Private Sector Engagement (PSE) refers to the interest of donors and others to work more strategically and systematically with business to meet the SDGs. The OECD has proposed a very broad definition of PSE as ‘an activity that aims to engage the private sector for development results, and involves the active participation of the private sector’ (OECD, 2016). The DCED PSE Working Group in its Operational Framework (2019) has focused on two specific PSE strategies:
- Engaging with, primarily large/ international, companies on equal terms to enhance the impact of their core business on the SDGs, e.g. through the joint development and financing of SDG-oriented business models or dialogue platforms on responsible business practices. In contrast, other approaches involving active private sector participation focus more on local business (e.g. MSD) or local business associations and government agencies (e.g. BER), primarily to generate inclusive and sustainable economic opportunities (SDG 8).
- Engaging with the financial sector, to mobilise private finance for development, e.g. through blended finance instruments.
Practical resources on these different types of PSE can be found below.
Synthesis Note 
Two-page Summary
Introductory overview of PSE as a way of operating to achieve the SDGs, as well as a summary of current key issues and practices.
Take a read
En français – En español
Towards strategic private sector engagement: Programming innovations and institutional change in donor agencies, 2018
Summarises pioneering changes in policies, procedures, and staff capacity that donor agencies are implementing to enable strategic PSE. For a checklist to review organisational readiness for PSE, click here.
Results Measurement in Impact Investing: A Preliminary Review, 2016
Reviews the ‘state of the art’ in measuring social and environmental impact generated through impact investment.
Promoting Responsible Business Conduct: Key issues for donor agencies supporting PSE, 2022
Summarises current practice related to four government instruments to promote RBC and highlights examples of how donor agencies can forge closer linkages between PSE programming and RBC objectives.
Demonstrating Additionality, 2017
Summarises the DCED guidelines on demonstrating additionality in one page plus graphics. It targets donor programmes providing grants and/or technical assistance to business.
Comparison of matching grant schemes and systemic approaches, 2015
Covers both the differences and potential complementarities between matching grant facilities such as challenge funds and systemic approaches to PSD.
Donor Engagement in Innovative Finance: Opportunities and Obstacles, 2019
Summarises four key issues that donors need to address as a basis for effective engagement in innovative finance, and illustrates key concepts and contested issues.
Donor funds and facilities for partnering with business, 2017
Gives an overview of design options, current trends and lessons learnt for challenge funds and similar facilities for partnering with business.
This section provides access to the DCED’s key documents on private sector engagement, based on the experiences of DCED member agencies and other organisations. Click here to learn more about the DCED’s Private Sector Engagement Working Group.
Enhancing staff skills in engaging the private sector more effectively is a priority for many donors. To assist in this effort, the DCED’s events page has a dedicated section on PSE training courses as well as information on relevant training providers.
‘How to’ guidance and resources
- How donors can make the transition to strategic private sector engagement: Programming innovations and organisational change, DCED, 2017
- Impact investing: Measurement valued by businesses, DCED, 2017
- Attribution in Results Measurement: Rationale and Hurdles for Impact Investors, DCED, 2017
- Demonstrating Additionality in Private Sector Development Initiatives: A practical exploration of good practice, DCED, 2014
Research on different formats of engagement
- Promoting Responsible Business Conduct: A scoping paper for donors supporting Private Sector Engagement, DCED, 2022
- Donor Engagement in Innovative Finance: Opportunities and Obstacles, DCED, 2019
- Operational framework and categorisation of PSE strategies for the DCED PSE Working Group, DCED, 2019 (updated 2021)
This section links to documents on how donors and other organisations engage the private sector in development, and how they can do so more effectively.
Global reviews and typologies
- What do we know about the effectiveness of Private Sector Engagement?, DEval, 2022
- Private Sector Engagement Evidence Gap Map, USAID, 2020 (regularly updated)
- Private Sector Engagement for Sustainable Development. Lessons from the DAC, OECD, 2016
- Mapping CSO-Business Partnerships, ECDPM, 2015
- Financial Instruments for Private Sector Development, EPS PEAKS, 2014
- How donors engage with business, ODI, 2013
- Practical approaches for effectively delivering subsidy to private sector entities for development purposes, EPS PEAKS, 2013
Agency evaluations and reviews
- SDC: Independent Evaluation of SDC’s PSE 2015 – 2021, 2023
- SECO: Evaluation on SECO’s engagement with the private sector, 2022
- NL MoFA: Evaluation of policy instruments aimed at engaging Dutch businesses in sustainable development (2013-2020), 2021; and Evaluation of the policy agenda on aid, trade and investment, 2022
- USAID: Improved Guidance, Data, and Metrics Would Help Optimize USAID’s PSE. Audit Report, 2020; and Enduring Results 3.0, 2020
- Sida: Opportunities for improving, scaling and diversifying methods for private sector partnerships, 2019; and Evaluation of Swedish Leadership for Sustainable Development, 2019
- DAC Peer learning country reports: Germany; Netherlands; Sweden; United States, OCED, 2016
Agency policies and operational support
- USAID: Understanding Private Sector Engagement (PSE) Processes Using Eight Field-Based Case Studies, 2023
- Netherlands MoFA: Strategy for Foreign Trade and Development Cooperation, 2022 (see Chapter 3)
- GAC: Private Sector Engagement for Sustainable Development Strategy, 2021
- USAID: Private Sector Engagement Policy, 2018
- SDC: SDC Handbook on Private Sector Engagement, 2021, and How can the SDC best work with large corporations to reach its impact goals? Hystra, 2020.
- DFAT Australia: Private Sector Engagement in Australia’s aid program. Operational framework, DFAT, 2019 and Private Sector Engagement Guidance Note, DFAT, 2020
1. Engaging with private investors and finance providers
A first set of PSE strategies focuses on donor engagement with private finance providers to mobilise additional private finance and/or for making more effective use of existing funds for the SDGs (DCED, 2019). This section links to cross-cutting overviews, and specific resources on three common innovative finance concepts.
- Mobilizing investment for development with catalytic funding. Learning brief, USAID 2023
- Enhancing coordination between European donors, development agencies and DFIs/PDBs. Insights and recommendations, ETTG, 2022 (complemented by seven case studies)
- Bridging the Gap. Unlocking synergies between private sector development and development finance, BII and Gatsby Africa, 2022
- Donor Engagement in Innovative Finance: Opportunities and Obstacles, DCED, 2019
- The Elusive Quest for Additionality, Carter et al for CGD, 2018
- Private Capital for Sustainable Development. Concepts, Issues and Options for Engagement in Impact Investing and Innovative Finance, DANIDA, 2016
- Innovative Financing for Development: Scalable Business models that produce economic, social, and environmental outcomes, Citi Foundation et al., 2014
- ‘Leveraging’ private sector finance: How does it work and what are the risks?, The Bretton Woods Project, 2012
Blended finance
Catalytic approaches used by development actors to mobilise additional private finance for development purposes using a wide range of instruments
Impact investment
The practice of private investors of deploying private capital towards development outcomes, while (according to most definitions) generating a financial return
Results-based finance
A set of instruments used by development actors to mobilise pre-financing for SDG-relevant projects by agreeing to repay or financially
reward (impact) investors or implementers upon achievement of results
Donors increasingly use blended finance approaches to mobilise private finance for impact investments; impact investors themselves increasingly provide blended finance to encourage financial providers to cater to underserved clients. Result-based finance formats that mobilise additional finance qualify as blended finance instruments.
- Scaling Private Investment to Close the Development Financing Gap: Case studies, USAID, 2023
- Beyond leverage ratios: A strategic approach to blended finance, IDB, 2023
- Structured Funds. A balancing act between financial sustainability and development impact, DEval, 2020
- Inspiring Investment Partnerships to Achieve Global Goals: Attracting the Necessary Capital. A summary of key lessons, Swiss Sustainable Finance, 2019
- Making Blended Finance Work for the Sustainable Development Goals, OECD, 2018
- Blended finance: What it is, how it works and how it is used, Oxfam, 2017
- Blended Finance Vol. 1: A Primer for Development Finance and Philanthropic Funders, OECD, 2015. This overview document is complemented by a practical guide (2015).
- Case studies, by AgDevCo: Transforming fruit production in Manica Province, Mozambique, 2020; Stimulating the potato value chain in Zambia, 2019
- Social Impact Investment 2019. The Impact Imperative for Sustainable Development, OECD, 2019
- Annual Impact Investor Survey 2019, GIIN, 2019
- Impact Investing: who are we serving? A case of mismatch between supply and demand. Oxfam, April 2017
- Impact investing: Measurement valued by investee businesses, DCED, 2017
- Attribution in Results Measurement: Rationale and Hurdles for Impact Investors, DCED, 2017
- DCED (2016): Results Measurement in Impact Investing. A preliminary review, DCED, 2016
- Swiss Results-Based Financing Experience Review, Key Insights Slide Deck and Executive Summary, May 2024
- Impact-Linked Finance: Learnings from Eight Years and Ideas For The Future, Roots of Impact, June 2024
- Independent Evaluation of the UK Department for International Development’s Development Impact Bonds (DIBs) Pilot programme, DFID, 2019
- Paying for Poverty Alleviation: A Case Study, Richard Sedlmayr, 2018
- Pay for results in development. A primer for practitioners, USAID/Palladium, 2017
- A practitioner’s guide to results-based financing. Getting to impact, Instiglio, 2017
- Social Impact Incentives. White paper, SDC and Roots of Impact, 2016
2. Engaging with companies’ core business
A second set of PSE strategies focuses on supporting or influencing core business investments and practices (DCED, 2019). This section links to cross-cutting advice, as well as specific resources on four common engagement modalities.
General tools and guides across the project cycle
- Private Sector Engagement to Advance Climate Adaptation and Resilience: A Guide to Building Effective Partnerships, USAID, 2023
- Forming partnerships with the Private Sector. A summary of lessons learned by Market Systems Development Practitioners, SDC, 2019
- NGO and company partnerships for inclusive business, Endeva, 2019 (Guide).
- Private Sector Engagement Toolkit, Mercy Corps, 2012
Results measurement
- Private Sector Engagement Theory of Change, Key Metrics and Learning Agenda. Guidelines, CRS, 2023
- Measuring the results of PSE. Discussion paper, OECD, 2018
- 12 Good Practices for Results Measurement, Endeva, 2014
Partner selection and project design
- SDC Handbook on Private Sector Engagement, 2021 (including detailed guidelines on partner screening)
- Study on due diligence requirements in supply chains. Synthesis report and additional resources, EC, 2020.
- Private Sector Engagement and Due Diligence, USAID, 2020
- Minimising the risk of negative market distortions in PSE. A practical framework, DCED, 2018
- Demonstrating Additionality – A practical exploration of good practice , DCED 2014; one-page summary
- Promoting ethics when partnering with the private sector for development, NSI, 2014
2.1 Supporting the development and/ or piloting of new SDG-oriented business ventures
Co-creation of innovative business ventures
Joint development (and potentially piloting) of new business ventures with SDG impact by donors, companies and possibly other partners
Challenge funds
Competitive mechanisms that invite business proposals and offer cost-sharing and/or technical assistance to innovative projects in developing countries
- Lab of tomorrow manual and toolkit for sustainable business co-creation, GIZ, 2023
- Co-creation field guide, USAID 2020 (not limited to co-creation of business ventures) and Discussion note on co-creation, USAID, 2017; co-creation is also a key modality in USAID’s PSE policy
Research on current practice and lessons learnt in challenge funds
- Donor partnership funds and facilities for partnering with business, Synthesis Note, DCED, 2017
- USAID’s Public-Private Partnerships. A data picture and review of business engagement, Brookings, 2016
- Enterprise challenge funds for development: rationales, objectives, approaches, ANU, 2014
- Centrally managed donor funds and facilities to promote business engagement, ODI, 2014
- Meeting the challenge: How can enterprise challenge funds be made to work better, EPS PEAKS, 2014
- Models for Trade-Related Private Sector Partnerships for Development, North-South Institute, 2013
- Measuring Results in Challenge Funds. Practical Guidelines for Implementing the DCED Standard, DCED, 2013
Result reports and evaluations of challenge funds
- Evaluation of Sida’s Global Challenge Funds, IPE Triple Line, 2018; the evaluation findings were also shared in two DCED webinars on When to use challenge funds, and How to manage them effectively
- Evaluation of the DeveloPPP Programme, DEval, 2017
- Evaluation of the Responsible and Accountable Garment Sector (RAGS) Challenge Fund, Oxford Policy Management, 2014. The Fund’s own final report can be accessed here.
- AusAID Enterprise Challenge Fund for the Pacific and South-East Asia. A report on the outcomes of the ECF Portfolio Investment, Coffey International, 2012
- Evaluation of PSOM/PSI 1999-2009 and the MMF, for the Netherlands Ministry of Foreign Affairs, Triodos Facet, 2010
2.2 Promoting more responsible and sustainable business conduct or sectoral supply chains
Sectoral partnerships
Partnerships with combined donor and private funding and an agreement of all funding and implementing partners on the sharing of tasks towards a common goal
Multi-stakeholder platforms
Dialogue processes with a knowledge-sharing or standard-setting purpose involving multi-stakeholder members, supporters and funders
- Study on the responsible management of global value chains in the garment sector, EC, 2016
- Public-private partnerships for agribusiness development: A review of international experiences, FAO, 2016
- Review of the Sustainable Trade Initiative IDH 2008-2013, Netherlands Ministry of Foreign Affairs, 2014
- Key conditions for successful value chain partnerships: A multiple case study in Ethiopia, The Partnerships Resource Centre, 2012
- Multi-stakeholder initiatives with the private sector: Key considerations and decision-making framework, USAID, 2021
- Evaluation of the Dutch RBC Agreements 2014-2020: Are voluntary multi-stakeholder approaches to responsible business
conduct effective?, KIT, 2020 - A smart mix for responsible business conduct: due diligence legislation and multi-stakeholder initiatives, ECDPM, 2019
- Incentivising and regulating multi-actor partnerships and PSE in development cooperation, DIE, 2018
- Engaging the private sector through multi-stakeholder platforms, DCED, 2017
- In-country multi-stakeholder platforms to catalyse collaboration and partnerships for Agenda 2030, The Partnering Initiative, 2016
- The MSP Guide: How to Design and Facilitate Multi-Stakeholder Partnerships, Wageningen University, 2016
Photo credits: USAID Ethiopia (flickr.com).
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