Innovative finance

There is huge potential in leveraging the expertise of both development and finance stakeholders towards a common goal: achieving sustainable development without leaving anyone behind.

The ILO understands innovative finance as a set of financial solutions and mechanisms that create scalable and effective ways of channelling both private money from the global financial markets and public resources towards solving pressing global problems. This concept incorporates two distinct facets: first, innovative financing is a complementary source of capital to development aid; and second, innovative financing is a way of making development more effective and efficient by linking financing to results, redistributing risk, improving the availability of working capital, and leveraging technology. Innovative finance is not a homogenous mass of initiatives, mechanisms or solutions, but it can be categorized on the basis of key technical attributes and goals.

Social Finance work on the topic:

• Social performance. To facilitate progress at an industry level, the Social Finance Programme has been collaborating with the Social Performance Task Force. As a result, Social Finance supported the microfinance industry in the drafting of Universal Standards of Social Performance Management and helped distil a subset of relevant standards for investors in microfinance. With the Social Performance Task Force, we provided input towards developing a meaningful impact measurement framework for financial inclusion in collaboration with the Global Impact Investing Network.
• Impact investing. Since 2012, Social Finance has been collaborating with the Africa Agriculture and Trade Investment Fund. Initiated by Kreditanstalt für Wiederaufbau on behalf of the German Federal Ministry for Economic Cooperation and Development, the Fund is a public-private partnership aimed at realising the potential of Africa’s agriculture for the benefit of the poor. Social Finance and UN Environment are providing technical advice, developing and testing assessment methodologies, and supporting the implementation of a monitoring framework. For more information about this innovative partnership, visit our work on sustainable investing.
• Impact bonds. As part of the Impact Bond Working Group, we have a particular interest in employment-related bonds. See our analysis of thematic impact bonds here. Most recently, we concluded a feasibility study for an impact bond aimed at addressing child labour in the cocoa value chain in Côte d’Ivoire, integrated in the ACCEL Africa project. We discussed the encouraging results and next steps with the ILO constituents in Côte d’Ivoire. Backed by local stakeholder support, our plan is to proceed with the design phase in 2022.
• Pushing the frontier. With a number of key departments and units, Social Finance has been working since late 2017 towards exploring further potential to engage with innovative finance stakeholders all with the goal to achieve the 2030 Agenda for Sustainable Development and in particular the goal of decent work and economic growth. Related technical input is outlined in Social Finance Working Paper #75.

Broader ILO agenda on the topic:

• The Enterprises Department and the Partnerships Department organized a series of webinars “Innovative Finance: Why should we care?” to build capacity within the ILO to better understand the concept. In these webinars, we looked at how other UN agencies are using innovative finance, and started investigating how the ILO could increase engaging with innovative finance stakeholders to further promote Decent Work. Click here for more information about these webinars.