Unlocking Early-Stage Financing for SDG Partnerships


accelerator: An organization or partnership seeking to advance innovative business ideas or create a pipeline of investable projects or initiatives.

anchor funder: An early-stage funder that provides multiple rounds of flexible funding to a partnership and helps shape an investment fund or a facility. These funders have strong buy-in to the partnership mission and support the partnership as it tests new approaches and works to scale. Support of an anchor funder also helps crowd in other investors.

bankability: The ability of a partnership to secure investment and generate profitable return (Vermeulen et al. 2018).

blended finance: The use of public sector funding to mobilize private sector investment in sustainable development (Convergence 2021; OECD DAC n.d.).

business: A for-profit organization.

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.).

civil society organization (CSO): A nonprofit or NGO. CSOs can range from small community organizations to large international groups. Also known as an NGO.

commercially driven partnership: A partnership aiming to transform market systems through profit-generating activities such as the launch of a new product, service, or business model.

concessional finance: Below-market-rate finance provided by major financial institutions (e.g., development banks) to advance sustainable development. Concessional finance is not tied to a specific funding structure but typically comes in the form of debt, grants, or equity (WBG 2021).

convertible debt: A loan or debt obligation that is paid with equity or stocks in a company. Also known as a convertible note or convertible loan.

debt: An obligation that requires one party, the debtor, to pay money or another agreed-upon value to another party.

development finance institution (DFI): The investment arm of a donor government that focuses on engaging the private sector to mobilize sustainable investment. DFIs are affiliated with donor governments but operate independently (Crishna Morgado and Lasfargues 2017).

donor government: 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.

end-to-end facility: Supporting partnerships by layering in different types of support at various stages of partnership growth, such programs can help to support project pipeline development and an improved understanding of investor criteria for early-stage ventures.

equity: The value of shares issued in a company.

EU Taxonomy for Sustainable Activities: A classification system establishing a list of environmentally sustainable economic activities. This taxonomy provides companies, investors, and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable. Its specific intention is to create security for investors, protect private investors from greenwashing, help companies to make more climate-friendly choices, mitigate market fragmentation, and help shift investments where they are most needed. Investments are judged by six objectives: climate change mitigation, climate change adaptation, the circular economy, pollution, effect on water, and biodiversity (European Commission n.d.).

financial instrument: A type of commercially driven partnership that seeks to tackle investment barriers through the development of financial instruments such as funds, bonds, or insurance instruments that help catalyze funding to riskier markets and/or de-risk investment to advance the SDGs.

financial intermediary: The required party between large funders, such as institutional investors and beneficiaries. This includes early-stage venture funds, private equity and debt funds, private family offices, angel investors, and friends and family. For the purposes of this report, these parties will be referred to as early-stage private sector investors.

government: A governing body, agency, or ministry at the national, regional, or state level. Governments can act as public sector funders or investors for partnerships.

guarantee: A financing mechanism in which a third party, typically a philanthropy or donor government, compensates investors if a company defaults. Also referred to as a first-loss guarantee.

impact investing: Investment that prioritizes positive social and environmental benefits in addition to financial return.

incubator: Programs designed to help start-up businesses grow. Incubators may provide workspace, mentorship, and access to an investor network. These resources allow new initiatives to grow while keeping operating costs low (Draper University 2020).

institutional investor: A financial institution, such as an insurance company or a sovereign wealth fund, that invests either directly in companies or through financial intermediaries.

mezzanine tranche: A layer in the capital structure positioned between senior tranche (typically senior lenders) and junior tranche (typically first-loss or junior equity investors). Mezzanine tranche allows the flexibility to attract specific types of investors that do not fit either senior or junior tranches but have risk-return expectations between these tranches of capital.

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).

multilateral development bank (MDB): An organization with donor or member countries that finances economic development in emerging economies. Examples of MDBs include the World Bank and the Inter-American Development Bank (ITA n.d.).

new business venture (NBV): 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.

partnership: 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.

philanthropic grant funder or investor: A mission-driven organization with a mandate to advance social or environmental well-being. These organizations can be part of the public or private sector and include CSOs, nonprofits, and family and corporate foundations.

private sector grant funder or investor: An investment party that is accountable to individual owners or managers and may require a market-rate financial return on investment. Private sector investors include financial intermediaries, institutional investors, and individual investors.

project developer: A type of commercially driven partnership that seeks to advance innovative business ideas or create a pipeline of investable projects or initiatives. Project developers often aim to help governments, businesses, and other entities make sustainability a core part of their operations by aligning their standards of practice or commitments.

public sector grant funder or investor: A funder or investor that is accountable to donors, governments, or taxpayers. Public sector actors have a mandate to work for the greater public good.

quasi-equity: A type of investment instrument that has features of both debt and equity. The characteristics include flexible repayment terms or subordinated debt. This implies that quasi-equity either is unsecured or has lower priority than other debt in the capital structure. An example of a quasi-equity structure is a revenue-sharing agreement.

returnable investment: Debt, equity, or a convertible debt/loan that partnerships are expected to pay back to the investor.

ticket size: The amount of grant or investment provided in one funding round.

transformative partnership: A partnership working to make changes that are systemic, long term and sustained, and disruptive of the status quo, such that they align with the SDGs and Paris Agreement goals (Li et al. 2020). Also referred to as partnerships with transformative ambition or transformative potential. BlueMark. 2022. “Raising the Bar: Aligning on the Key Elements of Impact Performance Reporting.” BlueMark. https://bluemarktideline.com/wp-content/uploads/2022/04/BlueMark_Raising-the-Bar_Full-Report.pdf.

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