Without immediate and fundamental changes, the world will fail to fund the SDGs and finance the transition to a sustainable, resilient, and inclusive future. Based on the latest report from the Force for Good Initiative (F4G), the current funding shortfall to achieve the SDGs is c.10% of annual global GDP for the next decade and this amount is not something governments nor the private sector can deploy on their own. However, financial institutions as the custodians of over 85% of the world's gross liquid assets have a critical role to play in the mobilization of other key stakeholders and in the development and execution of solutions.
The Force for Good Initiative has hosted a series of high impact sessions at UNCTAD's World Investment Forum in support of the UN Secretary General's strategy and roadmap for sustainable development to 2030, exploring the challenges facing the world, the current efforts of finance industry leaders to address these, and the big ideas for the world to transition to a more sustainable and inclusive future.
Session 1: Systemic and Inclusive Change
Leaders of institutions that are active and innovative in addressing major global challenges discuss the systemic nature of the challenges facing the world and the need for systemic solutions to address both environmental sustainability and social factors such as financial inclusion or resilient healthcare. The interrelated nature of the SDGs implies the need for a holistic and multi-stakeholder effort for the targets to be achieved, which will require alignment between consumers and producers, the owners of asset and their managers, and governments and society as a whole, ultimately making the system of capital more robust and fit for purpose in meeting the challenges and opportunities of the world.
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Session 2: Strategic Capital Allocation
Leaders of some of the world's biggest investing institutions discuss current and emerging capital allocation strategies seeking to address the world’s challenges. The world’s largest asset managers are increasingly embracing ESG, sustainable and even impact investing strategies as part of their core offering or as core to their missions, transforming their own organizations in the process and developing the blueprint for successful financial services businesses in the 21st century.
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Session 3: Delivering Multistakeholder Change at Scale
Leaders at the front line of mobilizing their organizations for large scale sustainable investment discuss the practical execution considerations for funding the SDGs and the transition to sustainable and inclusive future. The systemic change needed requires a multi-stakeholder effort and the integration of finance, technology, civil society, and policy to ensure that the world’s challenges are fully met.
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Some of the key messages from the leaders interviewed:
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1. The pandemic is a red line between a carbon past and a cleaner, more sustainable future
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2. We are all in this together as the pandemic demonstrated to great effect, on all issues.
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3. Finance, issues and solutions need to come together, including public, private and development finance, and beyond philanthropy so that its truly scaleable and sustainable, which means a return is required that enables businesses to pay salaries, pensions, taxes and meet other obligations.
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4. Closing a US$100 trillion gap over the next decade in order to properly fund the UN’s Sustainable Development Goals requires radical solutions that enable capital to flow, and this endeavour would be one of the greatest ever undertaken in human history, a leap to creating a new civilisation.
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5. Time however is short, and this requires the alignment of values that shape behaviours across all stakeholders underpinned by commercial gains, risk taking and an innovation.
The finance industry's leading institutions have already mobilised to support sustainable development and the transition to a cleaner future; US$88 trillion of assets under management are subject to net zero carbon commitments, and industry leaders have committed nearly US$9.5 trillion of investment capital in support of the SDGs while nearly all of the leaders have integrated ESG into core business processes. Additionally, strategic dialogues with industry leaders have given rise to ten big ideas that would make a fundamental difference to meeting the SDGs, including:
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1. Establishing a new Bretton Woods agreement for finance to address the wider needs of the planet.
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2. Determining the systemic changes that can address the flow of funds in a more inclusive and scalable manner.
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3. Establishing a process of rapid change for industries and companies that begins with engagement to support them to transition, and where change is not embraced determine the conditions for divestment.
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4. Designing regulation and accounting for externalities that can help accelerate the transition and support asset allocators in managing change.
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5. Determining the transition management measures to safeguard the people who will lose out as we move away from current industries and to create a bridge to the future.
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6. Establishing a basic security package for the world’s people, including food, water and a home.
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7. Recognizing a class of financial products and services as inherently social good products and services - such as, affordable housing, insurance, pensions - these will need to be made accessible and affordable for mass inclusion, with technology, and the tech industry, playing an important role to enable this alongside other stakeholders.
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8. Examining a global contribution tax as a potential answer to funding the SDGs, and should be explored to see if it can be effective and additive without damaging the mass investment and risk taking that is required.
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9. Promoting dual track funding the future and today of breakthrough innovation, while rolling out solutions that are proven today in a parallel track supported by all stakeholders.
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10. Distilling and building in the lessons of COP26 into the full range of SDGs, given the enormous endeavor has led to a broader climate change alignment and COP26, to simplify, mobilize and gain the commitment from capital allocators, and the world at large.
The urgent imperative as a next step for the world is to now get to a level of
detailed work with powerful and willing representatives from key stakeholder groups
to work together to identify the