How to boost private investment in Sustainable Development Goals: UNCTAD's proposal for an Action Plan
This year’s World Investment Report (WIR) focuses on Investment in the Sustainable Development Goals (SDGs), which are currently being formulated by the United Nations in consultation with a wide range of stakeholders.
The SDGs are intended to galvanize action worldwide through concrete targets for the 2015–2030 period for poverty reduction, food security, human health and education, climate change mitigation, and a range of other economic, social and environmental objectives.
They will have very significant resource implications across the developed and developing world. Estimates for investment needs in developing countries alone range from $3.3 trillion to $4.5 trillion per year.
At current levels of investment in SDG-relevant sectors, developing countries face an annual gap of $2.4 trillion. In developing countries, especially in the least developed countries (LDCs) and other vulnerable economies, public finances are central to investment in SDGs. However, they cannot meet all SDG-implied resource demands. The role of private sector investment will be indispensable.
Today, the participation of the private sector in investment in SDG-related sectors is relatively low. Only a fraction of the worldwide invested assets of banks, pension funds, insurers, foundations and endowments, as well as transnational corporations, is in SDG sectors. Their participation is even lower in developing countries, particularly the poorest ones.
UNCTAD believes that,in LDCs, a doubling of the growth rate of private investment would be a desirable target. About twice the current growth rate of private investment is needed there to give it a meaningful complementary financing role next to public investment and overseas development assistance (ODA).
UNCTAD proposes a set of principles to deal with the inevitable policy dilemmas that arise with increasing involvement of private investors in SDG-related sectors, many of which are sensitive or of a public service nature. They include (i) balancing a climate conducive to investment and the removal of barriers to investment with the protection of public interests through regulation; (ii) balancing sufficiently attractive returns to private investors with accessibility and affordability of services for all; and (iii) balancing the push for more private investment with the parallel push for more public investment and ensuring complementarity.
The Report develops a concrete Action Plan for Private Investment in the SDGs, presenting a range of policy options that respond to challenges in mobilizing funds for investment in SDGs, channeling such funds to SDG sectors, and maximizing positive impacts while managing risks.
UNCTAD specifically suggests that a focused set of action packages can help shape a Big Push for private investment in sustainable development:
1. A new generation of investment promotion and facilitation. SDG investment development agencies to develop, market, and facilitate pipelines of bankable projects in SDG sectors.
2. SDG-oriented investment incentives. Restructuring of investment incentive schemes to facilitate sustainable development projects, moving from "location-based" incentives towards "SDG-based" incentives.
3. Regional SDG Investment Compacts. Regional and South-South initiatives towards the promotion of SDG investment, especially for cross-border infrastructure development and regional clusters (e.g. green zones).
4. New forms of partnership for SDG investments. Specific proposals include partnerships between outward investment agencies in home countries and investment promotion agencies (IPAs) in host countries. They also include a multi-agency technical assistance consortium to support LDCs.
5. Enabling innovative financing mechanisms and a reorientation of financial markets. Options include innovative tradable financial instruments and dedicated SDG funds, seed funding mechanisms, and new “go-to-market” channels for SDG projects. Reorientation of financial markets also requires integrated reporting.
6. Changing the business mindset and developing SDG investment expertise. A curriculum for business schools that generates awareness of investment opportunities in poor countries and that teaches students the skills needed to successfully operate in developing-country environments is a specific suggestion.
The Action Plan for Private Investment in the SDGs is meant to serve as a point of reference for policymakers at national and international levels in their discussions on ways and means to implement the SDGs. Your feedback, comments and ideas through this site will be invaluable to the further development of the action plan.