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SDGs remain off track and underfunded

Unctad secretary-general Rebeca Grynspan told the WEF annual meeting in Davos that the pandemic and the war in Ukraine had stymied progress towards the SDGs, requiring a “significant increase” in FDI to fill the $4tn annual investment gap (Photo: Fabrice Coffin /AFP via Getty Images)
Unctad secretary-general Rebeca Grynspan told the WEF annual meeting in Davos that the pandemic and the war in Ukraine had stymied progress towards the SDGs, requiring a “significant increase” in FDI to fill the $4tn annual investment gap (Photo: Fabrice Coffin /AFP via Getty Images)

Without immediate support from the public and private sectors, the Sustainable Development Goals will not be met

A year ago, Rebeca Grynspan, secretary-general of the UN Conference on Trade and Development, called for the private sector to recalibrate its foreign direct investment to rejuvenate the sustainability development goals. Her words appear to have largely fallen on deaf ears.

Since then, there has been little progress and experts suggest change is unlikely without greater support from multilateral development banks and the private sector.

In January 2023, Grynspan told the World Economic Forum annual meeting in Davos that the Covid-19 pandemic and the war in Ukraine had stymied progress towards the 17 SDGs and suggested a “significant increase” in FDI was needed to fill the $4tn annual investment gap. In April, a UN report said this deficit was a 50 per cent increase on pre-pandemic estimates.

At the World Bank spring meetings in April, UN deputy secretary-general Amina Mohammed called for increased public and private investment for the goals. She highlighted as key targets requiring private sector financing the transition to a decarbonised economy, a digital transition that offers affordable digital services to all, and the building of better infrastructure to achieve zero hunger.

“These transitions require supportive policy and regulatory frameworks, operationalised through strengthened public sector capacity,” said Mohammed.

“And they require robust public-private partnerships and adequate financing,” she added, commending the work of the MDBs to revisit blended finance “particularly through the expanded use of guarantees to mitigate risk and catalyse private finance”.

Shari Spiegel, director of the Financing for Sustainable Development Office, in the UN’s Department of Economic and Social Affairs, said the April UN report “really highlighted that the SDGs are well off track”.

Spiegel told Sustainable Views: “The world is facing a sustainable development crisis, and at the height of that crisis is the lack of financing,” and suggested the lack of global growth since the 2008 financial crisis was a central reason for tepid investment in the SDGs.

Reinvigorating private investment in the SDGs will also require “very targeted” input from the public sector, according to Eila Kreivi, former chief sustainable finance advisor at the European Investment Bank. “The public sector must, as far as possible, support new technologies or businesses and not just throw millions and billions in every direction,” she told Sustainable Views.

MDBs should deploy resources to promising policies or projects that need a greater risk-taking capacity than the private sector is willing to take on its own, said Kreivi, citing floating wind technology as one such example, which could help countries reach SDG 7 (affordable and clean energy) but is not yet commercially viable.

Agreeing and implementing de-risking strategies and adding portfolio guarantees to projects would comfort private finance in a way that a loan or grant to the same project would not, said Kreivi.

Support the SDGs “by design”

In June 2023, the World Bank launched its private sector investment lab, an initiative that brings together 15 CEOs across the private sector to pin down the biggest barriers to investment and to identify potential solutions to stimulate investment into emerging markets.

“The objective is to increase our risk guarantee insurance issuance business to $20bn by 2030 to help mobilise private capital,” said Ayhan Kose, deputy chief economist at the World Bank.

The World Bank is also attempting to build a securitisation platform for emerging market countries to free up a pot of capital of around $70tn from institutional investors, pension funds and sovereign wealth funds to finance the SDGs, Kose added.

Other initiatives the bank is working on to boost SDG support include a new guarantee platform that it says will simplify and speed up access to payments, and improve the internal standardisation processes in areas such as procurement to save developing countries time and money.

As for the private sector, John Morton, head of Americas at Pollination, an investment firm focused on climate change said private investors putting their money in projects that will further progress towards the SDGs should be “by design, not because it’s a fiscal necessity”.

“Looking down the list of SDGs, in terms of economic growth, even in water and sanitation, there are increasingly opportunities for private sector investment to be both developmentally positive, but also profitable at the same time. It is entirely reasonable for the UN to be looking to partner with private capital in trying to achieve these SDGs,” said Morton, who is a former climate adviser to the Obama and Biden administrations.

Improving policy and regulation to encourage capital markets activity in emerging markets is a critical part of creating an enabling environment for SDG investment, he added.

“Reform is probably the biggest single barrier to investment in many countries, which is why MDB help in improving the domestic, legal and policy frameworks that courage and protect private investment is so important,” he said.

A service from the Financial Times