How to line up the Sustainable Development Goals' money

Sustainable development is essential not only for the well-being of future generations and preservation of ecosystems but also to meet the aspirations of the present generation. G20 Sustainable Finance Working Group (SFWG) is mandated to align financing and policies to the goals of the Paris Agreement on climate and the 2030 Agenda for Sustainable Development. The approach of the Indian presidency for the sustainable finance agenda is guided by the fact that finance at scale and on a concessional basis is critical to achieving climate and other SDGs.

The World Economic Outlook 2022 estimates that about $4 trillion a year needs to be invested in RE till 2030 to reach net-zero emission announcements of countries. However, statistics speak of the meagre flow of climate finance to developing from developed countries despite the latter’s predominant role in contributing to the problem of climate change.

With only seven years left to achieve Agenda 2030, and the need to fill in the vast SDG financing gap of $3.9 trillion annually for developing countries, India has taken up mobilisation of climate finance, enabling financing of other SDGs and capacity-building as priorities of the G20 SFWG.

Under climate finance, the focus has been on two themes:

The mechanisms for mobilisation of timely and adequate resources for climate finance.

Policy measures and financial instruments for catalysing the rapid development and deployment of green and low-carbon technologies.Through the deliberations, developed and developing countries conceded that scarcity in public concessional funding needs to be addressed. They underscored the primary role of multilateral development banks (MDBs) in financing climate action.MDBs can stimulate the efficient allocation of resources without compromising on financing other development projects and catalyse the private sector through derisking and adopting innovative instruments to mobilise resources at a concessional rate. Acknowledging that non-price policy levers are vital in enabling a low-carbon development pathway was an equally significant movement forward and in line with the developing country’s perspective against the near-exclusive focus on carbon pricing in the previous G20 presidencies.

In recent years, the private sector has increasingly invested in social services through financial instruments such as impact and sustainability-linked bonds. However, factors such as the nascent investment-enabling environment and insufficient awareness about tools to integrate social SDGs into investor investment policies continue to limit private financial flows to social sectors.

Recognising these challenges, G20 members focused on ways to crowd in private capital through the broader adoption of social impact investment instruments to complement public investment in social sectors. SFWG’s recommendations aim to foster innovative approaches and specialised investment vehicles that reduce transaction costs and scale up finance flow to SDGs, such as health and education. Suggestions for improved nature-related data and reporting, and greater interoperability of approaches while preserving flexibility by due consideration for country-specific circumstances, would also facilitate private finance flows into biodiversity-aligned and nature-positive activities.

The lack of adequate knowledge and the absence of skilled professionals, particularly in SMEs, is a hurdle in the global transition towards a sustainable economy. The working group identified the need for capacity-building in financial product innovation, transition planning and sustainability alignment approaches, among others. Consequently, the G20 Technical Assistance Action Plan (TAAP) and its implementation mechanism, developed this year, provide a roadmap to bridge the knowledge gap, ensuring a more inclusive and effective transition.

The New Delhi Leaders’ Declaration has accepted that the vision of ‘one future’ cannot be achieved without collaboration across governments to enable an enhanced flow of funds to developing countries. The G20 sustainable finance work has been central in the light of the exponentially growing financing needs for climate action and other SDGs, and preserving the world’s rich biodiversity. This year’s work under the Indian presidency would lay a solid foundation for the future discourse of G20 on sustainable issues, in line with the needs and priorities of developing countries.

Nageswaran is chief economic adviser, and Raina and Joshi are economic advisers, department of economic affairs, ministry of finance, GoI


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