Three Innovative SDG Funding Ideas
The Debate on SDG Funding
The United Nation’s Sustainable Development Goals have been billed as “the closest thing the world has to a strategy” by Lindsay Smart, Head of Impact at ClearlySo. But the fact remains, that achieving these 17 goals will require massive amounts of funding, $115 trillion, to be exact. To achieve the SDGs by 2030, there needs to be an additional investment anywhere between $3 and $5 trillion per year that have no way of being funded. As the year 2030 creeps closer and closer, we’re predicting that increasing numbers of stakeholders will begin to ask the questions: Where will the funding come from? And, who is ultimately responsible for funding and achieving these goals?
Although these questions seem complicated, the answer is quite simple. Everyone is responsible. Our governments, our corporations, our NGOs & NPOs, and our fellow man. Each of us is responsible for finding funding and making way for these massive changes. As each of us are beneficiaries of this world’s resources and members of society, we must ask these questions and volunteer funding solutions.
Traditional Stakeholders, New Ways of Thinking
A key group of stakeholders in the investment of SDGs has always been private funding from corporations. In 2018, Corporations will play an even larger role than ever before in accomplishing the SDGs. Corporations’ roles will shift to a focus on technological innovations that solve climate change, green energy, etc. A second role taken on by corporations will be to become advocates for SDG funding from local government. It is estimated that $12 trillion of market opportunities and an estimated 380 million jobs will become available with corporate funding. While these results are tangible, they can only be obtained if corporations act in new ways to accomplish the Goals.
As members of the UN, it was the governments and not corporations, that agreed on achieving the SDGs. The expectation surrounding governments and financial support is changing with the recognition that developing countries might not be able to meet the necessary investments for both infrastructure and achieving the SDGs. Conversations will focus on allowing developing countries to meet the SDGs through policy changes that align corporate practices to the SDGs in those countries.
Traditional Stakeholders, New Ways of Thinking
Despite the rather bleak outlook of the news these days, there are plenty of new and innovative ideas for financing the SDGs. These ideas are just the beginning. As we continue into 2018 and the future, a greater partnership between public and private sectors will bring about new funding models and innovative ideas to achieve these goals. Much of 2018 will be spent exploring new funding models for the SDGs. Some of the highlights are discussed below:
Institutional Investors: These investors often look to invest north of hundreds of millions of dollars. Investments of this type require investor expertise, a new way to deploy capital and an understanding of risk. Traditionally, the barriers to entry have been too great for institutional investors to enter SDG investments. Those barriers are lowering, and specialized companies like Aligned Intermediary, a Public Benefit Corporation and Registered Investment Advisor (RIA), have been developed to profitably invest large sums of money in solutions to climate change. These types of Funds are changing the conversation and the traditional role of private financing in SDGs.
Blended Finance Task Force: The Business and Sustainable Development Commission has disbanded, but left in its place is a very specific initiative, the Blended Finance Task Force. Blended Finance is “the strategic use of public or philanthropic development capital to mobilize commercial finance for SDG-related investments”. Basically, this idea calls for private institutional investors (foundations), multilateral development banks (like the World Bank), and development finance institutions (like OPIC) to provide capital. Once that capital is provided, a project is identified, and a blended finance deal is struck. Public and private resources are then used together to scale existing initiatives to further the goals of the SDGs.
Green Bonds or Green Finance: These bonds allow purchasers to buy the debt of specific development projects that impact goals, like climate change. Like traditional bonds, these investments are repaid over a specific period of time with some rate of return. The bonds are a unique solution because they contribute financing, but allow the flexibility in the use of those funds. The World Bank has issued $10.2 billion since 2008 in their “Green Bonds” program. Companies are getting on board with this concept as well. Apple issued green bonds for the second time in 2017, focusing on projects involving renewable energy resources and energy efficiency. The demand for green bonds is increasing as asset owners are looking to seek a positive impact beyond just a financial return.
Continuing the Conversation
Many groups have reported that we will miss certain SDG targets in 2030. The United Nations is calling for an increased pace of progress for fear of missing them entirely. But these reports will only serve as continued fuel for the conversation that has already begun. If these new roles for traditional stakeholders and new funding ideas are implemented, it may be possible to close that $3 trillion gap. Continuing this important conversation, innovating new SDG funding ideas, and implementing those ideas may be the difference between calling the SDGs a success or a failure in 2030.