comfort level of grant funding but is also too small or immature for commercial investment. This report aims to help commercially driven partnerships A partnership aiming to transform market systems through profit-generating activities such as the launch of a new product, service, or business model. and their financiers accelerate the SDGs by examining new approaches to funding and exploring lessons learned from partnerships in their funding journey.

About This Report

This report, authored by World Resources Institute, discusses how commercially driven partnerships and their grant funders and investors can accelerate the SDGs and overcome the missing middle challenge by examining new approaches of funding and exploring lessons learned from partnership funding journeys. Funded by the Danish government, this report has been developed in collaboration with the Global Impact Investing Network, a prominent champion of impact investing, as well as Partnering for Green Growth and the Global Goals 2030, the global partnership accelerator. An organization or partnership seeking to advance innovative business ideas or create a pipeline of investable projects or initiatives.

This report draws its findings from several sources: an analysis of existing research on development financing and multistakeholder partnerships; 35 interviews of grant funders, private investors, and partnerships; and a comprehensive survey of 66 commercially driven partnerships that seek returnable investment Debt, equity, or a convertible debt/loan that partnerships are expected to pay back to the investor. . It also deep dives into six partnerships, presenting case studies on how they have successfully overcome some of the challenges partnerships face when seeking grant funding and investment.

Through our research, our team’s understanding of partnerships has evolved. Initially viewed as a formal construct between multiple stakeholders, we have adopted a looser understanding of partnerships—that is, an informal or formal, voluntary collaboration between parties whereby stakeholders agree to share resources, accountability, risks, leadership, and benefits to meet a specific SDG-related objective (adapted from UN DESA 2015).

Key Findings and Recommendations

We find that partnerships struggle to get appropriate investment because grant funders and investors prioritize matters—such as political capital, reputation, risk, and bureaucracy—over achieving and demonstrating impact. This complicates their ability to provide the optimum financing to support partnerships in their journeys to accelerate the SDGs. Likewise, commercially driven partnerships struggle to demonstrate impact, partially because it is difficult to attract financing to scale their activities but also because it is not easy to adopt the best practices recognized as important for partnerships to drive transformative change. All of this inhibits the path to impact. To overcome these barriers, we provide four recommendations:

  1. Grant funders and investors should adopt approaches to financing that stretch beyond their comfort level. This first recommendation is not a new one—essentially, partnerships need more catalytic capital Patient, flexible, and risk-tolerant capital that helps partnerships to bridge the missing middle and scale new and innovative concepts. Catalytic capital can take the form of grants, debt, equity, or guarantees (MacArthur Foundation n.d.). , and grant funders and investors need to provide it. For example, donor governments Any government agency or ministry providing development aid funding (e.g., USAID, UK Aid, GIZ, etc.) as well as associated programs such as USAID’s DIV. should increase the proportion of their disbursed funding dedicated to catalytic structures, and development finance institutions should increase their risk tolerance to provide funding to early-stage ventures (as opposed to larger commercial, established investment opportunities).
  2. Funders and investors should be more open in how they make investment decisions and more flexible with their funding requirements. If funders and investors can adopt leaner requirements on matters such as reporting, investment criteria, and SDG goals, they can enable partnerships to have greater freedom to achieve proof of concept. For example, funders may want to collaborate with other funders to align on reporting metrics and processes.
  3. Investors should be more transparent and increase their accountability to better optimize impact. Investors may find it hard to prioritize impact over other considerations partially because assessing impact is difficult and expensive. Investors can aim to improve public reporting of their positive and negative impacts, impact measurement and management frameworks, funding opportunities, and lessons learned. Investors can also improve accountability through verifications or third-party audits. Finally, investors can use leading impact measurement and management frameworks such as IRIS+ and the SDGs to track impact performance in a way that is standardized and comparable with other investors.
  4. Partnerships should focus on building a high-quality funder and incubation network. The onus is on partnerships to show that they can have impact as well. For example, we found that the best-in-class partnerships—those that successfully sought returnable investment—tended to collaborate with a partnership acceleration program.

How to Use This Report

The findings and recommendations of this report are intended to help partnerships, their grant funders, and investors.

  • Partnerships may be interested in reviewing the in-depth case studies in Chapter 2, which illustrate how other partnerships have accessed returnable investment. They may also explore how funders and investors are starting to take new approaches to financing in Chapter 3; these approaches are more amenable to early-stage commercially driven partnerships, and the partnerships can seek out funders and investors who are adopting such approaches.
  • Funders and investors may review the partnership funding challenges illustrated in Chapter 2 and understand how they can help partnerships overcome such barriers. They can also look to Chapter 3 and consider adopting the financing approaches offered by other financiers.
  • All stakeholders can review the findings and recommendations in Chapter 4 to see how they can adapt their existing behavior to help accelerate proper financing for the SDGs.
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