Our Perspectives

Can business help finance the Post-2015 Agenda? Yes, But…


A participant at the Latin America regional consultationA participant at the Latin America regional consultation on 'Engaging with the Private Sector' in Cartagena, Colombia. Photo credit: (AECID)

In this blog series, our experts share their thoughts and lessons learned on key financing for development issues, in the run-up to the UN’s Financing for Development conference in July.

Diplomats and their governments are in the middle of a huge exercise to update the world's development agenda. Attention has now started to shift from the ‘what' of the agenda to the ‘how' – policy choices, capacities, institutions, and technology to name but a few. Yet where will the hard cash come from to fund these lofty aspirations?

Some of the poorest and least developed countries will be looking for a clear commitment from richer countries that they will meet previous commitments on official development assistance (ODA), including the international benchmark of 0.7% of GNI.

But the economies of many rich countries are still struggling, and their governments are finding it difficult to justify to domestic taxpayers that their money is being spent abroad rather than at home.

At the other end of the spectrum, some governments have emphasized that the private sector will step in and shoulder the burden of financing the new goals and targets. The discussion on the validity or means of this claim has not been very deep. More cynically, some have suggested that focusing on the private sector's role is a deliberate tactic to steer the debate away from aid commitments.

But this critical question remains – can the private sector actually play a role in financing?

It's a difficult exercise to work out how much achieving a set of goals will cost. Initial financing estimates run into the trillions of dollars; much higher than the amount of ODA on the table.

If the agenda is to be financed at all, it is clear that these resources will mostly come from private sources. But this means going far beyond philanthropy and our existing understanding of Corporate Social Responsibility.

Incentives may be enough when business opportunities lead to an alignment with the development agenda. For example, many private operators are driving investment in the deployment of renewable energies. However, when incentives and voluntary actions are insufficient, changes in regulation will also be needed, including on environmental and social impact reporting. If all countries need to be disaster-resilient, then the construction industry needs to adhere to building codes so that buildings can withstand earthquakes.

After the new agenda is agreed, a first commitment from governments could be to review regulatory frameworks at all levels – national, regional and global – to see where they are SDG compatible or incompatible. Of equal importance, governments will need to consider how well regulatory environments fit together, in particular to prevent a regulatory race to the bottom.

For a successful post-2015 development agenda, regulations on private sector financing will be as much of a weapon in the armory of policy-makers as ODA has been for the MDGs.

A full version of this blog was first published here.

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