The international community has reached a consensus that private sector finance must play a critical role to achieve the Sustainable Development Goals (SDGs) and the COP 21 commitments. While the private sector finance is more abundant than even the most generous levels of development assistance, private investment does not always flow to areas of need. As a result, local capital markets and financial sectors remain shallow in several developing and emerging markets. MDBs are uniquely placed to help bridge the significant gap between demand and supply for private finance and help build a more effective demand in developing and emerging markets.
MDB shareholders have recognized that to achieve the objectives of the 2030 Agenda for Sustainable Development, MDBs must help enhance the private sector’s role across a broad spectrum of development activities, among other things. A fundamental principle guiding MDBs’ engagement in these operations is additionality.
Additionality captures a clear and simple premise: interventions by multilateral development banks (MDBs) to support private sector operations should make a contribution beyond what is available in the market and should not crowd out the private sector.
This report summarizes the efforts of MDBs to develop:
- more detail on the principle of additionality;
- common definitions;
- guidance on a common approach to the governance of additionality; and
- guidance on types of evidence that help demonstrate the presence of additionality.