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The development sector has done a formidable job of creating progress on the globe. But if we are to have a balanced world, we cannot rely on the money that governments set aside for development aid. We need new financial instruments that can provide access to private capital.
This is the opinion of Faraz Khan, who is director of the tech company SpectrEco and founder of Seed Ventures, which invests in social enterprises.
He tips his hat to the pioneering work that has taken place in the development sector and which, among other things, has led to a common framework tool in the Sustainable Development Goals.
“But if we are to create a more sustainable world, it requires new types of capital,” says Faraz Khan:
“We need mixed financing consisting of public funds, money from business and philanthropic capital,” he says.
Financial geniuses challenge the status quo
And fortunately, rapid development is taking place in the area, notes Faraz Khan.
“There are thousands and thousands of financial geniuses around the world challenging the economic status quo mechanisms and coming up with innovative financial solutions. And that is hugely encouraging,” says Faraz Khan.
He has comprised an overview of 13 financial instruments and mechanisms which can each trigger sustainable capital flows.
Click here to see the overview of the financial instruments
The overview is not exhaustive, Faraz Khan points out, but should be seen as a collection of examples in progress.
“The list literally evolves month by month. But it gives an idea of an important direction in the global economy and strikes down some mechanisms it is important to be aware of,” says Faraz Khan.
For him, the growing number of financial instruments in the area of sustainability is an expression of increasing awareness that the world’s challenges require new solutions.
“Stakeholders across sectors have recognized that the conventional structures are not sufficient to solve the challenges the world has in relation to climate and the environment. So we have to open our minds and come up with new, contemporary value propositions,” says Faraz Khan.
Big results with limited risk
In his overview, the global investor & ESG technologist focuses on the potential of the new solutions. But it is a well-known fact that the new financing mechanisms do not come without complications.
Critical voices have, for example, pointed out pitfalls in social impact investments. Faraz Khan is not terribly worried about that.
“The beauty of the direction we are moving in is that it is very results-oriented. These are mechanisms that start with a pilot to see if the approach works. If a scalable result is achieved, we move on to phase two. And if it doesn’t work, we don’t continue – or we change the approach,” says Faraz Khan.
The way of thinking about financing sustainability is limited risk, he points out.
“We can achieve results in a prudent way that ensures no one’s money is wasted and paves the way for new forms of capital,” says Faraz Khan.
