Two recent reports paint a grim picture for the future of life on our planet. The first, the special IPCC report, states that we have about 12 years to drastically reduce greenhouse gas emissions if we are to avoid runaway climate change. Even doing so, we are likely to face grave planetary consequences. WWF recently released the 2018 version of their Living Planet Report, stating that we have lost 60% of biodiversity in less than 50 years. The message of both reports is unequivocal: we must take bold action now, and failure to do so will have permanent repercussions for all future generations.
But how can the world take action? One answer is simple: we need to radically rethink how we invest our wealth. The past two months have been busy ones for the United Nations Development Programme (UNDP) on the topic of finance. Among many others, an event sponsored by the UNDP-led New York Declaration on Forests during the UN General Assembly highlighted key trends in forest finance; UNDP launched the Lion’s Share initiative accelerating private sector finance for conservation, a new initiative on measuring the impact of finance for the SDGs, and most recently UNDP launched a new partnership with the Government of Scotland to accelerate inclusive, nature-based private sector finance.
In each of these events, as well as many others over the past few months, several key themes emerge:
- There is widespread commitment to shift finance away from investments that do not align with the Sustainable Development Goals (SDGs), such as a recent open letter, signed by 44 investors worth $6.4 trillion putting their clients on notice to get out of the business of deforestation;
- There is a sizable finance gap in achieving the Sustainable Development Goals, of $2.5 trillion for developing countries, and as much as $7 trillion annually. Yet this gap represents incredible opportunity, valued at about $12 trillion, and small-enterprises are especially important in using this finance to achieve the SDGs.
- We are well into, but not yet through, a paradigmatic shift in thinking about investments. This is reflected in the semantic diversity across different events; investors are struggling to make sense of this new world, and describe it as ESG (environmental, social and governance), faith-aligned, responsible, ethical, impact and SDG-aligned finance.
- There is an asymmetry between the availability of supply of private sector finance and the supply of investment-ready projects, a phenomenon known as the ‘missing middle.’ This is especially true when it comes to inclusive, nature-based small-and medium-sized enterprises, one of the core indicators of UNDP’s new strategic plan.
- The ‘missing middle’ means that new, innovative finance instruments are likely required to accelerate finance, including green bonds. In fact, the UNDP-led Biodiversity Finance Initiative (BIOFIN) has identified dozens of such finance mechanisms.
- We will not be able to accelerate the deployment of private sector financing of inclusive, nature-based small- and medium-sized enterprises, and the creation of new financial instruments, without new partnerships.
For that reason, it is especially exciting to see a new partnership between UNDP and the Scottish Government, along with the Ethical Finance Hub and the Heriot-Watt University, each committing to a two-year partnership to accelerate learning on how to finance inclusive, nature-based small enterprises.
Stay tuned for an update in the spring, when we plan to jointly launch an open online course on green entrepreneurship!
Jamison Ervin is the Manager of UNDP’s Global Programme on Nature for Development. Follow her on Twitter: @jamisonervin