Searching for scale in sustainable development

Anthony Bartzokas directs the International Economics and Development Laboratory at the University of Athens, where he holds the position of Professor of Development Economics. Also a Research Associate at the London School of Economics, Bartzokas specializes in sustainability, governance and financial management for multilateral and investment organizations. Previously, he worked with the United Nations University and the European Bank for Reconstruction and Development. He holds a PhD in the Economics of Technological Change from the University of Sussex, UK. 

Four years on from Mark Carney’s “billions to trillions” speech as UN Special Envoy for Climate Action and Finance, there is broad agreement – at least among observers – that the time for talk and half-measures is over. That means taking our eyes off the distant horizon and focusing instead on the next steps needed for the global energy transition. The money is there and the partners are willing, so how do we make it happen with sufficient scale and speed? 

A new research and policy center, the International Economics and Development Laboratory at the University of Athens, seeks to answer exactly that and more. Drawing on decades of learning from a range of international financial institutions (IFIs), the new center aims to break inertia and build momentum for climate-friendly sustainable development worldwide. 

Founding director Anthony Bartzokas has already set out a range of recommendations for our era-defining transition – with proposals scrutinized at the highest levels, including recent G20 summits in Brazil (November 2024, on knowledge capacity for sustainable infrastructure) and India (July 2023, on how IFIs can be catalysts for financial innovation). 

In our interview, his first as director of the center, Bartzokas calls on the international development community to share knowledge systematically, be more transparent and substantially increase syndication. For quick wins he recommends a counter-cyclical investment in trade finance (which dovetails with the OPEC Fund Trade Finance Initiative launched at our Development Forum in June 2025). And perhaps most intriguingly, he calls for central banks to play a formal role in the credit ratings process. 

OPEC Fund Quarterly: This summer you founded the International Economics and Development Laboratory at the University of Athens. What will be the main focus? 

Anthony Bartzokas: I was elected Professor of Development Economics at the University of Athens in September 2024 and set up a new laboratory the following July to create the opportunity for researchers to investigate the real-life trends and challenges of sustainable development and the potential of financial innovation. 

Our starting point is to look beyond the funding gaps in sustainable development. Everybody’s talking about the missing trillions, but too few people are talking about what needs to be done on the ground. So we’re trying to build a bridge between policy-relevant research and what happens in the field. My personal conviction is that: (a) economics is never an end in itself, but always a means to the end of contributing to the better allocation of scarce resources and (b) policy engagement is never a substitute for clarity, rigor and intellectual honesty. 

OFQ: What case studies can you already point to? 

AB: Consider what the banking sector is already doing for investment in sustainable development. Here’s one example of an “A/B loan”: Say you’re the CEO of a mining company in Africa and you need US$100 million for a major expansion. The local financial market can’t provide that kind of money, so you contact the African Development Bank (AfDB), which is a trusted partner to a large network of collaborating banks. Every now and then these banks share new opportunities for funding, for which you then apply. 

You do your due diligence and establish yourself as a credible partner. But still you’re based in sub-Saharan Africa, so private sector investors and other institutional investors remain hesitant. Recognizing that it’s a difficult environment, the AfDB takes on the riskier A component. Other development finance institutions can join in this A-loan via a parallel loan structure. In addition, commercial parties – impact investors or institutional investors – are invited to participate via the B-loan structure. This has a catalyst effect, building a network of investors with credible asset solutions in developing countries. 

IFIs have been doing business in this standardized way for the last 50 years, basically raising loans for developing countries, so they have a large pool of these good investments on their balance sheets. Now the intermediaries are coming into the picture and saying: If you have a balance sheet of US$10 billion, including US$2 billion of loan syndications with credible private sector companies in sub-Saharan Africa, why not pass this on to us and take it off your balance sheet? This is a good example of how you can find practical bottom-up solutions for projects in sub-Saharan Africa, which improve the local financial system through innovative policies. 

OFQ: How else can IFIs make a difference? 

AB: Our laboratory is also investigating the obstacles, best practices and how knowledge is shared, including operational insights into how the allocation of capital enables innovation and sustainable development. I’ve also started research into global public goods, particularly knowledge, which can help fill the abovementioned gaps. 

There’s more than half a century’s worth of knowledge concentrated in IFIs, which needs to be quantified, standardized and disseminated. Developing countries need this knowledge, particularly the 44 UN-designated Least Developed Countries. Local financial capabilities are weak in these countries. Practical examples from IFIs include data and analysis on loan syndications, where they become off-balance sheet structures for scaling up investments, while improving local capabilities and overall efficiency. 

How does this work in practice? Let me come back to loan syndications. One side, the beneficiaries, often suggest that we need to be more local-oriented. The other side, the international investment community, often cite quality problems for the lack of bankable projects in the pipeline. In my experience, it’s best to pursue investments where you can align local capabilities with local and international needs. 

Take infrastructure development, where investment decisions must be tailored to local communities. Those localized decisions don’t have to end there. Instead, they can feed into standardized approaches, which are often required by international investors. That in turn can improve efficiency and unlock future investments in developing countries. Moreover, where cross-border collaboration is needed for big infrastructure projects, these aspects are even more important. 

OFQ: How can we encourage more private sector involvement in sustainable development projects? 

AB: One tried and tested approach is to provide technical assistance to help local stakeholders identify needs, formulate proposals and understand the regulatory environment. There should indeed be private sector involvement, even limited contributions, because that boosts investment capacity. This is the main issue when it comes to the polarization between bankable and missing markets. Where you lack investment capacity the way to create it is to add a thin layer of technical assistance to help identify needs and start building the project. 

It is also important to be practical and develop platforms where you can share the established practices and data of IFIs with local financial institutions from the Global South, as well as other institutional investors. The attractiveness and opportunities that the development finance asset class present have been reinforced by an impactful EIB initiative, i.e. the Global Emerging Markets Risk Database report on recovery statistics. This report, coupled with IFI-specific disclosure on sovereign default and recovery rate statistics, will contribute to an accurate risk assessment, mitigate the current disparity between perceived risk and actual risk, and grow investors’ confidence when investing in emerging markets. 

It’s important in this debate to bring in the central banks of developing countries. To not include them is a missed opportunity because there’s one in every country and it’s usually a strong institution with fair credibility that monitors the quality of loans across the territory. However, there’s often a big gap between the data held by central banks and what the rating agencies are observing. The best way to break that inertia – and to help rating agencies make better decisions – is to bring the central banks formally into the process. 

OFQ: What should we be focusing on next? What holds the greatest potential for development effectiveness? 

AB: The challenge ahead for policy relevant research is how to gain a deeper understanding of the imbalances in capital allocation and innovation processes and how these imbalances can be effectively addressed with scalable innovation-driven and market-based solutions. Let me give you an example: Because we’re now dealing with deglobalization, a prominent area for easy wins is trade finance. At the same time there are fascinating technological changes – and opportunities – in how trade transactions are taking place. If we want to help developing countries catch up, including via sharing knowledge and building capacity, trade finance is a key area.