18 April 2017: The UN General Assembly (UNGA) convened a high-level event on financing the Sustainable Development Goals (SDGs), with support from the UN Environment Programme’s Inquiry into Design Options for a Sustainable Financial System, to “foment a global conversation” on mobilizing the needed resources from a range of sources.
Opening the SDG Financing Lab on 18 April 2017, in New York, US, UNGA President Peter Thomson said financing the SDGs will require US$6 trillion per year, or US$90 trillion over 15 years, while the cost of inaction would be far greater. He said the private sector must orient its actions and investments in the direction of these needs, and that this work has begun but must be scaled up. He added that in only four sectors – food and agriculture, cities, energy and resources, and health and well-being – investors could find a US$12 trillion opportunity. Domestic resource mobilisation is also needed, and this requires addressing the drivers of conflict and other crises, he said.
UN Deputy Secretary-General Amina Mohammed highlighted the role of leadership in financing the 2030 Agenda for Sustainable Development. The first step is for ODA commitments to be met consistently, she said, to develop domestic resources and activate local investor bases. Mohammed reported that the UN is undergoing its own reform process to become more “fit for purpose” and accountable to countries in supporting SDG implementation and that she has been tasked with leading a comprehensive review of the UN Development System. Mohammed said pension funds, the insurance sector and other large pools of capital have the potential to provide “breakthrough opportunities” to implement the SDGs.
Mahmoud Mohieldin, World Bank Group, pointed out the risk of going “from billions to millions,” and said the concern is not just about finance, but the nexus with “real-world challenges” such as forced displacement, inequality, low growth, and demographic challenges. He stressed that ODA will not be enough, so it must be used to leverage other types of financing. He also stressed the need for investments in human capital, skills and life-long learning, infrastructure, and resilience.
In a panel discussion, moderator Rachel Kyte, Chief Executive Officer and Special Representative of the UN Secretary-General for Sustainable Energy for All, described the “gray area” where the public sector meets the private sector, which she said presents challenges for accountability and incentives. She stressed the importance of “speed and scale” to achieve the SDGs.
Keynote speaker Sunil Bharti Mittal, Founder and Chairman, Bharti Enterprises, and Chair, International Chamber of Commerce (ICC), highlighted the role of the business community in enabling trade liberalisation, which he said could advance commerce and economic growth. He noted the importance of the internet and technology for connecting markets; financial support for small and medium-sized enterprises (SMEs); and integrating Big Data in crisis response and prevention.
Steve Waygood, Aviva Investors, said that if markets worked properly, the SDGs would not be needed, and called for policy reforms to correct market failures. He asserted that the UN’s invitations to the private sector “haven’t been sent,” but only published in documents, and it is time to reach out to the private sector and to hold them to account for financing sustainable development. Waygood suggested building public rankings of companies to drive a “race to the top.”
Elliott Harris, UN Environment, noted the need for a methodology and accepted the standard for assessing new risk. The current lack of such a methodology turns away potential investment from sustainable projects, sending it back into to “brown projects,” he said. Giulia Porino, Finance Watch, called for leadership and political will to make capital flow for the SDGs, including through tax and monetary policies.
Matt Arnold, JP Morgan Chase, called for “translators and anthropologists” to bridge the cultural gap between the UN and the private sector. He said an “over-perceived risk” of investing in sustainable development is preventing the SDGs from being financed, despite the world having enough money. Explaining that banks must prioritise returns on depositors’ money, he said that were investing in the SDGs will not be profitable, “this is not a role for commercial capital” but for developmental capital, which yields a lower, non-commercial level of return. Arnold added that greater transparency could correct the over-perception of risk.
Summarising the panel discussion, Kyte said: “money is not the problem”; transparency could be a powerful galvanizer and could be achieved through a combination of mandatory and voluntary mechanisms, and dialogue should distinguish between the roles and impacts of the public and private sector and the financial and real economies.
Governments made statements about sustainable financing in a plenary session. Ecuador for the Group of 77 and China welcomed a catalytic role for ODA, and called for addressing investment financing gaps in countries in vulnerable situations. El Salvador for the Community of Latin American and Caribbean States (CELAC) said ODA is still needed to reduce inequality and structural gaps and to generate the capacity to achieve sustainable development.
China for BRICS (Brazil, Russia, India, China and South Africa) stressed the need for political will and to “meaningfully implement” the Monterrey Consensus, Doha Declaration and the AAAA. He said some countries are experiencing a growth in “anti-globalization thinking” and the rise of protectionist tendencies. He added that cooperation on financing should be strengthened within the framework of the World Bank, the Asia Infrastructure Investment Bank (AIIB) and other international development institutions. He called for keeping North-South cooperation as the main channel for cooperation, respecting the principle of common but differentiated responsibilities (CBDR), and fulfilling ODA commitments.
The EU said moving from billions to trillions will require a mix of financial and non-financial means. He called for a more ambitious role for the private sector, and for private entities to work closely with local authorities and civil society, which are “at the forefront” of SDG implementation. He welcomed the “balanced” first draft of the report of the Inter-agency Task Force (IATF) on FFD, which will be considered at the upcoming meeting of the ECOSOC Forum for Follow-up on FFD (FFD Forum).
Belize for the Caribbean Community (CARICOM) called for financial mechanisms and policies that address the integrated nature of sustainable development, to ensure that deliverables have “a knock-on effect” for other SDG targets. She also highlighted the negative impacts of de-risking practices, noting that when large international banks terminate or limit Corresponding Banking Relationships (CBRs) in the Caribbean to reduce their risk, it cuts off local businesses. Maldives for the Alliance of Small Island States (AOSIS) called for capacity building for data collection and analysis, as well as enhancing SIDS’ access to concessional finance. Bangladesh for the Least Developed Countries (LDCs) called for fulfillment of ODA commitments, technology transfer, and capacity building.
Many other statements underlined the value of ODA and meeting international commitments, including to the AAAA and the Technology Facilitation Mechanism. Some highlighted national efforts to establish an enabling regulatory environment to encourage investment, and capacity building efforts to make tax collection more efficient.
The need for the creation of intersectoral partnerships was noted, including political partnerships like the Group of Friends of Financing for Development. One speaker stressed the need for sustainable business models, while another suggested sharing case studies on the conditions that lead to new investments in sustainable development projects.
Three parallel workshops considered ways to increase the speed and scale of financing for SDG implementation. In the workshop on ‘Building an Inclusive and Peaceful Where No One is Left Behind,’ moderated by John McArthur, Brookings Institution, panelists suggested better highlighting the economic opportunities of the SDGs, and for the UN to make global measurement standards better known. Participants also outlined mechanisms that should be used or replicated, such as: green bonds, social bonds and inclusive business bonds; public-private partnerships (PPPs); financing front runners; investing in rural banks and infrastructure in developing countries; and the IFC’s “Banking on Women” programme to target women entrepreneurs and pro-poor financing.
In the workshop on ‘Fostering Economic Growth and Development, and Tackling Inequality,’ moderated by Irv Mintzer, Johns Hopkins University, School of Advanced International Studies (SAIS), participants agreed that PPPs are first and foremost a risk-sharing scheme. They said the risk is a paramount concern, and “suspicion is the name of the game.” Recommended actions to reduce risk included: partnering with development banks; replicating successful mechanisms; and using risk-sharing agreements, such as with OPEC or the World Bank. These can distribute risks that seem unmanageable by separate private actors. Sensitising UN Resident Coordinators to business concerns was also suggested.
Speakers called for promoting the vision of “doing well by doing good,” and for rewarding SDG investment. They also highlighted actions related to urban planning, such as ensuring that cities have sufficient space and the appropriate density to become vibrant centres, rather than only upgrading slums.
Cities’ potential role in SDG financing was highlighted in the workshop on ‘Protecting Our World in the Present and the Future,’ moderated by Simon Zadek, UN Environment Inquiry. One participant called to make transport systems “investible,” and for ensuring that cities are livable for climate refugees and economically productive. He added that development banks could buy down costs to enable developing country cities to choose sustainable infrastructure.
It was also stressed that sustainability projects should be made to seem “completely habitual” to investors, including by using business language more than conservation language. Other ideas included: regulate the pricing of natural capital to drive investor decisions; facilitate recycling and other behavior changes without waiting for education to change mindsets; scale up project proposals to banks (“the time of pilots is over”); and bundle investment opportunities with market opportunities together with those with social impact, such as fisheries certified by the Marine Stewardship Council.
Participants said the UN could help to match investors with projects at different stages of development. The UN can also help to “build belief that green paths can succeed,” and better position the business case for reforming the financial system. One said some business actors “still don’t realise that greening is good for them.”
Zadek summarised that a major need is for incentives, standards, and information to make financial markets work in a green way, including by moving “beyond innovation” to commoditize and de-risk investments. He also highlighted the need for a stronger connection between the market and a broader vision and stewardship role provided by the UN. He noted that there is a danger in separating the belief system in sustainability from the functioning of markets, but “that separation isn’t correct” and the UN can work to draw the linkages.
Synthesising the three workshop discussions, Kyte highlighted that capital is abundant. Therefore, when “it feels like there is no finance flowing,” it is important to focus on the true problem to be fixed, which is putting it to use behind the world’s agreed values. She also suggested: creating measurable indexes for each SDG, to provide benchmarks for the private sector, and highlighting the opportunities, not only creating disincentives for “bad behaviour”; and making requests to the private sector more specific. Such requests can focus on spaces between the Goals, such as food/energy/water security, and health/gender/inequality linkages.
In closing remarks, Thomson said speakers had spotlighted the need for scaling up and replicating successful projects, and the pivotal role of PPPs in that. Thomson also noted the importance of ODA to catalyse private investments and of enabling environments, and for multilateral development banks to help develop financial systems with increased investment and leveraging. Business speakers had argued that the right policies could incentivize the directing of funds towards sustainable projects.
On the role of the UN, Thomson said the event heard a proposal to bring the top 100 financial sector actors to the UN to continue discussions on how to catalyse changes to the financial system. Discussions had also highlighted a potential role for the UN as a policy space between the Member States and global financial system actors, by giving guidance on financing the SDGs, and encouraging the development of SDG-consistent certification standards and ‘SDG ratings’ by credit rating agencies.
Thomson said he will convey the central messages from the event to Finance Ministers and other senior officials at the World Bank’s Spring Meetings this week.