Some of the UN Finance Ecosystem related to the private sector and finance
The financing for the Sustainable Development Goals (SDGs) and the Paris Climate Agreement will need a refocusing of private sector finance. In that context, it might be useful to just look at the UN ecosystem of initiatives on private sector finance to address these issues.
There are several entry
points in the UN system which can have an impact on the private sector. These
include:
UN General Assembly
The annual UN General
Assembly resolution on “Promoting investments for sustainable development.
[A/C.2/L.40]” (UN,
2020) (see UNCTAD section
below)
UN ECOSOC forum on
Financing for Development
“About the Forum
The ECOSOC Forum on
Financing for Development follow-up (FfD Forum) is an intergovernmental process
with universal participation mandated to review the Addis Ababa Action Agenda
(Addis Agenda) and other financing for development outcomes and the means of
implementation of the Sustainable Development Goals (SDGs).” (UN,
2021)
The Forum is the venue to
follow-up on the Addis Agenda, including the private sector chapter on “Domestic
and International Private Business and Finance.” The Forum results in an outcome document which
is itself informed by an inter-agency Financing for sustainable development
report. This report’s chapter on private sector can be found here “2020
Financing for Sustainable Development Report: Domestic and International
Private Business and Finance”.
The report for 2020 can be found here.
Global Investors for Sustainable Development
Alliance
The SG has issued a Roadmap for Financing the 2030 Agenda for Sustainable Development that include and supports many of the UN existing initiatives listed below. It also include the Global Investors for Sustainable Development Alliance (GISD), a UN-supported coalition of 30 business leaders, works to provide decisive leadership in mobilizing resources for sustainable development, with the core objective being to identify incentives for long-term sustainable investments. They control assets worth US$16 trillion and are committed to deliver on key strategies that will scale-up sustainable investments globally. They have agreed on a range of actions to better align business activities with the SDGs. “These include:
- Developing platforms to catalyse finance and investment flows to developing countries in support of the SDGs;
- Creating a clear and unified set of information for investors on how companies are performing on sustainability criteria;
- Incentivising financial institutions and corporations to take a longer term, sustainable approach to their investments; and
- Coordinating GISD actions with major policy making groups (like the G20) and financial system bodies to ensure that its recommendations are included in their priorities.”
Among the achievements of
the GISD Alliance’s first year was the report Renewed, Recharged, and Reinforced: Urgent actions to harmonize
and scale sustainable finance, which was submitted to the European
Commission’s sustainable finance consultation on?. The report made more than 60
recommendations for global action to scale-up investment in sustainable
development to help advance the SDGs.
The Alliance also developed
a unified definition of Sustainable Development Investing (SDI) and
released the first of its kind Call to Action for COVID-19 bonds, which was endorsed
by the International Capital Markets Association.” (UN,
2020)
UN Global Compact
“CFO Principles on Integrated SDG Investments and Finance. The CFO Principles supplement the UN Global Compact’s Ten Principles to support companies in the transition to sustainable development and to leverage corporate finance and investments toward the realization of the Sustainable Development Goals (SDGs). Chief Financial Officers and Treasurers participating in the CFO Taskforce for the SDGS are committed to implementing the CFO Principles inside their organization and to share their experience and learnings with peer CFOs in the broader community of UN Global Compact participating companies.” (UN, 2021)
“CFO
Taskforce for the SDGs: As the stewards of trillions of
dollars in corporate finance, Chief Financial Officers (CFOs) have a critical
role to play in ensuring that companies’ financial strategies are aligned to
the Sustainable Development Goals (SDGs). The UN Global Compact is convening a
taskforce of CFOs for 24 months to provide a platform to interact with their
peers, investors, financial institutions, and the United Nations to share
ideas, develop new concepts and frameworks, and provide recommendations to
unlock private capital and create a market to mainstream SDG investments.” (UN,
2021)
A useful set of
publications are
SDG Bonds: Leveraging Capital
Markets for the SDGs. This guide explores the role of the bond
market – the largest asset class in the global financial markets – in the realization
of the Sustainable Development Goals (SDGs). With US$ 6.7 trillion of annual
issuance, bonds can provide a cheap, reliable and scalable source of capital
for a variety of stakeholders involved in the implementation of Agenda 2030,
including companies, governments, cities and public-private partnerships. SDG
bonds also provide an answer to the lack of SDG investment opportunities for
institutional investors. A diverse portfolio of SDG Bonds, including sovereign,
municipal, corporate and project bonds across developed and emerging markets
could fulfill mainstream investors’ growing demand for impact while matching
their risk-return appetite.
Scaling SDG
Finance for the Sustainable Development Goals:
This guide explores the role of corporate finance and investments in scaling
finance for the Sustainable Development Goals, including how FDI, financial
intermediation and public-private partnerships can be a source of finance for
less liquid SDG investments that cannot be invested directly by portfolio or
institutional investors. This includes providing access to finance in countries
with less developed financial markets or for SDG solutions that are too small
or illiquid to attract portfolio investors.
Corporate Finance
| A Roadmap to Mainstream SDG Investments: Investors,
Governments and other stakeholders are increasingly demanding that companies
demonstrate sustainable strategies aligned with the SDGs. This report provides
guidance to companies looking to integrate the SDGs into their financial
strategy and business model. A credible SDG strategy allows companies to
clearly communicate impact, facilitate easier access to the growing market for
SDG financing, and connect investors with a pipeline of potential opportunities
to address the SDG investment gap.
UNCTAD
UNCTAD “support
developing countries to access the benefits of a globalized economy more fairly
and effectively. And we help equip them to deal with the potential drawbacks of
greater economic integration. To do this, UNCTAD provides analysis, facilitate
consensus-building, and offer technical assistance. This helps them to use
trade, investment, finance, and technology as vehicles for inclusive and
sustainable development.
Working at the national, regional, and global level, our efforts help countries to:
- Comprehend options to address macro-level development challenges
- Achieve beneficial integration into the international trading system
- Diversify economies to make them less dependent on commodities
- Limit their exposure to financial volatility and debt
- Attract investment and make it more development friendly
- Increase access to digital technologies
- Promote entrepreneurship and innovation
- Help local firms move up value chains
- Speed up the flow of goods across borders
- Protect consumers from abuse
- Curb regulations that stifle competition
- Adapt to climate change and use natural resources more effectively
Working with other UN departments
and agencies, UNCTAD help deliver on the SDGs, with a focus on the economic ones
(SDG8, SDG9, SDG10) as well as the means of implementations in SDG17 and through
advancement of the Addis Agenda.
UNCTAD is indeed a major
institutional stakeholder to the Financing for Development process mandated in
the 2015 Addis Agenda, together with four others: the World Bank, the
International Monetary Fund, the World Trade Organization, and the United
Nations Development Programme.” (UNCTAD,
2021)
UNCTAD also supports the Sustainable Stock Exchanges Initiative (SSEI), launched in 2012 with UNEP FI, UN Global
Compact, and the PRI. Today this involves 99 stock exchanges accounting for
almost all publicly listed capital markets.” UNCTAD
has also elaborated Principles on responsible lending and borrowing as well as Principles for
Responsible Agricultural Investment that Respects Rights, Livelihoods and
Resources with FAO, IFAD and the World Bank.
United Nations Environment Programme Finance
Initiative (UNEP FI)
“UNEP FI is a partnership between UNEP and the global financial
sector to mobilize private sector finance for sustainable development. UNEP FI
works with more than 350 members – banks, insurers, and investors – and over
100 supporting institutions – to help create a financial sector that serves
people and planet while delivering positive impacts. They aim to inspire,
inform and enable financial institutions to improve people’s quality of life
without compromising that of future generations. By leveraging the UN’s role,
UNEP FI aim to accelerate sustainable finance.
Industry-based principles
UNEP FI supports global finance sector principles to catalyze
integration of sustainability into financial market practice. The frameworks
UNEP FI has established or co-created include:
· Principles for Responsible Banking (PRB) launched with more than 130 banks
collectively holding USD 47 trillion in assets, or one third of the global
banking sector, on 22 September 2019.
· Principles
for Sustainable Insurance (PSI), established 2012 by UNEP FI and today applied by one-quarter
of the world’s insurers (25% of world premium).
· Principles for Responsible Investment (PRI), established in 2006 by UNEP FI and the UN
Global Compact, now applied by half the world’s institutional investors (USD 83
trillion).
These frameworks establish the norms for sustainable finance,
providing the basis for standard-setting and helping to ensure private finance
fulfils its potential role in contributing to achieving the 2030 Agenda for Sustainable Development and Paris Agreement on Climate Change agreed by governments around the world
in 2015.
UNDP – New Finance
Investment Platforms
In response to country needs to mobilize low-carbon, climate-resilient investments, a new global public good, announced today will aim to increase the flow of capital in developing countries to meet climate ambitions. The Climate Investment Platform (CIP) is an inclusive partnership welcoming all stakeholders from governments to international organizations to the private sector to scale-up climate action and translate ambitious national climate targets into concrete investments on the ground.
With energy accounting
for two thirds of total greenhouse gas emissions, the platform’s first service
line is dedicated to the global transition to clean energy. Other service
lines, such as adaptation, land use, cities and infrastructure will be launched
in the first quarter of 2020. By decluttering and streamlining support to
developing countries, the platform aims to accelerate action and advance
climate investment in developing countries. Progress will be presented at
UNFCCC COP 25 in December 2019.
The service offered by
the CIP covers four key building blocks along the climate finance value-chain:
supporting governments to specify ambitious energy targets and scale up their
nationally determined contributions (NDCs), establishing well-designed,
implemented and enforced clean energy policies and regulations, financial
de-risking of energy projects, and a market-place to connect clean energy
investors and project sponsors.
UNDP
launches standards for bond issuers and private equity funds seeking SDG impact
UNDP has Practice Assurance Standards in development
for SDG Bonds, Private Equity
Funds, and Enterprises. UNDP plans through SDG Impact to establish an assurance
system and SDG Impact Seal.
SDG Financing Solutions
The financing needed to achieve the
Sustainable Development Goals (SDGs) will greatly surpass all current
development finance flows, but can be also raised from the large amounts of
(mostly private) investable resources available globally. Domestic public
resources, even in low income countries, can be increased and spending
optimized. Financing solutions provide strategies and means to effectively
unlock and direct these sources of finance toward realising the SDGs.
Measurable conservation
outcomes resulting from actions that compensate for significant residual
adverse biodiversity impacts arising from development projects.
Systematic search for
biochemical and genetic information in nature in order to develop
commercially-valuable products and applications.
Carbon markets aim to
reduce greenhouse gas emissions cost-effectively by setting limits on emissions
and enabling the trading of emission units.
Market mechanisms that
enable entities, for which the cost of reducing emissions is high, to pay low-cost
emitters for carbon credits that they can use to meet emission-reduction
obligations.
Concessions allow people
to use land or property in a protected area or natural site for a specified
purpose, usually in exchange for a fee.
Approach for projects,
organizations, entrepreneurs, and startups to raise money for their causes from
multiple individual donors or investors.
Agreement that reduces a
developing country’s debt stock or service in exchange for a commitment to
protect nature.
Insurance schemes
covering—against a premium—the costs incurred by the insured entity from
extreme weather and natural disasters.
Integrating ecological
services means making conservation indices (e.g. size of protected areas) part
of the fiscal allocation formula to reward investments in conservation.
Funding instrument that
distributes grants (or concessional finance) to profit-seeking projects on a
competitive basis.
Tourists pay fees for
access to a protected area. The revenues can contribute to conservation through
retention by protected areas, revenue sharing agreements, and public transfers.
Legal entity and
investment vehicle to help mobilizing, blending, and overseeing the collection
and allocation of financial resources for environmental purposes.
Bonds where proceeds are
invested exclusively in projects that generate climate or other environmental
benefits.
Investments made with the
intention to generate a measurable social and environmental impact alongside a
financial return.
Governments and civil
society use lotteries to raise funds for benevolent purposes such as education,
health, and nature conservation.
Payments for ecosystem
services
Payments for ecosystem
services (PES) occur when a beneficiary or user of an ecosystem service makes a
direct or indirect payment to the provider of that service.
Guarantees can mobilize
and leverage commercial financing by mitigating and/or protecting risks,
notably commercial default or political risks.
Remittances (Diaspora
Financing)
Private unrequited
transfers sent from abroad to families and communities in a worker's country of
origin.
Social and development
impact bonds (Results-Based Financing)
A public-private
partnership that allows private (impact) investors to upfront capital for
public projects that deliver social and environmental outcomes in exchange for
a financial interest.
The sale tax any
individual or firm who purchases fuel for his/her automobile or home heating
pays. Fuel taxes can reduce the consumption of fossil fuels and greenhouse gas
emissions while generating public revenues.
Taxes on pesticides and
chemical fertilizers
Taxes on certain
pesticides and chemical fertilizers can mobilize fiscal revenues while
mitigating the negative effects associated with pesticide/fertilizers
application and promoting sustainable agriculture practices.
Taxes on renewable
natural capital (water; timber)
Any fee, charge or tax
charged on the extraction and/or use of renewable natural capital (e.g. timber
or water).
Excise taxes on tobacco
products can raise fiscal revenues, improve health and well-being, and address
market failures.
Standards applicable to
the financial sector that capture good practices and encourage the achievement
and monitoring of social and environmental outcomes.
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