Scaling Up SDGs Financing Effectiveness: Stronger Commitments, Greater Actions - Resident Coordinator, Gita Sabharwal's Remarks

Resident Coordinator of UN in Indonesia's Remarks on Panel Discussion at the Side Event of High-Level Multistakeholder Partnership in Bali, 3 September 2024

Moderator: Yanuar Nugroho

Q: What is the current state of SDG financing in the developing countries? What are the main obstacles hindering the effectiveness of current SDG financing initiatives?

• Thank you, Pak Yanuar.
• Let me begin by saying that SDG financing and SDG progress go hand in hand.
• SDG progress should determine the financing gap and the nature of the required financing to be brought to bear on SDG acceleration.
• I want to speak to these issues in the context of Asia and the Pacific and specifically bring in the example of the two countries where I have served as Resident Coordinator – Indonesia and Thailand.
• In the Asia-Pacific region 17% of SDG indicators are on track, the same as the global average.
• Indonesia’s progress on SDGs has bucked this trend with far more robust progress as 62% of indicators are on track. Thailand has done well too with a rate of 42%.
• In both countries as well as across Asia and the Pacific, accelerating SDG progress hinges on a whole-of-society approach, led by Governments in close partnerships with the private sector and civil society.
• Encouragingly, Governments have sought to establish the financing gaps for meeting the SDGs by 2030. For Indonesia this gap stands at $1.7trillion while for Thailand it is $400 billion.
• As the UN, we facilitate this process by lending technical assistance in partnership with Governments to mobilise financing to bridge gaps.

Q: Main obstacles hindering the effectiveness of current SDG financing initiatives

• The effectiveness of SDG financing will depend on country contexts.
• Emerging economies like Indonesia enjoy the advantages of dynamic private sectors, deep capital markets, low levels of deficits and growing economies. These create fiscal spaces cutting across the public and private sectors as well as international financial institutions to support SDG investments.
• Countries with moderate and high debt levels, which include 60 nations, will depend on development assistance to support SDG investments.
• This is where donors, international financing and commitments by developed countries to meet their 0.7% of Gross National Income play a critical role.
• DA will need to be complemented with transfers of technology for deep decarbonisation, broadening access to markets, and building capacity to empower countries to accelerate their SDG progress.
• In this context, the UN Secretary-General has proposed an SDG stimulus package of at least $500 billion annually for affordable, long-term financing together with reforms of IFI to unlock additional financing for developing nations.
• Ultimately, bridging the SDG financing gap requires not just increased investments but also a coordinated global effort to ensure that every dollar mobilized translates into meaningful progress for all.

Q: Are there innovative financing mechanisms that could be explored to mobilize additional resources for SDG implementation? How can the UN play an active role in coordinating and advocating for increased SDG financing in countries, especially in developing countries?

Innovative financing mechanisms

• Indonesia is a leader in blended and innovative financing.
• I know many countries across Asia, Africa and South America are learning from Indonesia on how to invest in financing mechanisms to mobilise capital from the private sector, CK and banks.
• In a fiscally constrained global environment Governments will need to leverage innovative financing models much more strategically to bridge SDG-related financing gaps.
• There are 4 in particular that I would like to address given the UN’s engagement.

• First, thematic bonds aligned to SDGs such as green, blue and orange bonds.
• The maturity of Indonesia’s bond market, which witnessed the issuance of $52 billion last year, is a big advantage.
• There is clearly a demand from national and international financial markets for risk-free instruments targeting ESG investments such as sovereign bonds.
• Going forward, this can be leveraged much more to mobilise additional SDG financing.
• UNDP, together with the Ministry of Finance, has mobilised $10 billion through SDG bonds, green sukuks and blue bonds. I also know that BAPPENAS is considering piloting coral bonds and orange bonds targeting the empowerment of women towards gender equality and SDG progress.
• The Government and the UN have assessed the financial viability of municipal bonds for 8 prospective provinces. If this goes forward, it could generate $2 billion in additional financing for SDG localization.

• Second, UNEP works closely with five commercial banks with an asset base of $116 billion to institutionalize sustainable financial frameworks and put in place transitional financing plans to scale up ESG portfolios.
• These banks have signed up to UN principles of responsible banking.
• As the share of ESG portfolio rises, this will translate into increased financing for ESG, which will support the decarbonisation efforts of the government. A 1% shift in the direction of ESG will imply over $1 billion of additional investment for reducing GHG emissions.
• Last week I saw how a state-owned bank is leveraging its ESG portfolio to finance affordable green housing while working with developers and suppliers to create an ecosystem for energy-efficient and recycled construction materials.
• In future we will need much more of this scale and type of financing.

• Third, Indonesia can also leverage Islamic Finance.
• The IF asset base, including sharia banking and non-banking sectors, securities, stands at $138 billion.
• Zakat contributions and waqf assets in the country are valued at $15 billion and $12 billion, respectively. They are largely invested in education, healthcare and social welfare services.
• Similarly, Zakat funds at provincial level provide an opportunity for institutionalising financing in support of people and planet as an integral part of SDGs.

• Fourth, partnering with capital markets, including investors and asset managers, to generate capital for investments in ESG stocks.
• In Thailand this has generated $150 million, which serves as an incentive for listed companies to disclose their carbon footprints and plans for net zero.
• Relying solely on fiscal and public funding is no longer sufficient to achieve the SDGs. Innovative financing mechanisms must complement these efforts.
• Indonesia and Thailand’s examples are a testament to what is possible when we think collectively and collaboratively.

Q) How can we ensure developing nations have equitable access to resources needed to achieve the SDGs? What strategies is UN employing to mobilize increased and more predictable financing from traditional and non-traditional donors and how is UN addressing donor fragmentation and ensuring alignment with national development priorities?
 

• There is no one-size-fits-all solution to this complex question.
• However, there are 3 approaches that we can leverage further in support of equitable, predictable and coordinated financing.
• First, SSTC harnesses the practical experiences and innovative solutions of countries with similar development contexts to share good practices and lessons learned.
• Second, convening financial stakeholders – B, I, AM, KM for a joined-up efforts for unlocking additional financing for SDGs.
• Third, bringing on board emerging donors – Indonesia Aid is a great example of this. Their endowment fund generates predictable financing that the government is using to support the Global South.
• Multilateralism provides a platform for addressing these issues while ensuring that countries uphold their commitments made in support of SDGs and climate.
• This enhances their collective capacity to achieve the SDGs on schedule.
• SDG financing it is not just about increasing the funds, but strategically aligning different sources under a shared commitment.

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