As global decision makers meet in Davos this week for the World Economic Forum Annual Meeting, one of the top agenda items should be how to mobilize more private finance to fund the Sustainable Development Goals (SDGs)—particularly how to strengthen the role of one of the most important tools of the international community: the multilateral development banks (MDBs).

The development community had high hopes that the private sector would fund much of the investment needed to achieve these goals, but as I discuss in an op-ed for Devex the “billions to trillions” are simply not materializing. Instead, the data show that global cross-border private capital flows remain depressed, and the volume of infrastructure investment with private participation in developing countries is down sharply.

In Devex, I contend that for the MDBs to evolve from lenders to mobilizers of private finance for development, many changes will be necessary, but two are fundamental: (1) greater risk tolerance and lowered expectations for risk-adjusted returns, and (2) a major cultural shift to encourage collaboration rather than competition among the MDBs.

On lower risk-adjusted returns:

Hard decisions confront shareholders and PSW [private sector window] managers with respect to the risk tolerance needed for greater leverage and impact. Who will bear the increased risk and accept lower returns?

Either shareholders will accept PSWs taking more risk on to their own balance sheets, or they must create and finance off-balance sheet vehicles for this purpose. Such off-balance sheet vehicles could be funded by small capital increases or by consolidating and rationalizing the numerous MDB donor trust funds that target mobilizing private finance.

On collaboration among the multilateral development institutions:

Cultural as well as financial changes are needed. To achieve catalytic scale, MDBs will have to collaborate more and compete less. Standardizing and pooling assets, harmonizing processes and standards, sharing project due diligence, pursuing common country strategies would all help PSWs attract institutional investors, lower their own transaction costs, and better serve country clients.

Read the full op-ed here. And you can read my recent paper on the topic here.