SDG Knowledge Weekly: Finance and Crowdfunding for the SDGs
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The Inter-agency Task Force on Financing for Development released the advance unedited version of its 2019 Financing for Sustainable Development Report.

A study discusses the viability of crowdfunding platforms and models to finance the SDGs, which another article notes may be seen as blurring the boundary between philanthropy and impact investing.

Reports by the UN Capital Development Fund and USAID look at blended finance in LDCs and the global health sector, respectively.

The Financing for Sustainable Development Office of the UN Department for Economic and Social Affairs (DESA) is organizing a series of informal technical briefings from 4-8 March on topics covered in the advance unedited version of the ‘2019 Financing for Sustainable Development Report’ issued by the Inter-agency Task Force (IATF) on Financing for Development (FfD). This SDG Knowledge Weekly provides an overview of the report and covers some less-frequently discussed subjects relating to financing for the SDGs, such as crowdfunding.

The 2019 IATF report version of 1 March 2019 pays special attention to SDGs 4 (quality education), 8 (decent work and economic growth), 10 (reduced inequalities), 13 (climate action) and 16 (peace, justice and strong institutions), all of which will be reviewed at this year’s session of the UN High-level Political Forum on Sustainable Development (HLPF) in July. The report also features chapters on the main areas of the Addis Ababa Action Agenda (AAAA), including: domestic public and private resources; international development cooperation; trade as an engine of development; debt and debt sustainability; systemic issues; science, technology and innovation; and data, monitoring and follow-up, in addition to a thematic chapter on integrated national financing frameworks. Each chapter is the focus of an informal technical briefing taking place this week.

Key messages from the report point to: continued underfunding of the SDGs; new or increasing risks around economic growth, debt and climate change; shifts in sentiments on multilateralism and a need to recommit to the AAAA; and the importance of countering behavior that focuses on short-term actions and incentives. The IATF is comprised of 60 UN agencies, programmes and offices, regional economic commissions and other institutions.

Researchers from INSTA Associates and the University of Oxford published a study on funding the SDGs by leveraging lessons learned from donation-based crowdfunding platforms. The working paper, based on comparative case study research, notes that such platforms—and the “system builders” behind them—enable transactions through the use of vetting actors, financial intermediaries and social media. Given that donation crowdfunding is not regulated, the platforms can serve as global marketplaces, albeit with a caveat from the authors that attracting users to fund projects that are adapted to local contexts may limit donors’ geographic scope. Further, given the low technological barriers to entry, the authors point to significant opportunity for the creation of an SDG-linked platform, which they note would likely involve partnerships with the UN system, B Corps or other social enterprise networks. A write-up of the paper is also available on Business Green.

With the proliferation of such platforms supporting other social investments and philanthropic projects, Bayani S. Cruz writes on The Asset that the SDGs too are “blurring the boundary between philanthropy and impact investing.” Cruz explains that although philanthropy and impact investing work independently of each other, the SDGs have driven a convergence of the two, pushing towards a common goal. Cruz notes that the SDGs highlight, or otherwise articulate, the areas to which philanthropists want to donate, while for impact investors the SDGs provide projects and opportunities for investment. The article also spotlights organizations such as Ashoka, which provide funding through grants for social and environmental projects that offer a spectrum of financial returns.

A press release by the Stockholm Environment Institute (SEI) notes that Vinnova, Sweden’s Innovation Agency, is investing approximately USD1 million in a crowd-sourced online tool to help industries, governments, civil society organizations and other stakeholders ensure that their long-term strategies deliver positive value to society. The tool, known as the Agenda 2030 Compass, enables users to quantify, visualize and compare how different action options contribute societal value across all the SDGs in order to maximize the positive interactions and minimize the negative ones. The Compass is based on a prototype developed with and for the Swedish steel industry.

Such tools, platforms and investments must be complemented by robust policy frameworks. The World Bank Group’s book titled, ‘Beyond the Gap: How countries can afford the infrastructure they need while protecting the planet,’ finds that in low- and middle-income countries (LMICs), funding needs can range anywhere from two to eight percent of Gross Domestic Product (GDP) per year by 2030. Estimating funding needs to close the service gaps in water and sanitation, transportation, electricity, irrigation and flood protection, the report considers not only new investments needed, but also replacement capital costs and maintenance needed for both new and existing infrastructure. It calculates that, with the right policies in place, 4.5% of GDP will enable LMICs to achieve the infrastructure-related SDGs and stay on track to limit climate change to a rise of two degrees Celsius. The report further finds that infrastructure investment paths compatible with full decarbonization by the end of the century need not cost more than more-polluting alternatives, and that good maintenance can generate substantial cost savings.

A more commonly discussed method of financing sustainable development has been the blending of public and private capital. On blended finance in LMICs, USAID’s Center for Innovation and Impact (CII) launched a report titled, ‘Greater than the Sum of its Parts: Blended finance roadmap for global health.’ The report provides a resource for USAID and other partners to close the health funding gap, which for LMICs in 2016 was estimated to be USD134 billion, and is projected to increase threefold by 2030. The report unpacks why blended finance matters to health through case studies in India, Tanzania and Liberia, each of which represent a country archetype derived from a calculation of the country’s health system status and attractiveness to investors. The six-step roadmap identifies a country archetype, defines its main health issues, prioritizes financing challenges, evaluates the potential for blended finance, shortlists specific instruments, and closes by identifying particular activities for USAID or partner engagement.

On the least developed countries (LDCs), the UN Capital Development Fund (UNCDF) examines the role of blended finance as part of a broader SDG financing strategy. The report assesses: current concepts, knowledge and data on the state of blended finance in LDCs; barriers to private capital in LDCs; the sectors blended finance supports; and its development effectiveness. Country case studies in Africa and Asia, and a section of guest contributions, show how blended finance is being applied on the ground, in areas such as gender, energy and infrastructure. Key takeaways emphasize that although blended finance receives a significant level of attention, only 7% of the funds mobilized go to LDCs, and that even providers of concessional capital may shy away from these markets due to low risk appetites. To mitigate, UNCDF proposes a five-part action agenda that covers risk-taking, the inclusion of LDCs in decision-making, and improving impact measurement and knowledge management.

The report was prepared in collaboration with the Organisation for Economic Co-operation and Development (OECD), Southern Voice, Convergence and the UN Foundation. It notes that UNCDF’s financing models work through two channels: 1) savings-led financial inclusion that expands the opportunities for individuals, households and small businesses to participate in the local economy; and 2) by showing how localized investments—through fiscal decentralization, innovative municipal finance and structured project finance—can drive public and private funding that underpins local economic expansion and sustainable development.

Also on the theme of financial inclusion and the SDGs, Next Billion has posted a series of blogs, and Southern Voice maintains an active blog on finance, aid and other means of implementation for sustainable development.

Additional issues of the SDG Knowledge Weekly can be found here.

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