Rebeca Grynspan: Speech at the Side Event of the Leading Group on Innovative Financing for Development: “What role for the private sector in innovative financing in the context of the Post-2015 Development Agenda”Sep 24, 2013
Speech by Rebeca Grynspan, Under-Secretary General of the UN and Associate Administrator of UNDP
Side Event of the Leading Group on Innovative Financing for Development
“What role for the private sector in innovative financing in the context of the Post-2015 Development Agenda”
United Nations, New York
I am pleased to open the second panel in this Leading Group Side Event on Innovative Financing for Development. This panel focuses on the role of the private sector in innovative financing initiatives in the context of the post-2015 development agenda.
I thank the Government of Nigeria for its Presidency of the Leading Group at this critical moment, and acknowledge the very pertinent themes which Nigeria has identified as priority for their presidency. I also thank the Government of France for its continued leadership on this issue and the Leading Group overall for co-organizing this important side event today. We are pleased to be a member of this Group.
I have a very particular connection with this subject. I was part of the High Level Panel on Financing for Development chaired by Mexico's President Zedillo and was present in the Guadalajara Conference where very important decisions were taken.
Many of the issues discussed then, still have an important role to play. Part of the innovative schemes we set in motion back then - have been implemented and some of the proposals that we have heard and will hear about here today, were already under discussion then.
Having said that, we have to recognize that the world of today is very different from the one we left in Guadalajara. Concerned individuals engaged in social media, social entrepreneurs, civil society, and businesses did not – then - have the force in the world of development and cooperation that they have today.
It is also true that back then we had just started with the MDGs agenda and there was yet a lot of skepticism, even inside the UN, staff were not convinced of its usefulness. Today, the MDGs have proven themselves to be a powerful tool for poverty reduction and human development - the attention they garnered and the progress they helped guide and inspire has made a difference in the lives of millions.
The intense and broad support generated by the MDGs, is being carried over to our discussions of what comes next. .
The level of engagement and enthusiasm in the consultations the UN development system has led over the last year - has been truly remarkable. More than 1.3 million people in over 190 countries have made their voices heard, sharing their priorities for the future agenda.
We now have a much clearer idea of people’s priorities around the world. People consistently call for the world to meet its commitments - to finish what we started and continue the business of the MDGs, while including issues of new and underlying importance – including employment, energy, inequalities and human rights, stronger gender content, environmental degradation, governance, conflict and violence.
While the journey to define a post-2015 development framework is far from over it is clear that people’s expectations for the future are high. This has already brought attention – and inevitably so– to questions about the means of implementation.
To listen, respond and meet the expectations of people, UN Member states have a responsibility to put into motion realistic, innovative and ambitious plans to meet needs, change the incentives of actors, including in the private sector, and finance development long into the future. To this end, we at the UN, those in the private sector, civil society and governments around the world must better understand the enormity of our task and work together to deliver.
We in UNDP believe that innovative sources of development finance will play an important role in this post-2015 era.
We have already heard today that innovative sources of finance, for example in the health sector or the airline ticket tax, have a solid track record in contributing to development results. Other initiatives have the potential to generate even more, such as carbon taxes and financial transaction taxes. Carbon taxes, as a market-based climate financing instrument has the potential to generate around $30 billion a year.
I commend the countries of the European Union which have recently agreed to introduce a financial transaction tax, and in particular France which has announced that it will allocate 10% of revenues raised to international development.
I urge other countries to follow this important example.
It would be an incredible achievement to have more countries – developed and developing alike – announce that they intend to allocate at least 10% of the revenues raised through such taxes to confront shared challenges. It offers promising way to complement current, insufficient levels of ODA and could make an important contribution to realizing the post2015 development agenda.
These initiatives demonstrate what can be done when actors – public and private - work in tandem to realize health, environment and development objectives.
But despite their potential– thus far innovative financing initiatives are still comparatively small.
Public monies alone will not be sufficient to meet the scale of the sustainable development challenges we share. We must look to the private sector and learn to more effectively leverage private financing for development.
In many cases, the private sector is looking to more creatively and actively contribute to development. For example, there is a growing body of socially and environmentally aware investors that are willing to invest in innovative initiatives such as ‘vaccine’ bonds and ‘climate’ bonds which offer investors a lower rate of return, but on the other hand contribute to important development and environmental objectives. Or consumers do turn more and more to products that not only satisfied their needs but that come from companies that care about society and the environment and behave accordingly. This suggests the power and importance of corporate social responsibility. Ethical values apply to the world of business. Leaders in the private sector must step up to the plate - and people and governments must hold the private sector to account – to ensure they operate in keeping with shared interest of us all.
Greater accountability is needed – to convince major corporations to end damaging practices and support progressive reforms which can leave us all better.
There is much interest in the potential, for example, of harnessing a greater share of the diaspora’s wealth to empower people and advance development. Ethiopia and Kenya have recently issued diaspora targeted sovereign bonds to much success.
Rwanda’s AGACIRO development fund is another example of a diaspora targeted initiative. The national development fund is capitalized, in part, by Rwandans overseas who wish to invest in the development and prosperity of their home country.
I also believe that there is much more potential in initiatives such as Product (RED) or the Digital Solidarity Levy. These initiatives give consumers the option to – at the time of product purchase - donate small sums to international development.
As growing numbers of people and actors are – each day learning and engaging in development imitative, this is an important model for the future. We should seek to develop creative initiatives to mobilize more resources on a voluntary solidarity basis from citizens and companies alike. Success will depend critically on public education and awareness combined with demonstrating concrete development results.
But a very important part of the investments needed for the transformation required towards sustainable development will come from businesses that look for clear rules and incentives which enable them to do good while making profits. Sustainable development is, after-all in everyone’s best interest over the long term – including that of business. This requires sufficient regulation and adequate incentives in place enforced by effective governments.
The Green Climate Fund (GCF) has introduced the potential of a private sector facility which would explore opportunities to engage the private sector in supporting climate mitigation and adaptation activities.
The problem of illicit financial flows is a case in point specially when stressing the need for more mobilization of domestic resources. As discussed earlier today, the magnitude of the problem throughout the world drains much needed resources from developing countries. Stemming the problem could be a boom for development finance. At the root of the problem, at times we find corporations engaging in aggressive tax avoidance strategies to reduce their taxes to developing country host governments and a race to the bottom to compete for needed private investments flows. Improving the domestic and international policy environment is important. But it also requires greater corporate responsibility on the part of major corporations. Importantly, we have already seen how increased transparency and accountability in disclosing key financial data by companies in the extractive industries can help prevent leakages and corruption.
In our rapidly changing and volatile world, developing and emerging economies are to a great degree - driving global growth and increased savings. This brings new opportunities for developing countries to put themselves in the driving seat and to develop their own regional innovative financing mechanisms.
UNDP has initiated extensive work over the past few years to support countries to strengthen climate finance readiness, and develop capacities to ensure they are ready to plan for, access, deliver and monitor climate funds once they arrive. At UNDP we believe this is an underexplored area - which shows enormous potential as was clearly stated by the UN Secretary-General’s High-level Advisory Group on Climate Change Financing. UNDP is ready and willing to work with interested governments to develop promising ideas.
I believe there are grounds for optimism looking forward. We are lucky to live times in which creative solutions are possible. New technologies have revolutionized the ways in which resources can be mobilized from citizens and the private sector. Financial engineering can also be harnessed for positive ends, as demonstrated by the International Finance Facility for Immunization.
I believe that innovative financing has the potential to play a key role in funding sustainable development over the coming decade. But leveraging its true potential will need strong partnerships and political will. The post2015 negotiation process provides a valuable window of opportunity to build this political will.
Of course, how the money will be spent is at the heart of it all. We need to ensure that all what is raised from innovative financing mechanisms are used transparently and effectively, governed in an inclusive manner and allocate resources in compliance with the principles of aid effectiveness and coherence.
Once again, I thank Nigeria, France and the Leading Group for the opportunity to speak at this important side event. Innovative financing helps us all to think creatively and ‘outside the box’ as to how we may work together to reach our shared goals.
Thank you for your attention.