Projects

Context
Sustainable economic growth requires resilient, well-functioning, and inclusive financial systems that can redirect financial flows to sustainable investments that benefit everyone. Meanwhile, a large financing gap is standing in the way of achieving the SDGs and global climate and biodiversity targets. Growing risks and economic crises, such as pandemics, climate change, and natural disasters, all threaten the resilience and stability of financial systems in many developing countries and emerging economies. In times of stagnant public funds, private finance becomes an increasingly important financing source for sustainable development. Integrating sustainability in financing decisions and risk management processes in the financial sector promotes a sustainable economic transformation in line with the UN Sustainable Development Goals (SDGs) and global climate and biodiversity goals. Greater inclusion of women, poor households, and micro-, small and medium-sized enterprises (MSMEs) in the financial system is crucial for the benefits of growth to be shared.

Objective
Developing efficient and responsible financial systems is key to sustainable growth, economic transformation, and poverty reduction in developing countries and emerging economies. The Sustainable Economic and Financial Systems Sector Project advises the Federal Ministry for Economic Cooperation and Development (BMZ) on how to establish the framework conditions necessary for building responsible, efficient, stable and inclusive financial systems in partner countries.

Approach
The Sector Project currently focuses on the following key areas:

• Private Capital Mobilisation:
  Mobilising additional private investment is essential for closing financing gaps for the SDGs and global climate and biodiversity goals. Our work focuses on improving the structural conditions that enable private capital mobilisation at scale. Firstly, we strengthen framework conditions, including data availability and transparency to support investor decision-making (especially through our support to the Hamburg Data Alliance). We also focus on enhancing the effectiveness and scalability of blended finance through standardisation, most notably via SCALED – Scaling Capital for Sustainable Development – a unique platform initiated by the German government together with a number of other governments and private institutional investors to promote standardized blended finance structures and reduce transaction costs. Lastly, we advance private capital mobilisation in international fora such as the G7, G20, OECD and MDBs to foster global coordination.

• Sustainable Finance:
  Sustainable finance policy measures such as taxonomies, sustainability disclosure and the incorporation of sustainability in banking supervision and regulation can redirect investment towards sustainable development. However, such measures need to enable rather than hinder cross-border investment in developing and emerging economies. Ensuring global interoperability of sustainable finance regulation is therefore a key aspect of our work. We also contribute to ongoing efforts to develop and expand global sustainable finance standards by supporting initiatives such as the Taskforce on Inequality and Social-related Financial Disclosures (TISFD).

• Financial Inclusion:
  We ensure that individuals and businesses have access to and use affordable financial products and services that meet their needs, which are delivered in a responsible and sustainable way. Although financial services have increased opportunities for millions of people around the globe, there are persistent challenges, notably regarding consumer protection, financial literacy and responsible account usage. In line with policies such as the BMZ’s Feminist Development Policy, our team analyses the barriers that restrict women’s access to financial services. We also advise BMZ on the opportunities and risks presented by innovative digital finance solutions. At a global level, we support BMZ in their engagement as part of the G20 Global Partnership for Financial Inclusion (GPFI), and ensure our work closely aligns with our partners, notably Consultative Group to Assist the Poor (CGAP) and the Alliance for Financial Inclusion (AFI).

The project is funded by the German Federal Ministry for Economic Cooperation and Development (BMZ).

The Sector Project provides technical and conceptual advice to BMZ on national and international processes.

The project has been commissioned from 2024 to 2026.