193 countries must meet the 17 Sustainable Development Goals (SDGs) by 2030. Do all countries have the wherewithal to implement the goals and make their economies more sustainable? For example, let us consider why private and public firms invest in fossil fuels? They are readily available, easy to obtain, and need no setting up, thus, making them cheaper to invest in.
Besides, COVID-19 has given a major setback to economies around the world. In such a scenario, addressing concerns around the financing of SDGs is as important as the need to achieve the goals.
Moving to sustainable practices is not necessarily expensive but comes with high up-front costs. To achieve the goals, countries, especially the developing ones need access to Sustainable Finance.
What Is Sustainable Financing?
In developing countries alone, $2.5 trillion is the estimated financing gap in achieving the SDGs. Global financial assets are sufficient to meet the needs of the 2030 Development Agenda. For instance, the global GDP in 2019 was $87 trillion. That means, only a third of it would have sufficed as an investment to achieve the SGDs. SDG Financing is about filling this gap.
Governments and public sector firms play a key role in SDG financing. However, investments from the private sector, institutions like banks, and donations can accelerate achieving the goals.
Where is the money for the goals?
The Financing for Development (FfD) is centered around commitments made during the Monterrey Consensus (2002), the Follow-up International FfD conference in Doha (2008), and Addis Ababa Action Agenda (2015). But, almost two decades, and three conferences later, we are still lagging on both – Sustainable financing and achieving the goals.
This video will help you understand where we are going wrong. Did you know, for example, why an alternative tool to GDP was devised to measure growth? Watch our video to know about alternatives to GDP.
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However, achieving SDGs is not just a prerogative for governments. It is as important for the private sector as well to adopt sustainable business practices. Coca Cola’s unsustainable business practices in India caused a lot of controversy for them. Also, it affected their brand value in the country. Watch this video to know why,.
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According to a report by Bain and Co., 25 % of companies lack investment to implement sustainable practices. However, the remaining 75% give fewer tangible reasons to not implement sustainable measures.
Besides offering a good profit-making opportunity, sustainable development strategies give companies other benefits. It helps them reduce their costs, improves their brand value, and also, they reduce their ecological footprint.
Besides, as per the United Nations, the road to achieving the SDGs could open up $12 trillion in market opportunities and create 380 million jobs.
Access to Capital for Achieving SDGs
An integrated approach that brings in all the stakeholders to fund the SDGs– government, the private sector, academia, members of the public, and civil society organizations – is needed. However, the international community is responsible for an enabling environment and support.
Public financing remains key for SDG achievement, as the return on investments from the SDG sector may not be as lucrative and attractive as other projects.
Private sectors seek good investment opportunities with less risk and good returns for investing their money. Thus, the governments and public sectors need to work with the private sectors at domestic (regional) and national levels to attract investments. Private firms can start by choosing fewer goals and selecting the ones that look like promising business opportunities to them. So, the SDGs become a part of their businesses.
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They can adopt short, meaningful sustainability targets and announce them to the public. This would increase transparency and keep the companies on track to achieve their targets.
Ways To Finance The SDGs
- Public-Private Partnerships (PPP): PPP can contribute to easing risks and faster implementation of projects. Sustainable projects like building infrastructures like schools, health clinics, and the provision of meals to school students can work wonders under the PPP model.
An NGO in India is working with the government in the state of Karnataka to provide meals to students. Watch this short video to know how this model works, and why these kids love their meals.
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2. Philanthropy: Mobilizing general public and civil society organizations to donate towards achieving the goals. Donations from the general public can be used to fill the financing gap. Crowdfunding platforms can be used to mobilize funds over social media.
People across countries donate differently. In Switzerland, 1.8 billion Swiss francs was the estimated amount donated towards charity in 2018 by households. Besides, the average size of donation per family in 2018 was 300 Swiss francs.
3. Loans from Banks: Development banks and Development Finance Institutions should act as catalysts for routing investment funds to SDGs. This can be done by improving the incentive structure for investments. Those investing in projects related to SDGs could be incentivized with better interest rates.
4. Impact Investing: The most important thing is to remember the goal of financing. Outcomes of investment and progress should be measured from time to time. Policy measures should be in place to see if the investment impact is sustainable.
Why Sustainable Finance?
Green finance and sustainable finance that help direct capital towards businesses supporting sustainability are gaining more attention. However, achieving equity in the world is a far goal. Impact investments are made to generate positive, measurable social, and environmental impact along with financial returns.
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Research by Oxfam published earlier this year said that the world’s 2153 billionaires have more wealth than 4.6 billion people combined. Such inequalities need to be wiped out so that the poor rise with the wealthy, and the environment gets healed more than exploited.
This can happen only when everyone plays their part and contributes towards achieving the goals.
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