The 17 Sustainable Development Goals (SDGs) adopted by United Nations member states in 2015 were aimed to address a wide range of social, economic, and environmental challenges by 2030. However, the lack of finance has been a key challenge hindering progress towards achieving SDGs. The annual SDG financing gap for developing countries is estimated at $4.2 trillion — up from $2.5 trillion pre-pandemic. Acknowledging this challenge, India has sought for new instruments for financing sustainable development goals.
India’s Sherpa Amitabh Kant, while addressing the pre G20-summit press conference here acknowledged that “we are way behind on SDG goals like improving the education, health and nutrition standards. Climate actions also require finance for the Global South.” For instance, for climate action alone, $100 billion annually is needed in developing countries.
There is an increased recognition that addressing SDG-related financing gaps would require significant improvements in mobilizing domestic resources, accessing innovative private finance, and leveraging international development cooperation. The resource mobilization landscape is more challenging for some countries due to the current international financial architecture, their underdeveloped national financial systems, changing priorities of traditional providers, the appearance of new actors, and the use of new financial instruments – all adding to the complexity of SDG financing.
“As the SDG financing gap has increased, the availability of resources has decreased. Achieving the SDGs would require mobilization and effective deployment of massive resources. Also, investments need to be tailored. For example, financing required for SDG dealing with social sectors works very differently from investments needed for infrastructure development, such as roads and ports. As a result, financing the SDGs requires a complex blend of public and private sources,” says Meenakshi Kathel, Chief Advisor, Strategic Planning and State Outreach, United Nations Development Program India.
“To achieve this, countries must endorse and implement a $500 billion per year Sustainable Development Goals stimulus plan by 2030. This requires immediate action for addressing the high cost of debt, scaling up affordable and long-term financing,” said Davinder Sandhu, Co-Founder & Chairman, Primus Partners
For India, domestic financing, which includes all forms of government public expenditure, remains the key driver for financing the SDGs. Blended finance - which aims to leverage public finance to attract private finance to increase the scale of financing for sustainable development, is also an important source. In addition to green bonds, which are aimed at environment-related projects, there has been a rise in social and sustainability bonds, which focus on projects that can positively impact the larger ambit of the SDGs.
“The rise of green, climate or SDG financing investment instruments can be located within the growing interest globally in measuring and reporting the impact of investments on the SDGs. Further, India is the first country in the world to make corporate social responsibility (CSR) mandatory, which has opened new avenues of financing to impact the SDGs. In FY 2022, over Rs 25,000 crore was spent under the CSR Act,” added Kathel.
Experts believe that while no single financing source is sufficient to close the gap, there is a need for interplay. Hence, it is essential to link SDG financing gap analysis with investment opportunities by exploring an expanded fiscal space and other innovative financing tools.