With increasing pressure on European development budgets, optimising the efficiency and impact of the European Union’s concessional finance is critical. In this paper in collaboration with CGD, we examine how the European Fund for Sustainable Development Plus (EFSD+) guarantee instrument can be strengthened to better support sustainable development in emerging markets. While the EFSD+ plays a key role in mobilising private capital, its complex structure, fragmented administration, and risk management limitations hinder effectiveness. Through a benchmarking analysis of major guarantee providers, financial modeling of the EFSD+ provisioning rates, and expert interviews, this paper identifies three key areas for improvement: (1) structural and operational efficiency, (2) impact and effectiveness, and (3) financial efficiency and risk management, advocating for data-driven provisioning and mechanisms to mitigate foreign exchange risks. By implementing these reforms, the EFSD+ can enhance its impact, ensure more strategic capital allocation, and improve financial sustainability, ultimately advancing the EU’s global development objectives.
Link to the blog: Here
Link to the paper: Here
