A summary of the WEF Community Paper

The Community Paper: “From Funding to Financing: Transforming SDG finance for country success” was issued in April 2019 by the World Economic Forum in collaboration with Climate Finance Advisors, Benefit LLC

The 2030 Agenda for Sustainable Development was adopted by all United Nations Members in 2015 and today, after more than three years into the implementation, countries are still working to translate the Agenda into actionable national development plans and strategies. Yet, according to the most recent report issued by the UN, “progress is insufficient to meet the Agenda’s goals and targets by 2030”. This slow progress is largely caused by the financial gap in development financing, and especially the developed countries are encountering challenges as they put their selected development goals into action and move from project funding to a national “strategic financing plan” for the Sustainable Development Goals (SDGs). The Community Paper focuses on the requirement of moving from single project funding to financing a pipeline of national projects, identifies key gaps and proposes a list of actions and potential solutions to be taken into consideration by the Global Future Council (GFC) on Development Finance*.

What does it mean to move from ’funding’ to ’financing’?

According to the International Monetary Fund (IMF), the real global GDP growth has peaked at 3.3% and given the growing income inequalities, it is unfeasible for governments to provide the investment needed to achieve the SDGs using budgets, tax revenues and development aid. Given that “the current gap in global development financing is significant, with an annual estimated investment requirement of $2.5 trillion”, it is obvious that the public finance alone cannot achieve much in attaining the Agenda 2030, unless the domestic and international private capital have been mobilized. In addition, the financing of SDGs will require “a steady pipeline of projects” in order to achieve their sustainable development objectives. Yet, countries’ capacities to attract private sources of capital are limited, and this inability makes the realization of the Agenda 2030 hard to achieve.

What are the gaps?

The Community Paper identifies several important “building blocks” of good development that are necessary to safeguard that countries follow a right approach in financing and implementing their identified SDGs. These blocks present areas of necessary improvement in both: “(1) the way countries approach financing selected SDG goals at national level; and (2) how SDGs are supported by Development Financial Institutions (DFIs)” and ask for the following requirements to be met:

  • An inclusive and effective development financing model– that should consider both public and private capital and the need to develop public infrastructure and the local private sector, the local financial system and markets, as well as to improve the legal, regulatory, policy and enabling environments to fully realize a country’s sustainable development objectives”
  • Institutions and tools from the development finance community locally can be used to achieve impacts locally but they need to be deployed strategically to maximize the effectiveness of public capital and achieve mobilization at scale of private capital”
  • Capacity and skills at the national level and within DFIs need to be in place in order for countries to best maximize their scarce public resources and catalyse investment from across a range of financing sources”
  • Behaviour of governments that impede effective decision-making on development objectives”
  • Measurement of ODA (Official Development Assistance) flows mobilized finance and impacts across SDGs is critical as part of a broader effort to better measure SDG achievement at the national level”

Most of these gaps and obstacles are systematic (legal, regulatory) and behavioural (capacity, skills) in nature. Yet, addressing all of them will enable the successful transition from a “funding” to “financing” paradigm.

Setting priorities to address the gaps

There are two actions that the Global Future Council (GFC) on Development Finance can undertake in 2019 to address “the gaps in the links between a country’s sustainable development planning process, pipeline development, country allocation and financing”. These are:

  • 1: To champion country-level capacity building
  • 2: To highlight gaps in the initiatives that support SDG plans and propose gap-filling measures and policy improvements

The proposed actions complement the significant efforts have been made on issues that address barriers and gaps that are financial in nature, but go even further, in order to address systemic and behavioural barriers and gaps.

Is a fast progress on implementing SDGs manageable?

Financing for sustainable development is critical for achieving a shared vision of sustainable future. Yet, the slow global growth and rising of debt risks, as well as countries’ inability to mobilize various sources (domestic and international) of public and private capital, do not create a nourishing environment for faster implementation of the SDG agenda. The current financial system requires restructuring, to allow for new strategies that can align with the types and sources of capital that can be mobilized in order to advance sustainable development. While public capital alone cannot drive the Agenda 2030 forward, financing strategies that incorporate mobilising private capital, will provide the considerable support required to achieve national planning and successful implementation of the global 2030 Agenda.

*The GFC on Development Finance is one of 38 councils convened by the World Economic Forum that focus on topics dedicated to promoting innovative thinking in order to shape a sustainable and inclusive future for all and is comprised of experts with extensive experience on topics relevant to development finance.

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