NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, July 24, 2015

Developing nations need trillions of dollars a year to tackle issues like food security, climate change risks and basic infrastructure. But foreign investment into these countries dropped by 16% in 2014, to $1.23tn, further widening the $2.5tn gap needed annually to address the most critical areas.

“The global challenges are so complex and the size of the funding that’s needed is so large, traditional funding sources like philanthropy are probably not going to be sufficient to meet it,” said Anna Kearney, associate director for corporate social responsibility at the Bank of New York Mellon (BNY Mellon), which this week released a white paper on the importance of social finance.

The report comes after a UN summit in Addis Ababa, Ethiopia, last week, where world leaders reached an agreement on how to finance some of the planet’s most pressing development issues.

Impact investing – investments that have a social or environmental benefit while also turning a profit – might be one of the best ways address the financing shortfalls, experts say.