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ODA and leveraging

The OECD DAC has been working on developing an international standard for measuring the amounts mobilised from the private sector by official development finance interventions. It has agreed, in February 2016, a set of principles of how to measure such instruments in ODA statistics. From 2017, data will be collected on amounts mobilised from guarantees, syndicated loans, and shares in collective investment vehicles in the DAC statistical system. A survey launched in September 2016 further pilots methodologies for credit lines and direct investment in companies.

The OECD survey  has found that USD 81.1 billion was mobilised from the private sector in 2012-15 by the five instruments and mechanisms surveyed, 26 per cent of which targeted climate-related projects. The Survey also indicates that annual amounts mobilised followed an upward trend over the period studied, with guarantees having played a major role. Several new initiatives are also under consideration. One recently launched initiative is the European Fund for Sustainable Development, which aims to mobilize (public and private) investments of up to EUR 44 billion based on an initial European Union contribution of EUR 4.1 billion, primarily in Africa and the European neighbourhood. 
Multilateral development banks (MDBs) have also made progress on harmonizing methodologies and common metrics to quantify private finance catalysed by their institutions through a special joint MDB Task Force. This work builds on existing joint MDB reporting of private climate co-financing.  The MDBs published a first report on 2016 commitments using the new methodology in April 2017. It estimates that the total amount of long-term co-financing mobilized by the MDBs from private investors and other institutional investors (including insurance companies, pension funds, and sovereign wealth funds) in all countries of operation was $163.6 billion. Of this, private direct mobilization is estimated at $49.9 billion. 
Beyond the quantification of leveraging and blending, there have also been discussions on the effectiveness and quality of such flows. A technical workshop organised by DESA on the margins of the 5th Biennial High-level Meeting of the Development Cooperation Forum (DCF) noted the importance of applying overarching principles of development effectiveness to blended finance, in particular transparency, aligning programmes and projects with country priorities and ensuring strong country ownership. It also cautioned against the notion that blending was the tool for moving ‘from billions to trillions’ in development finance. Rather, the use of blended finance would need to be assessed on a case-by-case basis, to avoid undue subsidies to the private sector and undue risk for the public sector, including in the form of contingent liabilities.