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Financing SDG to exceed $6 trillion annually
June 12, 2017, 10:58 am

A top UN official said that estimates suggest that financing the Sustainable Development Goals (SDG) will require annual investments of around US$6 trillion (or $90 trillion over 15 years).

Meanwhile, the Organization for Economic Cooperation and Development’s (OECD) Development Cooperation Report 2016 estimated that the annual SDG financing gap in developing countries is $2.5 trillion, or 3 percent of global Gross Domestic Product.

For its part the UN System Task Team Working Group on Financing for Sustainable Development said $17 trillion, a relatively small portion of annual global savings, could have an enormous impact.

If there is consistency amongst these estimates, it is that the financing needs for sustainable development are enormous. There is enough money to close this gap, but currently only a small portion of the global investment assets of banks, pension funds, insurers, foundations and multinational corporations is targeted at sectors and areas that advance sustainable development. The challenge will be unlocking the potential of the private sector and catalyzing financing from diverse private sector sources towards the SDGs.

During a one-day event in mid-April, held at the UN headquarters in New York, the UN General Assembly President Peter Thomson convened a high-level SDG Financing Lab highlighting the critical importance of sustainable finance for the achievement of the goals including climate action.

The event highlighted the critical importance of sustainable finance for the achievement of the Sustainable Development Goals, including climate action. It focused on how to drive the transformation to align financial markets with sustainable development, as well as showcased concrete ways in which Member States can approach the financing of different SDGs.

While the sums announced seem enormous and complex, the fact is the cost of inaction will ultimately be far greater, said Mr. Thomson.

"It is no exaggeration to say that the costs of inaction might include putting at risk the future of humanity's place on this planet," he added.

Taking part in the event, UN Deputy Secretary General, Amina Mohammed, stressed that after the adoption of the Addis Ababa Action Agenda in 2015, governments needed to act on their promises and implement their own action plans to achieve the SDGs.

"It is in the interest of all countries, companies and people to tap the wealth of good that sustainable development will bring in environmental, economic and social terms," she added.

Further, the UN official pointed out to partnerships between the government and the private sector and the engagement of youth as key aspects to stimulating investment and achieving sustainability.

In the meantime, the OECD Development Co-operation Report 2016 has identified five pathways to ensure the quantity and quality of investment for implementing the SDGs. Of these, blended finance is regarded as both largely underutilized and with high potential for impact.

The blended finance model uses development finance and philanthropic resources to mitigate risks and enhance returns for investors. ‘Blending’ can mobilize private capital to dramatically scale up investment and development outcomes across a range of sectors and countries.

Citigroup, HSBC, Standard Chartered and Sumitomo Mitsui Banking Corporation are joined in a public-private partnership developing new blended finance solutions, the Sustainable Development Investment Partnership. With partners including Danish pension fund PKA, USAID, the OECD, the World Economic Forum, the Swedish International Development Co-operation Agency and others, the partnership aims to catalyze $100 billion in private financing over five years to infrastructure projects in developing countries in support of the SDGs. It will leverage official funding to better mitigate risk and ‘crowd-in’ private sector capital.

The potential of finance to directly support progress towards the SDGs is enormous, especially in sectors such as infrastructure, telecommunications and water and sanitation where the funding gap is greatest.

However, a recent report by Development Initiatives cautions that the claims that blending can significantly plug the SDG funding gap have been based on little evidence to date. Improved transparency and data is required on where blended finance spending is going and on its impact on the ground. The report recommends development of a common reporting standard for better disclosure on who ultimately benefits from such financing.







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