Channeling investments to the countries and sectors most in need is affected by a range of challenges, including lack of financing and technical capacities. The GISD Alliance Members have identified several internal and external challenges that impact the allocation of private investments for sustainable development. This was done in close cooperation with relevant stakeholders in a number of pilot countries (Colombia, India, South Africa). Main findings include:
- Risk-adjusted returns on investments are too low
- Limited scale of investment opportunities
- Regulatory restrictions
- Insufficient support for investments through risk insurance, guarantees, etc.
- Internal evaluation and incentive systems do not encourage new types of investment
- Difficult to ensure that the investment product is actually "sustainable" (due diligence competence and capacity)
In addition, investments are restricted due to risks that cannot be quantified or controlled, including political instability, lack of a clear and stable policy environment, local currency volatility and external shocks such as natural disasters. Uncertainty about the looming debt crises in many countries as an impediment to investing. The GISD Alliance is developing and implementing solutions to address the identified obstacles, for example by building a pipeline of investment-ready projects.