P4G Partnerships The UN Sustainable Development Goals (SDGs) have become a globally recognized standard to align action, including between public and private-sector organizations. Meeting the SDGs will require solutions that the private sector can deliver. Residents of low- and middle-income countries (LMICs) represent a large and growing market for SDG-aligned business innovation. Businesses are in the midst of a paradigm shift from an industrial era where the business bore no or minimal penalty for environmental and social externalities, to a post-industrial era where businesses work in partnership with government to provide social and environmental value that drives the economic growth of people living in the world’s poorest and often most climate-vulnerable communities. 

Developing countries carry a disproportionate burden of the negative economic and social impacts of extreme climate events. High-income countries contribute the most to climate change, while communities in developing countries carry a much higher burden compared to their contributions to the climate challenge. For example, the World Bank estimates that 74 of the world’s poorest countries account for less than one tenth of global greenhouse gas emissions. Meanwhile, these countries—along with communities around the world who are in the same economic bracket— are the most vulnerable to extreme weather patterns, natural hazards and food and water shortages. In the past 10 years alone, they have experienced eight times43 as many nature disasters, and unchecked change may force mass migrations. It has been estimated that by 2030 climate change could push more than 120 million additional people into poverty.  

The “Decade of Action” declarations of 2020 have increased the focus on accomplishing the SDGs and addressing climate needs in developing countries from public and private sectors around the world. From an institutional side, this increased focus is reflected in the Danish strategy for development cooperation, “The World We Share,” which describes a proactive approach to establishing innovative partnerships with civil society, the business community and public authorities. The Netherlands and the Republic of Korea also take similar approaches in their policy documents for development cooperation: “Do What We Do Best” and the “3rd Mid-term Strategy for Development Cooperation (2021‒2025)” respectively. Similarly, the private sector has shifted from an initial SDG-related perspective of doing business responsibly and doing no harm, to an approach that more directly focuses business solutions on addressing global or local challenges in a manner that creates positive social and environmental impacts.  

The push for accomplishing the SDGs and climate goals is also directly affecting the private sector, with the world’s leading reporting and standards-setting institutions driving for even deeper accountability for environmental, social and governance (ESG) impact. The principle of dynamic or double materiality embraced by these organizations requires companies to consider not just the impacts of climate on the company’s financials, but also the impacts of a company on the climate or any other ESG factor. This reflects the emergence of growing private-sector actions and innovations in addressing the SDGs not only through the cross-cutting climate goal (SDG 13) but also SDGs such as hunger (SDG 2), water and sanitation (SDG 6), energy (SDG 7), cities and communities (SDG 11) and sustainable production and consumption (SDG 12) that are central to human material rights. In these sectors, there is a strong potential for business innovations that provide an SDG-related product or service that addresses both the core SDGs (in this case, SDGs 2, 6, 7, 11 and 12) and the cross-cutting SDGs such as climate (SDG 13). It is noteworthy that the SDGs for Economy (SDG 8) and Partnerships (SDG 17) are two other such cross-cutting SDGs that affect delivery of the core SDGs. 

A rapidly increasing number of innovative businesses are able to provide products that are affordably priced for the poor. These are also working in regions that lack access to core SDG-related services, such as food, water, sanitation and energy, and suffer the economic growth-stifling effect that the lack of such services carries. For example, one cannot have refrigeration for either a grocery store or a clinic without access to electricity. The provision of such services is directly tied to economic growth, with studies showing that for every increase in basic energy service levels, average household revenue will also increase. 

Many such examples exist within P4G partnerships, such as partnerships supporting Kenyan fisheries and avocado growers with Pay as you go (PAYGO)-based financing for refrigeration units that increase the shelf life of agricultural products and reduce the amount of food lost between the farm and the store, thus increasing farmer incomes. Many of these businesses are also contributing to climate mitigation (SDG 13) because these products are often solar powered or otherwise delivered in a manner that contributes to climate goals. A few P4G examples of this include partners such as Chanzi, who is using industrial food waste to grow black fly soldier larvae as a protein for animal feed; Fresh Life's affordable in-home containerized sanitation solutions for unconnected urban slums; and IDH, Slow Coffee and Africa Bamboo’s varied solutions in sustainable agroforestry that contribute to sustainable and traceable value chains for coffee and bamboo. 

The companies providing these innovative and affordable climate-friendly products in Overseas Development Assistance (ODA)-eligible countries face considerable challenges in getting the investment needed to start and to grow their businesses. From the outset, LMICs have difficulties in attracting private investments because risks are perceived as too high, and the enabling environment is not conducive. This results in private capital costs being prohibitively expensive and prevents private capital flow to LMICs. To meet this challenge, many programme initiatives aim to enable investment, e.g., including early-stage project development that proves the bankability of business solutions and blended finance mechanisms where public funds are engaged to make private investments possible.  

The following problem analysis goes more into depth on these issues and provides the basis for the theory of change in the programme document. 1. Businesses supported by P4G become investment ready   

2. Government and private-sector leaders contribute to improving the green growth enabling systems based on inputs by P4G partnerships 

3. Knowledge mobilization (incorporating MEL) engages knowledge partner stakeholders who can influence enabling systems and country transitions in food, water and energy systems. Early stage businesses