As an aftermath of the pandemic, the so-called ‘decade of action’ unfolded with severe economic contraction throughout the world, followed by disproportionate recoveries. According to the 2021 Financing for Sustainable Development Report (FSDR) of the Inter-agency Task Force on Financing for Development, the pandemic has set back the SDG progress dramatically and affected financing for development – “around 120 million people have fallen back into extreme poverty; 114 million jobs have been lost; tax revenues, foreign direct investment, trade and remittances have decreased; and debt vulnerabilities increased along with the rise in debt levels”.
While the annual SDG financing gap[1] was estimated to be $2.5 trillion pre-COVID-19, the gap just in developing countries is set to further increase[2] by $1.7 trillion due to the global economic uncertainty and the gap in COVID-19 emergency and response spending.
On the development front, despite success in some areas, several key challenges still remain: food insecurity, uneven access to energy, recovery from pandemic, growing inequalities, poverty, and the climate crisis. For instance, just to limit global temperature rise to 1.5C, global emissions must be cut by 45% by 2030 and the consequent transition challenges that comes with it. In order to solve these interconnected problems and fuel sustainable growth and more broadly deploy innovative solutions to achieve the 2030 Agenda, a scale-up of sustainable finance is urgently needed. These transitions cannot be achieved without a rapid and significant shift in financial flows into sustainable projects backed by of favourable policy agendas.
Sustainable finance has grown rapidly to nearly $450 billion annually[3], but by some estimates, it is only one-eighth of what’s needed and several barriers remain to scale it up to satisfactory levels. The multiplication of sustainable finance initiatives, approaches and tools has created a fragmented landscape, which hinders progress in mobilizing sustainable financing for the global climate agenda and the SDGs.
The COVID-19 crisis has also highlighted the urgent need to address sustainability risks at a holistic level, including those related to climate, environment, biodiversity, economic and social issues. Public sector engagement and policies, including climate finance mobilized from public and private sources, have the potential to help foster orderly and just transitions and catalyse sustainable private finance.
With these priorities in mind, in 2021, the G20 leadership, under the Italian Presidency re-established the Sustainable Finance Working Group (SFWG). The SFWG was mandated by Finance Ministers and Central Bank Governors to develop a G20 Sustainable Finance Roadmap (“the roadmap”) to help focus the attention of the G20, international organizations and other stakeholders to key priorities of the sustainable finance agenda and form consensus on key actions to be taken.
The Roadmap is a multi-year document with a voluntary set of recommendations that will help inform the broader G20 agenda on climate and sustainability, future workplans of the SFWG, and other relevant international work.
So what three things should you know about the Sustainable Finance Roadmap?
THREE PURPOSES – THE WHYS
At the heart of the roadmap are three high-level purposes that the SFWG has prioritised during 2021 – gaps, opportunities and communication.
First, the roadmap identifies gaps where the G20’s sustainable finance priorities are currently not being robustly addressed or where current efforts are nascent or insufficient and therefore warrant further attention.
Second, it identifies opportunities for the G20 to leverage, support and coordinate G20 member efforts across ongoing international work in different fora.
Third, it communicates G20 priorities on sustainable finance to a broad set of stakeholders, with a view to inform relevant work by international organizations (IOs), networks, and initiatives, even if the G20 or the SFWG are not directly engaged in that work.
FIVE FOCUS AREAS – THE WHATS
The Roadmap identifies the following 5 Focus Areas with actions and timelines identified from 2021 to 2025.
- Focus Area 1: Market development and approaches to align investments to sustainability goals
- Focus Area 2: Consistent, comparable, and decision-useful information on sustainability risks, opportunities and impacts
- Focus Area 3: Assessment and management of climate and sustainability risks
- Focus Area 4: Role of IFIs, public finance and policy incentives
- Focus Area 5: Cross-cutting issues (including digital solutions, transition finance and capacity building)
NINETEEN ACTIONS – THE HOWS
The Roadmap identifies 19 actions that the G20 views as priorities for scaling up sustainable finance.
The actions articulate key priorities that G20 members can act on through the G20 and as members of other international organizations, networks, and initiatives, to help scale up sustainable finance to support the objectives of the 2030 Agenda and goals of the Paris Agreement.
The “List of actions” (contained in the Annex to the roadmap), lays out the actions with indicative timelines, and indication of which G20 working groups, international organizations and other international networks and initiatives are currently planning to carry out work to address those actions.
REFERENCES:
[1] https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2019/01/18/Fiscal-Policy-and-Development-Human-Social-and-Physical-Investments-for-the-SDGs-46444
[2] https://www.oecd-ilibrary.org/sites/6ea613f4-en/index.html?itemId=/content/component/6ea613f4-en
[3] https://thoughtleadership.rbc.com/closing-the-global-sustainable-finance-gap/
Disclaimer: This was published first by the UNDP Sustainable Finance Hub on this link.