As Prepared for Delivery

Madame President, Members of the Executive Board, Excellencies, colleagues, and friends.

I am very pleased to join you today for the first regular session of the UNDP/UNFPA/UNOPS Executive Board for 2022.

Thank you Associate Administrator Rao-Monari for your remarks.

Let me also congratulate Her Excellency Ms. Yoka Brandt, the Permanent Representative of the Kingdom of the Netherlands, on her election as the President of the Board. I also welcome the new Executive Board Bureau and members for 2022. We look forward to engaging with you all.

I am here today to present to you the UN Capital Development Fund Strategic Framework 2022 – 2025.

As you know, UNCDF’s mandate is to first and foremost support the least developed countries.

As we prepared the new Strategic Framework, one of our foremost priorities was determining how we can best accelerate and scale our assistance to the LDCs to support and enhance their capability to combat the devastating impacts of COVID-19, which has caused LDC economies to shrink, extreme poverty rates to jump and SDG progress to reverse.

At the same time, the LDCs remain highly exposedto the escalating and existential impacts driven by climate change and catastrophic biodiversity loss. This is precisely why at COP26 last year, leaders from the LDCs advocated effectively to help secure commitments to double the provision of finance for adaptation by 2025. While this is progress, it is not enough.

The impacts of these crises are made worse by the structural obstacles LDCs continue to face, including undiversified and informal economies, low levels of productive capacities, and limited access to energy and digital infrastructure.

Despite these challenges, we must not forget that the LDCs represent an enormous and untapped opportunity for inclusive growth and human development that can be harnessed with the right types of support.

With their young population of more than one billion people – representing some 14% of the world population - LDCs are frontier markets and the growth markets of the future, which are ripe for investment and expansion.

Technology and digital solutions, local infrastructure development, a new generation of dynamic entrepreneurs, and increased focus on South-South trade, are additional triggers that can allow LDCs to leapfrog towards greater prosperity.

To unlock this potential and tackle the structural constraints will require increased access to capital.

Recent research indicates that about US$ 1 trillion will be needed annually to achieve the SDGs in the 46 LDCs. The total estimated financing gap is roughly $ 400 billion per year.

Unfortunately, resource flows to LDCs are simply not increasing, particularly in commensurate fashion to development challenges. In 2021, only 1.7% of global FDI flows, $28 billion, went to the LDCs.

This is despite the fact that the world has no shortage of capital. There was US$ 418 trillion in wealth available on global capital markets at the end of 2020. And strengthening capital markets in the LDCs will help increase domestic and international resource mobilization.

This is where UNCDF comes in.

In our new strategic framework, UNCDF’s mission is:

“to serve as the United Nations flagship catalytic financing entity for the LDCs to strengthen financing mechanisms and systems for structural transformation.”

In recent years, we have put in place the necessary foundations to accomplish this mission and to scale our impact.

• We have fully established our ability to provide catalytic loans and guarantees and we have built a pipeline of SDG-compliant investments. Our focus on small, risky but highly impactful investments fills a critical gap in the development finance architecture.
• Our new strategy on inclusive digital economies allows us to respond to new opportunities to drive financial inclusion and economic development.
• And we have adapted and deepened our local transformative finance work to further support local investments in green infrastructure and inclusive and gender-responsive economic development.

As a result of these developments, we have grown steadily. In 2018, our delivery was $63 million. The estimated delivery figure for 2021 is more than $99 million approaching a record $100 million mark for the first time in UNCDF’s history. This represents a 55% increase.

To deliver on our aim to scale up, we will expand partnerships with a range of actors.

First, we will reinforce our partnerships with the LDCs themselves. We will fully align with LDC priorities and work together to develop pipelines of SDG investment opportunities and bring these to potential investors under our Country Investment Strategies. We will also work closely together to elevate the voice of LDCs at relevant global development forums.

We will also deepen collaboration with the UN development system to deploy innovative solutions that catalyze SDG financing at scale, combining the UN’s development support with UNCDF’s development and investment capabilities. We are providing a financial instruments strategy and implementation service to the other UN Agencies and this is set to increase.

So, what do we aim to achieve under the new Strategic Framework?

The vision we have articulated is that:

“LDCs are able to access and leverage the development impact of capital to enable sustainable and inclusive economic growth and achieve the Sustainable Development Goals.”

To realize this vision, we will support LDCs to achieve three inter-linked game-changers, or development outcomes.

• First, we will support LDCs to catalyze additional flows of private and public capital.

• Second, through our policy, TA and development work, we will help strengthen market systems and public and private financing mechanisms.

• Third, through the capital we help catalyze and the policy development and financing mechanisms we help strengthen, will contribute to accelerate inclusive, diversified and green economic transformation.

To achieve these game-changers, our triggers or toolkit combines financial instruments – including deployment of grants, loans and guarantees along with strengthened financial advisory services – alongside non-financial technical assistance, policy advice and development work—leveraging the full power of our unique capital and development mandate.

Let me highlight some key capital mechanisms at our disposal. To provide concessional loans and guarantees directly from our own balance sheet for SDG-positive businesses, financial service providers and infrastructure projects; the BRIDGE Facility is our main on-balance sheet mechanism. We aim for an initial capitalization of $50 million for this dedicated financing facility for the LDCs.

We will also continue to deliver the external third party-managed blended finance funds we have established—the BUILD Fund, which is designed to bring capital to small and medium sized enterprises

UNCDF brings together the first loss capital, provides technical assistance and the pipeline of investments. The Fund’s target capitalization is $250 million. We are pleased to report that we have raised more than $25 million of risk capital in 2021 and we are confident that this will help unlock significant additional private sector financing for this Fund.

Our second fund is the International Municipal Investment Fund (IMIF), the first-ever blended investment fund for municipal climate resilient infrastructure projects. This fund will mobilize up to €350 million and we are well underway to achieve this target in partnership with one of the largest global infrastructure asset managers, Meridiam.

Our triggers of toolkit of capital and development assistance will be applied across five areas:

• Our two well-established flagship practice areas of (a) inclusive digital economies; and (b) local transformative finance, which as you know well;
• Additionally, after consultations with our LDC partners, we are consolidating, deepening and fine-tuning our pre-existing capital and financing mandate in the areas of: (c) women’s economic empowerment; (d) climate, energy and biodiversity finance; and (e) sustainable food systems finance.

Let me stress that the latter three areas are not new for UNCDF. We have worked actively on these issues for many years. To respond to demand from our programme countries and other partners, we have decided to designate an even deeper focus and even greater spotlight on these areas to ensure that we will deliver on these SDGs, particularly in light of the harsh impacts resulting from the pandemic.

In these areas, we aim to partner with UN entities and others with thematic expertise that can be combined with our financing capabilities.

So let me give you a few illustrative examples..

First, our work to support countries to develop inclusive digital economies will equip millions of people to access digital financial and other services that help achieve the SDGs..

To help guide countries’ digital transformations, we have developed the Inclusive Digital Economies Scorecard (IDES) in collaboration with UNDP, the EU, the private sector and others. Through collaboration between public and private stakeholders, this scorecard identifies key market constraints and helps set policy and investment priorities to foster digital economies that leave no one behind.

This tool is being rolled out in more than 20 LDCs. For example, in Uganda, the Scorecard served as a basis for mainstreaming the digital development thematic throughout the new National Development Plan.

In our second flagship area, Local Transformative Finance, we will support local authorities with financing and policy expertise to manage three inter-linked transitions: the urban transition, the green transition and the productive transition.

One critical area will be our assistance to subnational governments to gain access to capital markets.

In Tanzania, for example, we support the Government to mobilize domestic capital for sustainable development through the issuance of municipal revenue bonds. One example is a US$27 million infrastructure bond in Tanga City. We support the municipal authority with catalytic capital and advisory services to issue a fixed rate bond for the construction of water infrastructure, responding to growing water demand due to rapid population growth and increased commercial activities.

In terms of women’s economic empowerment,one main ambition is to address the finance gap and the lack of access to finance that women businesses face..

In Senegal, we assist FONSIS, the country’s sovereign wealth fund, to set up and manage a Women’s Economic Empowerment Fund, known as the We! Fund. This fund’s initial capitalization is $2 million and it made its first investment in 2021 in an innovative domestic retail chain, which sources ingredients from local producers. The Fund has a pipeline of projects for a total investment need of $15 million. Efforts are underway to raise additional capital for the Fund.

We are also deepening our support for climate finance. Our main initiative – the LDC-led LoCAL, which channels climate finance to local communities – will be expanded across more countries and we aim to at least double the volume of finance mobilized. This effort is currently active in 29 countries, supporting climate resilient investments benefitting some 11.5 million people. Since its start, it has mobilized over $125 million for local climate adaptation.

Closely linked to climate change is the global biodiversity crisis.. LDCs depend heavily on their rich biological resources and the financing needed for their conservation is massive.

With our blended finance expertise, we support initiatives that unlock private finance for integrating biodiversity conservation into business models and economic development. For example, with UNDP, UNEP and others, we helped create the $625 million Global Fund for Coral Reefs blended fund to support investments in sustainable business activities that save coral reefs and the communities that rely on them. 

As these examples indicate, our high ambitions will require us to also raise the levels of resources we mobilize.

Our base growth resource scenario is $150 million per year. With estimated revenues of $137 million for 2021, a year on year growth of 69% from 2020, we are inching closer to reach this base scenario.

However, our goal is to be a $200 - $250 million per year organization by 2025. This will allow us to have adequate presence of investment specialists in all 46 LDCs, a well-resourced investment fund in the BRIDGE Facility, which also would benefit the wider UN development system, along with an expanded programme portfolio that catalyzes multiples of additional SDG finance.

To increase our resources, we have established a resource mobilization task force, which will develop a UNCDF business plan and a corporate-wide resource mobilization strategy.

We will seek to diversify our donor base and deepen engagement with existing partners. Other priorities include increasing joint programming and resource mobilization efforts with UN partners as well as finding innovative ways to mobilize private sector resources.

Our success in reaching our goals will be challenging but necessary.

We firmly believe that UNCDF’s approach provides good value for money, based on our explicit aim to leverage every dollar given to us to unlock and crowd in additional public and private SDG finance.

As part of the Strategic Framework, we have also developed a new results matrix and evaluation plan. We aim to increase investments in our results management and evaluation functions, as these are critical to allow us to learn, enhance our impact and communicate our results .

Excellencies, distinguished board members,

Whether the next 10 years will be remembered as the Decade of Action that achieved the Goals, or a lost decade of development for the LDCs, will be determined in part by what we achieve as a UN collective, as well as what UNCDF achieves in its own right. As we take the next step on the UNCDF journey, we will use the new Strategic Framework to make our mark, specifically by:

• Serving and becoming fully operational and present in all 46 LDCs
• Supporting 25 countries on their paths to inclusive digital transformation, directly benefitting 14 million people
• Support investments that allow 6 million people to access and benefit from clean energy
• Catalyse at least USD 1 billion through supported third-party investment for local infrastructure, while supporting fiscal decentralization and public finance management in at least 20 countries

Thank you.