Some of the UN Finance Ecosystem related to the private sector and finance

By Felix Dodds and Chantal Line Carpentier who is Chief, UNCTAD New York office of the Secretary-General, former UN DESA Major Groups Coordinator where she facilitated non-state actors’ contributions to the SDGs negotiations. She’s an Agricultural and Environmental Economist with PhD. from Virginia Tech and MSc. and BSc. from McGill University

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 produces a report for the UNGA second committee in a dedicated section of its’ World Investment Report since 2020 in support of the resolution  “Promoting investments for sustainable development (see above), produces an SDG Investment Trends Monitor,  Guidance on Core Indicators as a framework for corporate reporting on the contribution towards the attainment of the SDGs; and six areas of transformative action for a Big Push for private investment in the SDGs that  builds on the Investment Policy Framework for Sustainable Development (IPFSD).These are discussed and further advanced at the biennial World Investment Forum.

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.

Biodiversity offsets

Measurable conservation outcomes resulting from actions that compensate for significant residual adverse biodiversity impacts arising from development projects.

Bioprospecting

Systematic search for biochemical and genetic information in nature in order to develop commercially-valuable products and applications.

Carbon markets

Carbon markets aim to reduce greenhouse gas emissions cost-effectively by setting limits on emissions and enabling the trading of emission units.

Climate credit mechanisms

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 (Protected Areas)

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.

Crowdfunding

Approach for projects, organizations, entrepreneurs, and startups to raise money for their causes from multiple individual donors or investors.

Debt for nature swaps

Agreement that reduces a developing country’s debt stock or service in exchange for a commitment to protect nature.

Disaster risk insurance

Insurance schemes covering—against a premium—the costs incurred by the insured entity from extreme weather and natural disasters.

Ecological fiscal transfers

Integrating ecological services means making conservation indices (e.g. size of protected areas) part of the fiscal allocation formula to reward investments in conservation.

Enterprise challenge funds

Funding instrument that distributes grants (or concessional finance) to profit-seeking projects on a competitive basis.

Entrance and activity fees

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.

Environmental trust funds

Legal entity and investment vehicle to help mobilizing, blending, and overseeing the collection and allocation of financial resources for environmental purposes.

Green bonds

Bonds where proceeds are invested exclusively in projects that generate climate or other environmental benefits.

Impact investment

Investments made with the intention to generate a measurable social and environmental impact alongside a financial return.

Lotteries

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.

Public guarantees

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.

Taxes on fuel

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).

Taxes on tobacco

Excise taxes on tobacco products can raise fiscal revenues, improve health and well-being, and address market failures.

Voluntary standards (finance)

Standards applicable to the financial sector that capture good practices and encourage the achievement and monitoring of social and environmental outcomes.


Comments

Popular posts from this blog

Key dates in 2021 for sustainable development meetings with new events

Guest blog: Trade Policy for the New International Economic Order: A Sustainable Development Model for Trade in the Midst of International Protectionism and Decentralization

Guest blog: What Is a University Education For? Are We Educating Earth Literate Leaders? Is there a Case for Re-Purposing our Universities?