Financing the SDGs in cities: Innovative new approaches

By Gail Hurley, Policy Specialist on Development Finance, Bureau for Programme and Policy Support, United Nations Development Programme

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Mumbai is among a growing number of cities exploring green bonds as an option for financing sustainable urban development.

 “Cities are major drivers of the global economy. Today, cities occupy only 2% of total land but account for 70% of GDP.” (Habitat III, 2016)

Many of the investments needed to achieve the Sustainable Development Goals (SDGs) will take place at the sub-national level and be led by local authorities, especially in urban areas. Massive public and private investments will be needed to improve access to sustainable urban services and infrastructure, to improve cities’ resilience to climate change and shocks, and to prepare them to host 2.5 billion new residents over the next three decades, particularly in developing countries.  If city authorities can meet these challenges head-on, the sustainable development dividends could be immense. This reality underscores the need to recognise and strengthen the capacities of local authorities as major actors in promoting sustainable development.
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Maximising bang for the buck: Risks, returns, and what it really means to use ODA to leverage private funds

By Paddy Carter, Research Fellow, Overseas Development Institute

shutterstock_249974521The idea of using official development assistance (ODA) to leverage private finance is a staple of the financing for development circuit and features heavily in most donors’ strategies. Experienced financiers both from official sector development finance institutions (DFIs) and private investors are, however, still feeling their way into this field’s unfamiliar territory. DFIs for the most part emphasise the importance of providing finance on non-concessional terms to avoid distorting markets and crowding-out other sources of finance. Though some standard elements of their business could fall under the rubric of blended finance, such as grant-funded technical assistance, for the most part DFIs and development banks have treated explicit subsidies to private enterprises as dangerous medicine to be prescribed rarely. Now the pressure is mounting to find more creative ways to leverage private finance using ODA. But how?

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The three circles of philanthropy: Taking a tiered approach to achieving the SDGs

By Bathylle Missika, Senior Counsellor to the Director of the OECD Development Centre and Head of Unit – Partnerships & Networks, Organisation for Economic Co-operation and Development (OECD)

the-three-circles-of-philanthropy2People around the world have little faith in the ability of just governments to deliver on the promise of the Sustainable Development Goals (SDGs). They know governments alone can’t promote sustainable development and prosperity for all. What will make a difference is involving new partners. Philanthropic foundations, with their resources, expertise and quest for innovation, are prime partners in development. But how do we unleash the power of philanthropy to be agents of development change? How can we tap into this community of philanthropists and leverage their ability to take risks and to innovate in sectors like education, gender or youth empowerment? Better understanding foundations and how they view the 2030 Agenda will help us better partner with them. That’s why the OECD’s Network of Foundations Working for Development (netFWD) unveiled a new circle typology to outline a fresh way to think about and understand philanthropies and their role in advancing the SDGs and well-being overall. Continue reading

Creating jobs in the developing world

By Elizabeth L. Littlefield, OPIC President and CEO

Development-financeA generation ago, private capital flowing into developing countries was a small fraction of aid dollars. In recent years that ratio of aid to investment has flipped, and the amount of investment flowing to the developing world far exceeds aid dollars.

This significant increase in private investment comes at a good time. The cost of addressing the world’s most urgent development challenges outlined last year in the 2030 Agenda for Sustainable Development is in the trillions of dollars. Compare that to the estimated USD135 billion per year in total global aid flows.

Development finance institutions like the U.S.-based Overseas Private Investment Corporation (OPIC) were built on the understanding that the challenges the world faces are greater than any government can address on its own. They also reflect the conviction that business can serve as a force for good in development. OPIC works to mobilise private capital to support entrepreneurship and expand access to housing, education, financial services, energy and more. Continue reading

Reaching the last mile: The role of innovative finance in meeting the SDGs

By Judith Karl, Executive Secretary of UNCDF, and Samuel Choritz, Policy Adviser at UNCDF

financesdgsTo meet the SDGs with their emphasis on leaving no one behind, we need solutions that tackle persistent exclusions and inequalities in the local economies and communities where the poor live and work. Targeting the last mile means adapting solutions to the households, localities and small enterprises that are underserved, where development needs are greatest and where resources are scarcest.

Addressing market failures by making finance work for the poor is a critical catalyser to this end. Official Development Assistance (ODA) can be the largest source of external finance in least-developed countries, where private investment often favours commodity and real estate sectors. Disparities in incomes and living standards show that location matters more for living standards in developing countries than it does in developed ones [1]. “Last mile finance” models can use public resources — such as ODA — to de-risk and crowd-in public and private finance, especially from domestic sources, to create virtuous dynamics of inclusion, local growth, resilience, and productive investment. Continue reading

How China’s Rebalancing Affects Africa’s Development Finance … and More

By Helmut Reisen of Shifting Wealth Consulting and former Head of Research at the OECD Development Centre

 

Africa-globe2015 has been a challenging year for Africa. Average growth of African economies weakened in 2015 to 3.6%, down from an average annual 5% enjoyed since 2000. Total financial flows have decreased 12.8% to USD 188.8 billion, including UNCTAD estimates for foreign direct investment. Africa´s tax-GDP ratio tumbled to 17.9%, down from 18.7% in 2014.

Three core factors have underpinned Africa’s good economic performance since the turn of the century: high commodity prices, high external financial flows, and improved policies and institutions. Now, China´s decline in investment and rebalanced growth is depressing commodity prices and producing headwinds for Africa. Such macroeconomic headwinds for net commodity exporters also imply that Africa’s second pillar of past performance — external financial inflows — have suffered as well.

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Setting the Record Straight on ODA

By Doug Frantz, Deputy Secretary-General, OECD 

Doug FrantzThere will never be enough development aid to solve all the problems in the poorest countries. If we are to lift the last 800 million people out of extreme poverty we will need to find new ways to mobilize resources beyond the traditional assistance from wealthy governments in the form of loans, grants and other concessions.

Government assistance remains vital. The billions of dollars donor countries pour into developing countries every year are critical both in terms of actual aid and as a catalyst for mobilizing private sector funds and underpinning the efforts of developing country governments and civil society. Yet there is a consensus that the role of development aid must adapt to changes in the geography of poverty and to the new lens of the Sustainable Development Goals.

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