Big pants required
If we are to achieve the Global Sustainable Development Goals (SDG’s) anywhere near the target years committed to, it’s clear it will require significant investment across many sectors to enable progress on projects such as climate change adaptation, renewable energy and poverty reduction.
We must mobilise funds from multiple sources, not just place the burden of fundraising on the global financial community. We must join the dots between public-sector resources, philanthropy and private capital, both domestic and foreign through Collaboration, Innovation & Leadership.
The challenge may be enormous, but so, argue its passionate supporters, are the opportunities. Whether funding infrastructure initiatives such as transport networks or renewable energy projects, the route to success is increasingly being transferred from theoretical visionaries to practical investors with an eye on the balance between risk & return.
Philanthropic organisations are providing grants for research projects in areas such as healthcare or education which is great, but then what happens? Private capital should be used to finance businesses with a focus on sustainable development around the world.
At the international level, there are several strategies which have been successfully employed to mobilise funds in support of SDG’s.With over USD 100 trillion in assets in 2019 in OECD countries alone, institutional investors potentially represent a major source of long-term financing to support sustainable growth in developing countries. Long-term finance plays a pivotal role in fulfilling physical investment needs across all sectors of the economy, including low-carbon infrastructure.
Multilateral development banks and regional development banks offer access to large volumes of concessional financing, while foreign direct investment can provide the resources needed for new sustainable development projects. Tax incentives, such as carbon pricing and green bonds, can also be used to attract private capital to fund SDG-related projects.
The OECD goes on to say in their report Emerging Evidence of Opportunities & Challenges “While the pre-COVID-19 annual financing gap for the SDGs was estimated to amount to USD 2.5 trillion (UNCTAD, 2020[1]) for developing countries, it increased by 50% in 2020 and reached USD 3.7 trillion. Reducing the financing gap for the SDGs requires shifting financial resources towards sustainable development, including from the private sector, as well as greater alignment of all the investment chain with the SDGs. Institutional investors can help: shifting only 3.7% of their assets towards sustainable activities in developing countries would be sufficient to fill the USD 3.7 trillion gap (OECD, 2020[2]).”
They go on to say “However, a survey conducted by the OECD on selected institutional investors confirmed their propensity to mainly allocate assets in stable and low-risk contexts (Chapter 2. ). Only a small share of the global assets of institutional investors is allocated to developing countries, mostly to middle-income economies with well-developed investment climate and in the form of asset classes with a relatively low-risk profile and predictable returns.” Yet some Emerging Countries are also at the greatest risk of devastation caused by climate change.
In addition to these traditional sources of finance, there are also a growing range of innovative approaches available for mobilising financing in support of the SDG’s. These include crowd-funding platforms, impact investing funds and social enterprise start-up accelerators. By leveraging these diverse tools and strategies, governments, businesses and individuals can all play a role in creating an enabling environment for investment in the SDGs.
With the right mix of public, philanthropic and private investments, we can unlock both financial resources and new opportunities for progress towards achieving Global Sustainable Development Goals.
Only through collective effort and collaboration can we make the necessary progress towards meeting these important targets. With the right policies in place, mobilising finance for the SDG’s can be an achievable goal.
By leveraging these diverse tools and strategies, governments, businesses and individuals can all play a role in creating an enabling environment for investment in the SDGs. By bringing together public, philanthropic and private investments, we can unlock both financial resources and new opportunities for progress towards achieving Global Sustainable Development Goals. Only through collective effort and collaboration can we make the necessary progress towards meeting these important targets.
References:
1. UN Sustainable Development Goals Knowledge Platform. (2020). About the SDGs | United Nations Sustainable Development https://sustainabledevelopment.un.org/?menu=1300
2. World Bank Group & Global Partnership for Effective Development Cooperation. 2019). Investing in sustainable development – A policy paper https://www.effectivecooperation.org/wp-content/uploads/2019/08/Investing-in-Sustainable-Development_FINAL_20August2019_web1.pdf
3. The Guardian (2015), How to use crowdfunding to fund your social enterprise http://www.theguardian.com/social-enterprise-network/2015/mar/18/how-to-use-crowdfunding-social-enterprise.
4. Leal, P., & Simpson, K B. (2019). Impact Investing: A Comprehensive Guide to Market Growth and Opportunities https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/ImpactInvesting_DeloitteFSI_Nov2019_RV5aHR0cHMlMkYlMkZ3d3cuZGVsb2l0dGUuY29tJTJGY29udGVudCUyRmRhbSUyRnVzJTJGUERfU1NWMjAxOV9JbXBhY3RJbnZlc3RpbmdfVHdpdHRlci5wZGY.pdf.
