By Gaia Gallotti
According to the Sustainable Development Report 2023, the key to creating the appropriate investments needed for sustainable development lies in the renovation of global governance mechanisms and the global financial architecture.
The GFA includes not only financial mechanisms, but also budget regulation policies, along with the pursuit of public policies at different levels: globally, with treaties such as the UNFCCC; regionally, through the EU, the African Union and ASEAN (Association of Southeast Asian Nations); nationally, through plans and budget, and locally, through provincial and city networks. Alignment with SDGs is also required of the private sector, which will be aided by regulation, incentives regarding taxes and carbon pricing, and management practices.
The SDGs comprehend many different areas, such as economic development, social inclusion, energy decarbonization and transition, climate adaptation, digitalization, gender equality and universal healthcare and education; coordinating all of these fields is just one of the many challenges. The lasting, long-term SDGs are quite hard to achieve for governments, given that they’re far more complex than the typical aims: they’re technology-based and capital-intensive, depend on technological and political instabilities, aim at the cooperation between the public and private sector, and coordinated planning with foreign countries is also needed.
To help governments and businesses face these challenges, the SDSN (Sustainable Development Solutions Network) pioneered the concept of “Deep Carbonization Pathways” according to the Paris Agreement. The main goal is to show governments how to plan energy investments in the next 20-30 years while coordinating public investments, regulations and incentive structures. This initiative contributed to the concept of Long-term Low-Emission Development Strategies (LEDS) included in the Paris Agreement (article 4.19). To continue this work and make sure that all countries submit long-term LEDS to the UNFCCC, the SDSN also launched the Global Climate Hub. The SDSN is also cooperating with the Food and Land Use (FOLU) Coalition and other partners to define long-term sustainable food and land-use pathways via the Food, Agriculture, Biodiversity, Land-use and Energy (FABLE) Consortium; it has also joined the Group on Earth Observations (GEO) to support national, international and private sectors investments in Earth observations on urgent SDG needs.
The SDSN has recommended to focus on six long-term transformations:
Universal education and an innovation-based economy
Universal health access and coverage
Zero-carbon energy systems
Sustainable ecosystems, agriculture and climate resilience
Sustainable cities
Universal digitalization
These challenges will require public and private investments and a solid financing strategy; governments will therefore have to lead the policy and financial frameworks in which businesses will invest. The SDR 2023 identifies five fields which will be at the forefront of the transformation: governance, economy and finance, individual and collective action, science and technology, and capacity building. The financing strategies could be supported by already existing national financing frameworks, which are being developed in more than 80 countries.
However, long-term planning uncovers the main global financial structure’s weakness: while high-income and middle-income countries (HUCs and MICs) can finance these transformations via budgeting, public-sector borrowing and private financing, this is much more challenging for lower-middle-income and low-income countries (LMICs and LICs), proving that there is a large financing gap between the richer and poorer halves of the world, according to the SDSN and the International Monetary Fund.
The financing gap for 57 LICs and LMICs to cover basic life-quality investments amounts to about US$300 billion to US$500 billion per year, which is out of reach for roughly half of the world. These IMF estimates do not include the costs of fields such as decarbonization, climate adaptation, digitalization or damages from climate-related disasters, with which the gap would reach about US$1 trillion per year. According to the SDSN and the IMF, LICs need about 20% of their GDP for SDG investments, while LMICs need about 10%.
International finance institutions must incorporate SDGs into their core mandates and monitor all countries to make sure that the financial and additional resources are used for sustainable investments. Moreover, global infrastructure programs, such as China’s Belt and Road, the EU’s Global Gateway and the USA’s Build Back Better World, must collaborate to achieve SDGs together.
Source: Sustainable Development Report 2023