ith stakeholders accelerating efforts to build forward and create a sustainable world, UN SDG financing has emerged as a pertinent need. The Joint SDG Fund is an innovative instrument to incentivize transformative policy shifts and stimulate the strategic investments required to get the world back on track to meet the SDGs. In a post pandemic world, the Fund has leveraged strategic public-private partnerships to catalyze robust financing. Raphael Obonyo, caught up with Head of the Secretariat of the Joint SDG Fund, Ms. Lisa Kurbiel to engage on the integral contribution of the Joint SDG Fund to realize the 2030 agenda through its SDG financing component and strategic partnerships.
The interview has been edited for length and clarity.
What is the importance of the joint Sustainable Development Goals (SDGs) Fund?
The Joint SDG Fund is a multi-partner trust fund established by a UN Resolution. Our mission is to activate integrated policy and financing levers as accelerators for the achievement of the SDGs. We do that by triggering and funding cohesive UN action and partnerships with the private sector. Our target is to disburse $290 million in grants annually up to 2030. The COVID-19 pandemic has shaken the 2030 Agenda for Sustainable Development to its very core. However, the Fund stands firm not to let the pandemic derail our shared ambitions. If the world is to “build forward better” we need to get robust policies in place and mobilize the financing required to upscale as soon as possible. These two ingredients—more effective, integrated policy support and much greater financing—are the “raison d’etre” of the Fund’s strategy.
Why do you see the private sector as a key partner to the achievement of the SDGs?
It was intelligent design that makes the SDGs different from previous attempts to advance development. Achieving the SDGs is the whole of society’s responsibility. Another consideration is where financial resources are kept. There is about $300 trillion of wealth—the precise number moving constantly in the years but constantly upward and in that order of magnitude—that is owned by the private companies and individuals. Without a joint effort, we cannot be successful only with public finance, particularly in developing countries. Private investment decisions in the real economy and financial sector should move the world towards the aspirations set out in the 2030 agenda. This means going far beyond philanthropy and corporate social responsibility, which are still important. It is a matter of steering the decisions that investors make every day. The challenge is to move towards sustainable business models without undermining profitability.
What role does the private sector play in Sustainable Development?
Unfolding trends that were already in play prior to the COVID-19 crisis and which offered ways forward in respect to closing the SDG financing gaps, will be even more relevant in shaping the economic and social recovery going forward. The private sector can play multiple roles. From our perspective, we seek their leadership in driving technological innovations and fintech for a faster and inclusive outreach to clients who are left-out; to keep pace and respect the commitments made on alignment of capital with impact and integrating sustainability in business operations; and, honest collaboration in developing a new generation of tax systems, public incentives and regulatory frameworks that incorporate the SDGs.
What is the SDG Fund doing to shore up public-private partnerships and engagement of private sector partners in UN initiatives?
Public-private collaboration is at the core of the Fund’s strategy. In 2020, ‘SDG Invest’ was launched to test an innovative approach and platform to source, design, and develop financially catalytic joint proposals that could mobilize private financing for the SDGs. In response to a call for funding, the Fund received a total of 155 proposals from over 100 countries, out of which 28 were shortlisted via a rigorous screening process to receive preparatory grants. Over 330 public and private partners were engaged while 89 letters of commitments were collected from investors.
The Fund made an initial investment decision in March 2021 to disburse $41 million of public money to leverage of over $4 billion in Fiji, Indonesia, Malawi, and Uruguay. These proposals were selected based on their impact, anticipated financial leverage, partnership arrangements, innovation in reaching scale, and operational capacities. All of them can be considered as blended finance structures, where limited public resources unblock larger capital investment. Our partners at Convergence define blended finance as the use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development. Over $140 billion were mobilized to-date.
Beyond the catalytic investment portfolio, the Fund supports critical enabling environment work for actual investment to take place. This ambitious UN portfolio supports 69 countries in establishing the 1st generation of SDG financing strategies. Over 200 financial reforms, spanning public budgeting to guidance and regulations for companies’ disclosures of sustainability information have been initiated. Over 50 countries are developing national SDG financing strategies, which are being informed by hundreds of researches and diagnostic efforts. All these efforts are set as participatory with dialogues, platforms, and engagement of public and private actors. I invite readers to check our website and inff.org for stories and updates on this groundbreaking portfolio.
Developing countries have been facing major challenges in mobilizing private financing to implement the SDGs at the grassroots level, while traditional approaches have been ineffective in bridging the annual SDG financing gap of around USD $2.5 trillion. How are you actually incentivizing the private sector to support the SDGs?
Public finance is scarce and shall be used to correct market failures, help establish functioning markets and provide the right temporary incentives to integrate the SDGs. Nevertheless, it has also traditionally spurred innovation – internet is probably the most referred example. The work of the UN was instrumental in spreading the wave of responsible investing with the Principle of Responsible Investing and the work of the UNEP Finance Initiative and the UN Global Compact among others. This answer builds on the previous. We do this through strategic partnerships. We need all players, from development finance institutions, investors, and the financial sector. We aim to operationalize the UN Secretary-General’s strategy on Financing the Agenda 2030 and in broad brushes we do that by supporting developing countries governments to develop financing strategies to “close the gap” and by fostering innovation by combining public and private financing in catalytic investing. The UN offers both political de-risking by helping manage and reduce political risks and financial de-risking by contributing to blended finance structures with direct technical assistance, guarantees, and concessional capital. The UN Capital Development Fund does that covering the missing middle of financing that is left out from big infrastructure and larger lending facilities of banks and international financial institutions.
What are some of the challenges in mobilizing private sector finance?
If the objective is to build an impact economy that is inclusive and sustainable, the beautiful examples of impact investing need to become mainstream. Brown and dark bonds need to become the exception, and green and sustainable bonds are the core of the market. At this stage we have reached consensus on what is perhaps right to do, but we have still failed to deliver. The boom of responsible investing and of consumers’ attention to social and environmental considerations is the hope. The challenge is to gradually transform markets. To mobilize private finance at scale we need to transform international markets for capital to reach developing countries. However, this is just one challenge.
To have an impact economy we need commercial ventures that generate impact. Developing countries face many challenges in building up viable commercial opportunities. The matter goes beyond SDG-aligned investing, political risks and other market infrastructure gaps, which make the costs, and risks of investing in developing countries higher than the world’s average nations. Traditional challenges listed by private investors include lack of track records in transactions, currency risks, mismatching expectations on financial returns among others. In the work of the Fund, we add the challenge of bringing private capital to sectors that can legitimately seek to achieve returns but that are unknown to investors. This includes the water and sanitation sector or nature-related business. There is a legitimate business opportunity, but it has to be exploited.
Despite the challenges in mobilizing private sector finance, there are available opportunities—what are some of the opportunities?
There are opportunities, but they need to be unlocked. UNDP is for example mapping, including with the support of the Fund, SDG aligned investment opportunities across developing countries. Hundreds are being listed and we feel this is just a tip of the iceberg. According to a report by the Business & Sustainable Development Commission, SDG-aligned businesses could generate $12 trillion in savings and revenue across just four sectors—energy, cities, food and agriculture, and health and well-being.
What must we do if we want to leave no one behind?
We need innovation, passion, commitment, and entrepreneurship to shift the paradigm towards inclusion and participation. More than ever, we need leaders and all of us to not forget our commitments. The instruments are there, from finance to business planning, and the money is there in principle. We need to strive for cultural shifts that allow investment-decisions, public and private, to be better aligned with our shared and desired outcomes.
How far are we with the realization of the SDGs?
Over the last few months, expressions of alarm have come up side by side with optimism in a unique way. While the world has been hit with the hardest blow since World War II, optimists envision a new world characterized by solidarity and joint action. Still, the crisis does not seem to have shuffled the cards: the poorest will suffer the most and will likely become even poorer and more vulnerable. With a large share of the world’s production chain in full or partial lockdown, vast numbers of people suffered loss of income. Estimates from the UN and the World Bank indicate people are being driven back to extreme poverty, a number that in the worst scenarios could pass 200 million. There is no doubt that we experienced a set-back, but the response has been bold. In matters of weeks over USD $8 trillion have been mobilized to avoid even larger crisis-induced business losses among the G20 economies. We need to guarantee and ensure that access to capital is extended to the developing world.
This year the Joint SDG Fund will take the initiative to open a Donate Now button for the SDGs. We can be the generation to end extreme poverty, win the race against climate change and conquer injustice and achieve gender equality. Together, we will create an unstoppable force in achieving the Sustainable Development Goals. With just nine years left the time has come to deliver on our 2030 promise. Your contribution will drive sustainable innovation, financial investments and technology, while making space in our countries and communities for young people to lead. We have a shared ability to deliver the extraordinary and we must keep our promise for the Global Goals and create the world we want to see today and for our future.