Comment: $2.5trn in need is not $2.5trn in opportunity

$2.5 trillion is a talismanic number. It represents that amount of opportunity for the ASEAN economic community, for cities, for exports in the ocean economy, for hydrogen, for embedded insurance, annual investment in energy infrastructure, JPMorgan’s 10-year climate investment plan, dry powder in the private equity industry, and even grocers that are the first to the future.

But the major voodoo for this number is that it has become famous for representing the financing gap to accomplish the 17 Sustainable Development Goals, which were officially adopted by the United Nations on 1 January 2016.

A 2018 UN report, Local insights, global ambition, noted that achieving the SDGs would require funding at a level of $3.3 trillion-$4.5 trillion per year. It also noted a funding gap for developing countries of $2.5 trillion per year. The need is there.

Even though this report noted the challenges in raising this amount of money, it struck an optimistic tone, saying: “The SDGs are more than just an aspirational framework for governments – they are a roadmap for business opportunities for securing trillions in financing.”

It also stated: “In addition to increasing public-private partnerships, there are various other financial opportunities waiting to be ‘unlocked’ and explored.”

The following paragraph in the report illustrates a certain naivete about this supposedly enormous opportunity by inferring that the growth of sustainable and impact investing could bring billions, if not trillions, of dollars to the table. It also has its own reality check in noting that “official development finance interventions mobilised $36.4 billion from the private sector between 2012 and 2014”.