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MOODY’s: Sustainable finance in emerging markets to help combat effects of coronavirus

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The coronavirus pandemic will tighten near-term private financing prospects for emerging markets, Moody’s Investors Service said in a new report, as funding will focus on mobilising private capital for water, sanitation and health infrastructure.

“The outbreak will also focus multilateral development banks’ (MDBs) efforts on mobilising the private capital needed for essential water, sanitation and health infrastructure,” said Christopher Bredholt, a Moody’s Vice President and Senior Credit Officer.

“Blended finance initiatives, which seek to mobilise private sector capital alongside development finance, also align with efforts to dampen the virus’ impact on emerging markets and support sustainable development,” added Bredholt.

Recent multi-stakeholder initiatives seek to mobilise the private capital needed for sustainable infrastructure in developing countries. While MDBs’ use of credit enhancements remains limited so far, this will grow as they seek to optimise their balance sheets and improve the risk-return profile of sustainable finance for emerging markets.

As investor interest in sustainable finance gathers pace, Moody’s expects credit enhancement to be deployed more broadly.

However, the scale of sustainable investment needed to meet the United Nations Sustainable Development Goals (SDGs) still far exceeds the amount raised, but there is no single solution to address the financing gap.