Can development banks step up to the challenge of sustainable development?

The great planetary challenges, be it the climate, loss of nature or human solidarity, call for concerted actions at all levels, on a scale commensurate with the problems. Yet, this transformative change, which requires mobilising actors across the board, cannot be achieved overnight. A transitional period will be needed to allow the actors to build socio-economic models attuned to this vision. While multilateralism is struggling to meet these challenges, public development banks – whether operating at sub-national, national, regional or international level – can cooperate and contribute to the search for economic and social models that hold promise for the future. Building on their dual role as a provider of public funding and an enabler to leverage private finance, Public Development Banks (PDBs) need to acquire the tools and indicators to help them select and support low-carbon initiatives as a priority. They need to put in place “sustainable development analytical tools” allowing them to select operations on the basis of criteria other than purely financial ones and, where necessary, propose long-term loans for high impact operations. They must also ensure that none of their financing is likely to encourage activities at odds with the attainment of the Sustainable Development Goals, particularly those on climate and nature. This paper explores the reasons why development banks can play a leading role in promoting the transition to sustainable development. It proposes five recommendations for decision-makers in order to help build the conditions for a successful transition.

This Research Paper is published in the framework of the International Research Initiative on Public Development Banks working groups and released for the occasion of the 14th AFD International Research Conference on Development. 

It is part of the pilot research program “Realizing the Potential of Public Development Banks for Achieving Sustainable Development Goals”. This program was launched, along with the International Research Initiative on Public Development Banks (PDBs), by the Institute of New Structural Economics (INSE) at Peking University, and sponsored by the Agence française de développement (AFD), Ford Foundation and International Development Finance Club (IDFC).

Have a look on the key findings for a quick overview of the research results

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