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Securitization: Positive Instrument to Help Fund the Sustainable Development Goals

Securitization is needed to help mobilize private capital and fill the estimated $2.5 trillion annual financing gap that hinders achievement of the sustainable development goals (SDGs). Now is the time to emphasize that, when done right, securitization can be a stable, low-risk investment. And the ratings show that.

An estimated $100 trillion in assets currently under management in the global financial system could be deployed to support sustainable development. Unfortunately, there is a disconnect between where that capital is now and where it needs to go. Securitization could help bridge the gap. It is a blended finance instrument that can create bonds with the size, risks, and returns attractive to institutional investors. Many SDG activities generate the types of cash flows that potentially can be securitized, such as utility payments to renewable energy providers, mortgage loans for affordable housing, ticket receivables for clean transportation providers, and tuition payments.

Using data and takeaways from a recent Milken Institute webinar on rating securitization transactions, this report from the Center for Financial Markets outlines another reason why securitization should be harnessed to help fund the sustainable development goals.