Financing for sustainable development needs institutional and policy reform but the real cost of (un-)sustainable development remain vague
Right in time for the Spring Meetings of the World Bank Group the United Nations Inter-agency Task Force on Financing for Development launched the Financing for Sustainable Development Report 2021 (FSDR 2021). The report is a lot about investments, their financing but also the need to improve the enabling environment including the reform of policies and institutions. Financial experts love numbers but what you won’t find in the report are updated estimates on the cost (money, lives and other resources) for both cases, achieving the SDGs by 2030 and non-compliance with the SDGs by that date. So, we still don’t know exactly what is at stake. However, the report calls for immediate action to avoid a lost decade for many.
Immediate action: Financing sustainable development in times of COVID-19
The Secretary-General of the United Nations states in his foreword that the COVID-19 pandemic has dramatically set back progress on sustainable development, exposing and exacerbating inequalities among peoples and countries. According to the report
“… the focus must remain on containing the pandemic and addressing its socio-economic fallout for all. There is a grave danger of a sharply diverging world—with one group of countries recovering on the back of strong stimulus measures and digital acceleration, and many others sinking deeper into a cycle of poverty, hunger, unsustainable debt and austerity—potentially facing another lost decade of sustainable development and failing to achieve the SDGs. Preventing this scenario must be a foremost priority in global recovery efforts.
The 2021 Financing for Sustainable Development Report of the Inter-agency Task Force focuses on this urgency and calls for:
- Meeting ODA commitments and providing fresh concessional financing for developing countries, especially Least developed Countries (LDCs), along with replenishing the capital of Multilateral Development Banks (MDBs) as needed; sustaining a high level of positive net flows at highly concessional terms to International Development Association IDA-eligible countries through a successful replenishment of IDA20; Fully funding the Access to COVID-19 Tools (ACT) Accelerator, to ensure rapid and equitable access to vaccines, diagnostics and therapeutics;
- Provision of a new allocation of Special Drawing Rights (along with voluntary use of SDRs of countries in strong external positions to help countries most in need) in support of liquidity for developing countries to fight COVID-19 and its economic/social fallout; an extension of the G20 Debt Service Suspension Initiative as circumstances demand; and debt treatments from official bilateral and commercial creditors for countries with unsustainable debt levels or protracted financing gaps.”
(Source: Financing for Sustainable Development Report 2021, page xiii)
Governance reform: Financing sustainable development requires an institutional and policy reform plus a strengthening of multilateralism
The Secretary-General makes in his foreword an interesting remark on the framework for sustainable development: “Investment alone, however, is not enough. To address the systemic nature of global risks including climate change and pandemics, we must reform our institutional and policy architecture, strengthen multilateralism, and create new platforms and networks for global cooperation.” (page iv)
In chapter 6 on Global governance and policy coherence the report points to the need to increase the coherence and consistency of the international monetary, financial and trading systems: “Building on the Monterrey Consensus, the Addis Agenda calls for coherence across a broader range of policy areas, including investment, development policy, and environment institutions and platforms. The deeper coordination that is now needed covers additional areas, such as tax, competition, and non-economic issues such as climate change, disaster risk, human rights, gender and migration.” (page 154)
In addition, it briefly points to the need that national policy makers ensure a coherent policy mix to achieve the SDGs (page 154). Good governance and accountable institutions are highlighted as key for designing and implementing coherent policies for achieving the SDGs. What that could mean is described for instance in chapter III.G for the field of science, technology, innovation (STI) and capacity-building. According to the report STI development and implementation play an essential role in addressing increasingly complex and unpredictable threats in a globally interdependent world – beyond the immediate COVID-19 pandemic.
In addition, it is stated that diverse fields of scientific knowledge contribute directly and indirectly to building resilient societies. These and other references to non-economic aspects are interesting but they may be selective and not comprehensive. In addition, COVID-19 is an example of an emerging issue which dramatically increases the cost while it has dramatically set back the progress on sustainable development. It would be interesting if and, if yes, future dynamic developments can and are factored in.
The cost: Cost of sustainable development and of doing nothing
Considering the many goals and targets of the interrelated and dynamic web of SDGs it is plausible that it is challenging to estimate the full cost in for the 2030 Agenda implementation. Nonetheless, political decision-making often circles around the cost for planned activities and around the cost of not reacting to needs. Not having an updated estimation of cost risks that needs will be either not addressed at all or that they are not addressed appropriately. And financing for sustainable development becomes merely a matter of trial and error.
There is a tiny little subchapter on ‘the cost of doing nothing’ (page 16). There it is stated e.g. that in human development terms, the “cost on climate change is prohibitive” and that investments in prevention, risk reduction and resilience are a prerequisite for sustainable development (page 17). I like the message that ‘decision-making at all levels must become risk-informed’. However, this chapter is somewhat a lost opportunity because it doesn’t tell the full truth on the cost of doing nothing.
With respect to climate change there is the internationally agreed goal to limit the increase of the temperature on earth by 2 respectively by 1,5 degrees and what that would mean for the climate in the different regions of the world. That’s something governments and the public can talk about. In case of the SDGs there is nothing similar. The SDGs with their targets promise a better life but why isn’t there an estimation of the overall, economic, social and environmental costs for the case of non-compliance? These costs (finances, lives, other resources etc) could be estimated for different possible scenarios but having them would help to imagine what we’re talking about when it comes to SDG implementation and necessary reforms institutional and policy reform.
I recommend reading the report or to scan through and to get a taste of the challenge of financing sustainable development. Maybe you’ll conclude like me that not all answers on pending questions can be expected from financial experts alone. Instead, it needs the contributions by national development experts, urban and rural planners and many other sector experts to get a full picture on costs and financing opportunities. In that case the FSDR 2021 is an excellent starter.
Policies and Governance for Resilient and Sustainable Cities and Regions
