Foreword: Investing in a better sustainable development market
In 2015, the international policy community made a marked shift away from framing the world as donors versus recipients, to embrace a shared development agenda. With conflict- and climate-driven crises reminding us of our interconnectedness, this repositioning was well overdue. It’s time for the funding design for our global agenda to match this shift. Financing for sustainable development is not a cost; it is an investment. Rather than a static web of providers and receivers, today’s ecosystem of financing for sustainable development (FSD) should be seen as a dynamic market, with providers competing to respond to global demands. Healthy competition will help to drive innovation, better tailor financing to the needs of developing countries, and promote higher social and economic returns.
The Global Outlook on Financing for Sustainable Development takes a fresh look at the inter-linkages between sustainable development finance and policy, revealing that many paradoxes and inconsistencies exist. The sustainable development finance market is still in its infancy. This must be fixed through ambitious policy reforms (both in donor and recipient countries. In order to produce optimal financing mixes for developing countries, this market needs a triple shift: more transparency; new international standards and greater policy coherence. Ultimately, this will close emerging policy gaps like debt sustainability. A better FSD market will also reduce asymmetries of information with sustainable development impact metrics for investors. And, the “customers” of sustainable development finance will be empowered to make optimal choices. A properly functioning market calls for a more strategic interplay of beneficiaries, intermediaries and suppliers, so that each dollar spent is maximised and impactful.
The role of official development assistance (ODA) does not shrink in this market: if anything, it is more relevant to ensure that no country and no one is left behind. OECD countries’ ODA is driven by a unique mandate, and, some argue, a moral imperative, to support development in countries most in need – including least developed countries, small island developing states, and fragile states. ODA is the principal investor in long-term resilience and stability. The Global Outlook acknowledges the role of ODA working in unison with private sector investors, the tax revenue system, migrants, philanthropists and others outside of traditional development circles, to support development goals.
A better FSD market will not only mobilise new finance flows – some of which are catalysed by ODA – it also demands better orchestration of all resources. We need to improve the quality of public and private investment while we grow the market. Private sector actors, for example, are called on not just to help underwrite the SDGs but “to engage as partners in the development process, to invest in areas critical to sustainable development, and to shift to more sustainable consumption and production patterns” (United Nations, 2015). Our goal must go beyond turning billions into trillions. The larger objective is to turn all existing finance into more impactful investments for the billions of people that still live in extreme poverty today.
Within the OECD, this cross-sectoral approach required close collaboration of four directorates to produce this report – the Development Co-operation Directorate, the Development Centre, the Centre for Tax Policy and Administration, and the Directorate for Financial and Enterprise Affairs. Further contributions were provided from the Office of the Secretary General, the Public Governance Directorate, among other Directorates and divisions. The Global Outlook will exist at the OECD not only as a report, but a platform to build momentum and resources for a better informed FSD market amongst OECD actors and with the UN, partner countries, and private investors.
Jorge Moreira da Silva,
Director,
Development Co-operation Directorate