1.UNDP About Town – Mazar-e-Sharif
Public finance is essential to financing the many public goods the provision of which is at the heart of sustainable development. Credit: UNDP.

As prepared for delivery.

The 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs) present a huge opportunity to put the world on a more prosperous and sustainable development path. 

Two years into implementation, countries are moving from the initial stages of creating SDG plans and governance models to seeing policies and partnerships emerge that are specifically aimed at accelerating SDG achievement. The United Nations and the World Bank are also exploring ways to join forces in delivering support to countries for the implementation of the 2030 Agenda. 

Getting the financing right is indispensable to meet the SDGs by 2030. 

Financing for the implementation of the 2030 Agenda for Sustainable Development

Despite the availability of ample global savings and a rise in savings-GDP ratio across a swathe of countries, public finances, official development assistance and private sector finance are not sufficient or adequately aligned to secure the necessary investments and interventions to achieve the SDGs.

The Addis Ababa Action Agenda provides us with a global framework to guide our actions. It contains commitments to mobilize financing flows from all sources (domestic and international, public and private), and to align domestic and international policies with sustainable development.

Leveraging the private sector for growth and sustainable development (the focus of this Development Committee meeting) will be critical. The SDGs create an enormous opportunity for businesses and the interest of the private sector in linking investments to sustainability objectives has been growing. However large financing gaps remain in many areas critical for SDG achievement.

Overall, today’s global financial system is not channeling savings towards investments to support long-term sustainable development objectives. This needs to be addressed through policy interventions aimed at incentivizing greater SDG investments. 

One of the greatest challenges policymakers face is to align incentives with the longer-term horizon of SDG investments. Indeed, currently incentives in the financial system are such that much investment remains excessively short-term oriented. Investment in the SDGs, however, requires long-term investing that price longer-term risks, such as those associated with climate change, into decision making.  Efforts by the private sector to better align their incentives with long-term investment and with sustainable development indicators should be supported. Promoting the relevant United Nations system initiatives such as the UN Global Compact, the Sustainable Stock Exchange Initiative, Principles for Responsible Investing and the United Nations Environment Programme Inquiry would also be important. 

However, even with long-term horizons, markets often provide insufficient financing in sectors important for sustainable development due to their risk profile. In these cases, risk-sharing tools, including blended finance, can be used to attract greater private investment. The UN welcomes the World Bank’s pioneering of such instruments in the context of 18th replenishment of the International Development Association (IDA-18).

The fact that environmental and social externalities are usually not fully reflected in market prices poses another obstacle to private investment in the SDGs. It is the responsibility of policymakers to set the appropriate incentives, through targeted interventions, such as taxes and subsidies, to change relative prices, or regulations and standards to guide investment behaviour.

There is also a pressing need to reorient financial regulation and policy-making towards broader aims such as access to long-term finance. The United Nations aims to step up its work with all partners, including central banks and financial regulatory bodies, to ensure that the repercussions of economic and financial policies on the broader sustainable development agenda are fully considered. 

In addition to attracting and leveraging private sector finance for sustainable development, public finance and development cooperation will too remain critical.  

Indeed, public finance is essential to financing the many public goods the provision of which is at the heart of sustainable development. For instance, as the “World Development Report 2018: Learning to Realize Education’s Promise” stresses, increased public financing for education is required to ensure more children stay in school longer, to give a boost out of low-learning traps and expand opportunity.

To increase domestic resource mobilization, national tax systems need to be strengthened, and international tax cooperation needs to be improved to limit tax avoidance and illicit financial flows that drain developing countries from vital resources. Under the Platform for Collaboration on Tax, the United Nations and the World Bank, along with the IMF and the OECD, have intensified their cooperation on tax matters and capacity-building support to developing countries. Its first global conference, to be held at UN Headquarters in New York on 14-16 February 2018, will be an important opportunity to take forward the global dialogue on the role of tax in achieving the SDGs.

In many developing countries, even with enhanced efforts, domestic resources will remain insufficient. International public finance must complement domestic resources.  Official Development Assistance (ODA) therefore continues to play a critical role, especially in those countries that have the least capacity to raise domestic resources as well as  those most vulnerable to shocks, including conflicts and disasters caused by natural hazards.

For example, recent climate-induced events, such as the Hurricane Irma and Hurricane Maria, demonstrate how disasters and their growing intensity and frequency due to climate change can set back development progress. They have left catastrophic damage across the Caribbean, in particular on some of its most vulnerable populations. Currently, the UN, the World Bank and the European Union are undertaking a joint Post-Disaster Needs Assessment and recovery support in the Caribbean region. In addition to their pre-existing unique challenges (such as smallness and narrow economies) and vulnerability to climate change, many small island developing states (SIDS) – including those in the Caribbean - face high debt burdens. Concessional development assistance will remain critical to enable these countries to build back better and to invest in essential infrastructure to prevent future disasters. 

Meeting ODA commitments and enhancing the effectiveness of development cooperation remains absolutely critical. Stepping up South-South cooperation is important too, as we are already seeing in initiatives such as Belt and Road initiative. It is in the area of international public finance that development banks can make the greatest contribution, and the World Bank’s leadership in aligning development banks’ goals with the 2030 Agenda has been vital.

One important area is sustainable and resilient infrastructure. Closing the large global infrastructure gap is critical to achieving the SDGs, and is a core commitment of the Addis Agenda. With the World Bank in the lead, the multilateral development banks have taken on this agenda, including through two Global Infrastructure Forums organised in close collaboration with the United Nations. 

Enhancing UN support to financing for the implementation of the 2030 Agenda

The UN system is fully committed to enhance its support to financing for the implementation of the 2030 Agenda. The UN Secretary-General has stressed that to this end the UN system will work to ensure that the objectives of the 2030 Agenda are fully reflected in international economic and financial policies, and in key inter-governmental platforms such as the G20. 

In addition, in the context of the current reform of the UN development system, critical attention will be given to strengthening UN Country Teams so that they can better support governments on SDG achievement, including in broadening their own resource bases and leveraging financing for development. Here, enhanced collaboration with World Bank country offices will be essential. 

The Secretary-General will also champion key international initiatives that can harness large-scale changes in financing and financial system development, such as in the fields of digitalization and climate finance. Again, the United Nations will look to the World Bank to cooperate on these initiatives.

The United Nations already plays a critical role of de-risking investments over the long term by promoting peace and security, humanitarian relief and development. The World Bank also plays an important role in addressing crisis and fragility and has significantly increased the resources it dedicates to countries affected by conflict, and enhanced its ability to respond rapidly to crises. The United Nations and the World Bank Group can work together on this area – the Global Concessional Financing Facility is an excellent example of such collaboration.  

Further Collaboration Areas between the United Nations and the World Bank Group

Overall, the collaboration between the UN and the World Bank Group continues to grow. 

Together the UN and the World Bank continue stepping up our engagement in addressing crisis and fragility. The UN is committed to roll out the new Partnership Framework Agreement in Crisis-Affected Situations with the World Bank, with joined up analysis, planning, outcomes and financing in countries emerging from crisis. We have also worked together, along with the European Union, on Recovery and Peacebuilding Assessments and joint planning in support of governments in a number of countries recovering from crises. The goal is to ensure that peace dividends and recovery respectively are financed and delivered, and the foundations for long-term stability are established.

On conflict prevention, the United Nations and the World Bank share a common commitment to support countries address the root causes of conflict and build foundations for peace. Our  joint study “Pathways for Peace: Inclusive Approaches to Prevention of Violent Conflict”, launched by the UN Secretary-General and the President of the World Bank Group in New York last month, is a first step in working jointly to better harness our institutions’ respective and complementary resources, expertise and tools to support the prevention agenda. Violent conflicts have become more complex and protracted and increasingly linked to global challenges from climate change to international illicit activities. The joint study highlights that the best way to prevent violent conflict is to invest in inclusive and sustainable development.

Then, last June, the United Nations and the World Bank released the first ever joint Diagnostic Framework on Core Government Functions in Fragile and Conflict Affected Settings, which includes a set of joint principles for assessing government functions essential to stability, peacebuilding and statebuilding processes.  

The United Nations and the World Bank have also enjoyed good collaboration in the areas of disaster risk reduction and climate change, including through UN Plan of Action on Disaster Risk Reduction for Resilience and the UN System Strategic Approach on Climate Change Action.  

In support of the Paris Agreement on Climate Change we, along with other partners, have come together under the NDC Partnership, to support countries to deliver their Nationally Determined Contributions (NDCs). The Partnership, launched at COP22 in Marrakesh, now has members from 61 countries and nine institutions.

The World Bank Group and the UN also recently launched the “Invest4Climate” platform which brings together national governments, financial institutions, private sector investors, philanthropies, and multilateral banks to support transformational climate action in developing countries. The first Invest4Climate initiatives are expected to be announced at the Climate Summit in Paris in December 2017.

Through the Global Preparedness Partnership, the UN (UNDP, OCHA, FAO and WFP) and the World Bank are working with the V20 group of countries most vulnerable to climate change (now 48 countries) to enhance preparedness for disasters. We are also working together under the Insurance Development Forum (IDF) initiative, to optimize and extend insurance for those most vulnerable to climate, disaster and other risks, including associated economic shocks. 

Looking ahead, the United Nations looks forward to strengthening its partnership with the World Bank Group in support of countries’ efforts to implement the 2030 Agenda for Sustainable Development, the Paris Agreement on Climate Change, and to prevent and respond to crises. 

 

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