UNTT Issues Papers on Financing Needs, Public and Private Finance Resources

United NationsOctober 2013: The Working Group on Sustainable Development Financing under the UN System Task Team (UNTT) has published four papers that aim to inform the ongoing deliberations on the post-2015 development agenda and the work of the Intergovernmental Expert Committee on Sustainable Development Financing Strategy (ICSDF).

The papers focus on, respectively: financing needs; national, regional and international public sources for development finance; private sector resources; and the use of public finance to support private investment in sustainable development.

The first paper highlights that estimating the financing needs for sustainable development presents both conceptual and practical challenges, and that the quality of investment is as important as the amount. The paper reviews estimated investment requirements for: the Millennium Development Goals (MDGs); health; gender; infrastructure; agriculture, land management and rural development; energy; climate change mitigation and adaptation, other global commons (forests, biodiversity; oceans); and integrated sustainable development scenarios. The paper finds that published estimates vary widely, which indicates differences in data, scope, methodologies, and baselines. The paper also highlights the needs of Least Developed Countries (LDCs), Landlocked Developing Countries (LLDCs), and Small Island Developing States (SIDS), for which the financing needs are significant, compared to their gross domestic product (GDP).

The second paper, on national, regional and international public sources for development finance, emphasizes that public and private sources of financing for sustainable development need to be viewed as complements and not as substitutes. The paper takes stock of domestic public resource mobilization, with particular attention to preserving the tax base and preventing illicit financial outflows. The paper further argues that domestic resource mobilization needs to be complemented by regional and international public resources, and discusses the role of regional development banks, and official development assistance (ODA), which has been falling in real terms.

The paper discussing private sector resources finds that international institutional investors are critical for financing for sustainable development, and yet their investment to date has been limited in areas such as infrastructure, innovation, and climate financing. The paper provides an overview of impediments to private sector investments, including a short-term perspective and misaligned market incentives, and suggests regulatory reforms and industry initiatives to reallocate capital to sustainable development. The paper also discusses the role of domestic financial systems and investors, financing gaps in infrastructure and small and medium-sized enterprises (SMEs), and governance to promote an enabling environment for private investment.

Finally, the fourth paper discusses the use of public finance to support private investment in sustainable development. The paper reviews recent trends of providing subsidies to the private sector through concessional loans or grants, or risk sharing mechanisms. The paper argues that while this has worked well for demonstrating green technologies, this cannot be sustained over the long term, and argues in favor of mechanisms that focus on risk-mitigation rather than risk sharing or compensating.

The paper further reviews the capitalization, consistency, and coherence of existing international public instruments for financing climate, biodiversity and water. The paper finds, inter alia, that while new financing instruments are being developed, these funds remain under-capitalized, and that the current sector-oriented approaches may impede cross-sector synergies.

The ICSDF will hold its second session from 2-6 December 2013. [ICSDF Website] [Publication: Financing for Sustainable Development: Review of Global Investment Requirement Estimates] [Publication: The Variety of National, Regional and International Public Sources for Development Finance] [Publication: Challenges in Raising Private Sector Resources for Financing Sustainable Development] [Publication: Public Support to Private Investment for Sustainable Development: Challenges and Opportunities, with Emphasis on the Environmental Pillar] [Publication: UN System Task Team on the Post-2015 UN Development Agenda Working Group on “Financing for Sustainable Development”: Executive Summary]