Sixty-plus international organizations, led by the United Nations and including the International Monetary Fund, the World Bank Group and World Trade Organization, jointly sounded the alarm in a new report, warning that unless national and international financial systems are revamped, the world’s governments will fail to keep their promises on such critical issues as combatting climate change and eradicating poverty by 2030.
In their 2019 Financing for Sustainable Development Report, the international organizations find some good news: investment has gained strength in some countries and interest in sustainable investing is growing, with 75 per cent of individual investors showing interest in how their investments affect the world.
And yet, greenhouse gas emissions grew 1.3 per cent in 2017; investment in many countries is falling; and 30 developing countries are now at high risk or already in debt distress. At the same time, global growth is expected to have peaked at around 3 per cent.
Changing the current trajectory in financing sustainable development is not just about raising additional investment, says the report. Achieving global goals depends on supportive financial systems, and conducive global and national policy environments.
Yet the report warns that creating favourable conditions is becoming more challenging. Rapid changes in technology, geopolitics, and climate are remaking our economies and societies, and existing national and multilateral institutions — which had helped lift billions out of poverty — are now struggling to adapt. Confidence in the multilateral system has been undermined, in part because it has failed to deliver returns equitably, with most people in the world living in countries with increasing inequality.
“Trust in the multilateral system itself is eroding, in part because we are not delivering inclusive and sustainable growth for all,” said António Guterres, Secretary-General of the United Nations, in his foreword to the report. “Our shared challenge is to make the international trading and financial systems fit for purpose to advance sustainable development and promote fair globalization.”
The international agencies recommend concrete steps to overhaul the global institutional architecture and make the global economy and global finance more sustainable, including:
- supporting a shift towards long-term investment horizons with sustainability risks central to investment decisions;
- revisiting mechanisms for sovereign debt restructuring to respond to more complex debt instruments and a more diverse creditor landscape;
- revamping the multilateral trading system;
- addressing challenges to tax systems that inhibit countries from mobilizing adequate resources in an increasingly digitalized world economy; and
- addressing growing market concentration that extends across borders, with impacts on inequality.
At the national level, the report puts forward a roadmap for countries to revamp their public and private financial systems to mobilize resources for sustainable investment. It introduces tools for countries to align financing policies with national sustainable development strategies and priorities.
The United Nations Economic Commission for Asia and the Pacific (ESCAP) has produced a complementary report on “Financing for Development in Asia and the Pacific: Highlights in the Context of the Addis Ababa Action Agenda, 2019 Edition”. Among other findings, the ESCAP report emphasizes the importance of raising public resources to finance urban infrastructure development in a context of breakneck urbanization and enhancing capacity-building efforts in the area of infrastructure financing and public-private partnerships.
The ESCAP report also underlines the need to scale up investments and international development cooperation to facilitate the attainment of the Sustainable Development Goals in the region. “In a region as diverse as ours,” pointed out Armida Salsiah Alisjahbana, Under-Secretary-General of the United Nations, and Executive Secretary of ESCAP, “investment needs vary considerably. Least developed countries need to invest the most at 16 per cent of GDP while South and South-West Asia has an investment need of 10 per cent of GDP to reach the goals by 2030.”
Finally, the United Nations Development Programme’s (UNDP) Regional Bureau for Asia and the Pacific in partnership with the Asian Development Bank has prepared another complementary report entitled “Integrated Financial Solutions: How Countries are Innovating to Finance the Sustainable Development Goals”. Based on more than 40 case studies from around the world, the report documents integration efforts across public and private financing of the SDGs, with a focus on the connection between planning processes, budgeting and policies to engage the private sector.