In April 2024, Mr. Pradeep Kurukulasuriya was appointed Executive Secretary of the United Nations Capital Development Fund (UNCDF), a flagship catalytic blended financing platform of the United Nations. His tenure begins at a critical moment, as the international community ramps up its push to achieve the Sustainable Development Goals by 2030.
The UN Chronicle availed itself of the opportunity to ask the Executive Secretary about some of the challenges facing UNCDF moving forward, and his vision for the Fund’s unique role in implementing the 2030 Agenda for Sustainable Development. Below is Part 1 of our two-part interview.
3 June 2024
Interview
The theme for International Women's Day 2024 was "Invest in Women". How does the United Nations Capital Development Fund (UNCDF) plan to increase gender-responsive financing in challenging areas such as the unequal distribution of unpaid care work, which is primarily borne by women and girls?
Since UNCDF was founded in 1966, we’ve been defined by two things. One is a unique investment mandate to blend and deploy grants, loans and guarantees as well as related advisory services. The other is that we go where few others do, to the countries typically referred to as “last-mile” markets. And women represent the true last mile when it comes to sustainable development—the last frontier for development to reach.
It's appropriate that this year’s theme for International Women's Day was “Invest in Women” because this perfectly encapsulates our Gender Equality Strategy, which was released before my arrival. You can count on UNCDF to employ an array of approaches to support women’s economic empowerment in the markets we work in: “crowding-in” public and private financing to women-led and -owned small and medium-sized enterprises (SMEs). We will work with partners like local commercial banks and central banks to provide financial and technical support to women entrepreneurs, ensuring that our work to promote communities that are resilient to climate change includes gender-responsive financing.
But as much as we are doing, we need to do more and we must do better when it comes to women’s economic empowerment. And the best thing we at UNCDF can do is use our unique investment mandate to the advantage of women and their priorities. Women in the least developed countries (LDCs) and developing countries face tremendous barriers to accessing finance, barriers that others wouldn’t even think about. Take one example: women in many of the countries we serve are substantially less likely to possess collateral for financing. This, in 2024, should not be a problem where development objectives are sought. We can use our unique UNCDF investment mandate to connect women to financing via a 0 per cent loan using digital payments, or performance-based grants that can reward entrepreneurship, or via a guarantee scheme that provides confidence to others to lend, or a combination of these three approaches. These are the types of risks that UNCDF is designed to shoulder. In fact, we launched a partnership with the World Food Programme (WFP) in Rwanda that is doing just that: it provides the pipeline of women-led/-owned agricultural SMEs and uses our financing instruments to connect such organizations with critical business development capital. So this isn’t just talk. These are ways in which we can and do help women in the context of their real economies.
As the climate crisis deepens, so too has recognition of the need for scaled-up funding for adaptation and mitigation, especially since the issue took centre stage at COP 28 (the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change). Given the urgent need to phase out fossil fuels, how will UNCDF enhance its capacity to promote the expansion of sustainable development projects in areas such as energy and infrastructure?
Before we enhance our capacity, we will lean into the very thing that makes us unique—our investment mandate. We are the only United Nations entity that can deploy financial instruments towards any venture, regardless of the sector (the International Fund for Agricultural Development can deploy financial instruments but is focused on agriculture and related ventures).
Before COP 27, there was a lot of scepticism about whether we would ever see a Loss and Damage Fund for developing countries and LDCs. Now, it not only exists, but it’s funded.
What does this mean in terms of supporting climate action and the nationally determined contributions (NDCs) of countries? It means we can support countries to implement urgent action on adaptation and mitigation in a variety of ways, using an array of financial models. We are already implementing or designing performance-based grants models to crowd-in finance for locally led adaptation in nearly 40 countries, including two thirds of all LDCs as well as eight small island developing States (SIDS). We are working with national development banks, using guarantees to unlock capital for clean energy firms in frontier markets to support the sales of hundreds of thousands of clean energy products. We are supporting the deployment of innovative insurance products to support climate-disaster risk financing for last-mile communities in the Pacific. We have already helped establish and manage a blended finance fund that is capitalizing companies that will preserve coral reefs. All these efforts are attributable to our unique investment mandate. These are amazing examples of hope for the future, but there is something that frustrates me—it is not at sufficient scale. We must scale these initiatives up, and that requires partnerships to achieve scaled-up impact. The United Nations Development Programme (UNDP), in particular, as the lead United Nations organization supporting countries on climate action via the work it leads in assisting countries with their NDCs, the UNDP Climate Promise, is an integral partner for many organizations in the United Nations. UNCDF is no different. We must find ways to scale up financing for climate action, and fast. Time is not on our side.
That said, what gives me hope is that the runway has, perhaps, never been clearer for us in terms of climate finance. There are promising opportunities with the existing vertical funds, including the Green Climate Fund and Global Environment Facility, particularly given the UNCDF focus on supporting national development banks to access these funds more easily and to deploy across urgent needs. The newly established Loss and Damage Fund is another source of funding that can support countries in providing financing to blended finance solutions that unlock larger streams of public and private capital. Having worked with these funds for more than 18 years, the potential is immense, and I look forward to assisting countries in optimizing the opportunities that these important global funds present.
For years, there have been calls for multilateral lending institutions to be overhauled to make them more adept at combating climate change, but many countries still need to see a major increase in climate financing before they can implement strong, new climate plans. When or under what conditions do you think we will see Governments and the private sector make the level of investment in developing countries and LDCs that will reduce greenhouse gas emissions, and what role can UNCDF play?
We can’t overstate the quantum leap forward that we have seen from both COP 27 and COP 28. Before COP 27, there was a lot of scepticism about whether we would ever see a Loss and Damage Fund for developing countries and LDCs. Now, it not only exists, but it’s funded. It is in its early days, perhaps, but there is progress. I am an optimist by nature, so I am more than confident that we can see investment flows to developing countries and LDCs at the necessary scale in the future.
One reason for my optimism is the simple attractiveness of the investment opportunity—and I speak from experience. When I was Director of Environmental Finance at UNDP, I oversaw a portfolio of climate, nature and energy initiatives that was valued at over $5 billion. That’s both a robust portfolio and a drop in the bucket compared to the amount of financial wealth, which may amount to as much as $200 trillion. What will help unlock that financing is “de-risking”, on both the policy side and the financial side. The pipeline is there but it exists in markets that are often overlooked, where traditional finance will not give a second’s worth of attention. They simply cannot do so because their risk profiles do not match the investment thesis of such funds. Public finance can be used to de-risk projects so that private finance can follow. But, for that to happen, you must deploy platforms such as UNCDF, unique in its absorption and appetite for taking on risks. I believe that we are moving towards having the ecosystem where we will see the de-risking of climate initiatives that will crowd-in finance for developing countries at scale, between capital markets, development finance institutions, development banks, vertical funds and, frankly, platforms such as UNCDF. Not only can we provide a pipeline for financing, but we can play a tremendous role in terms of early concessional financing, given our investment mandate and that we are not constrained by requirements that other international financial institutions (IFIs) and national and international development finance institutions (DFIs) face. We are, after all, a voluntarily funded platform, designed to deploy financial instruments to work in risky environments as a complement to the other traditional development finance instruments that are out there, along with United Nations organizations that provide normative and technical assistance.
The truth is, if we want to achieve the impact we are looking for, then we will need partners. We can’t do it alone.
Staying with the climate crisis, how does UNCDF plan to support vulnerable people through innovative financing products, such as the anticipatory action pilot insurance schemes launched in the Pacific region to improve the financial preparedness and resilience of islanders facing climate-related impacts and hazards?
I am so proud to come into an organization that has this kind of innovation in its ethos. I often talk about the capital that can be triggered from our investment mandate. But the truth is our financial capital is only as effective as our human capital—the people who are innovating the financial instruments that are delivering value in difficult markets.
One thing we’re doing is taking the work you referenced in the Pacific and seeing how we can replicate it in Africa and other parts of the world. In 2023, we conducted feasibility studies for four African countries: Niger, Malawi, Senegal and Sierra Leone. We are also working on piloting a parametric microinsurance product in Sierra Leone this year. What we are trying to show is that, with the right capabilities and instruments, these are products that are replicable and scalable regardless of the market. I have my eyes firmly set on taking this support to the Caribbean SIDS (e.g., Haiti and other countries) in addition to the Indian Ocean SIDS.
But the truth is, if we want to achieve the impact we are looking for, then we will need partners. We can’t do it alone. Last year on the sidelines of the General Assembly, UNCDF entered into a partnership with Lloyd’s, the world’s leading marketplace for insurance and reinsurance, to collaborate around designing innovative insurance products that will deliver financial resilience against climate shocks in SIDS and LDCs. We must also link up closely with the insurance work of UNDP and WFP. We will need to act as one. Engaging with the private sector is a not a “nice-to-have”; it’s a “need-to-have”. It will only be through a collective effort that we will succeed in delivering solutions that will help the most vulnerable people in the world.
End of Part 1. For more, check out Part 2 of this Chronicle Conversation, in which Mr. Kurukulasuriya discusses digital financial inclusion, the valuation of nature assets, and how to close the income growth gap between the world’s poorest and the richest countries.
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