Public Investment Funds' future role in the realization of sustainable development - a case study of the IFU

Jens Bjarke Holst, Adam Elias Laugesen & Emil Villy Rømer Olsen

Student thesis: Bachelor project


This project was spawned out of an interest in the implications of the shift in financing structure of global development efforts signaled in the UN’s strategy for realizing realization the Sustainable Development Goals (SDGs). The new structure places the majority of the financing responsibility on the private sector, through foreign direct investment (FDI), which is a conscious pivot away from traditional foreign aid.
The project argues that this pivot will cause state-owned development funds to gain an increasingly important role in the global strive to accomplish the SDGs. These funds represent a benchmark for how FDI can harmonize with sustainable development as they only interact with private actors but are mandated to reduce poverty. To analyze the implications of the changing role of these actors, this project has conducted a case study of the Danish Investment Fund for Developing Countries (IFU).
The main goal of this was to understand the possibilities and barriers for the IFU to contribute to the realization of the SDGs. Thus the conclusions of the project were reached through two separate analyses whose findings were converged and discussed.
The first analysis utilizes critical development theory in a probe of the IFU’s two central instruments made to facilitate the sustainability of its investments. This with the aim of identifying specific areas of the fund’s practice, which presented either challenges or possibilities towards contributing to the SDGs.
The second analysis applies the same theory to a comparative study of the investment patterns of the IFU and the Danish government’s bilateral aid. The comparison provides a reference point to better the understanding of the IFU and the key differences between a semi-public fund and a traditional foreign aid actor.
Thusly the project finds two primary aspects that development funds can utilize in their contribution to the SDGs: (1)Funds can mobilize huge amounts of capital relative to state aid. (2) They can, to a limited degree, sway their financial partners towards more sustainable policies.
However, the project also finds two innate barriers to this end: (1) The reactive nature of the funds makes it impossible to coordinate investments in any form of general developmental strategies. (2) Lack of transparency makes it impossible to gauge, control and improve the developmental impacts of investments projects.

EducationsBasic - Bachelor Study Program in Social Science, (Bachelor Programme) Bachelor
Publication date2017
SupervisorsSøren Lund