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Private sector finance is increasingly important in both the national and
international diffusion of technology, and the relationship between public and
private is particularly important in the context of technology transfer. It
will have a major role in private-sector-driven pathways and often a role in
community-driven pathways. This section thus discusses the criteria used by
private sector finance and the forms it can take, and then identifies some of
the financing mechanisms most relevant to environmentally sound technology transfer,
and then looks at the some of the important initiatives taking place in private
finance.
While such initiatives can be successful, they clearly will not work if the
macroeconomic and environmental framework is not adequately supporting ESTs
so that they are financially viable. Even if this is the case, they may not
be sufficient to cover other concerns of the financial markets such as the significance
of climate change to their business or the risks of getting involved in this
area. Governments can be a source of risks themselves in the way they develop
policy and consistent, consensual policy development can help reduce risks.
It is also important to distinguish between investment and financial products
from private sector financial institutions, which is the real focus of this
section, and investment by private businesses as part of their business development,
which will be discussed in section 5.4 on private-firm perspectives. Most foreign
direct investment is by its nature in this latter category.
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