World Economic Situation and Prospects 2017
Chapter III of the United Nation’s World Economic Situation and Prospects 2017 analyses the current trends in finance for sustainable development and discusses the risks facing developing countries as they seek to implement the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda.
Chapter III: Finance for Sustainable Development
Closing the investment gap to achieve the Sustainable Development Goals (SDGs) by 2030 requires the mobilization of significant financial resources. The global environment, including the weak global economy, low trade growth, soft commodity prices, volatile international capital flows, and the increase of geopolitical risks make raising long-term investment particularly challenging.
At the Third International Conference on Financing for Development in July 2015 in Addis Ababa, Member States of the United Nations agreed that both private sources of finance (including financial and direct investment) and public resources (including domestic and international) are necessary to achieve the sustainable development and the SDGs. Public and private resources should not be seen as substitutes, as they have different investment objectives. Investment in sustainable development is further challenged as many investors evaluate risk and return over a short-term horizon. This myopia leads to not only herd behaviour and volatility, but also failure to incorporate long-term risks, such as those associated with climate change, in investment decisions. This short-term investment perspective is reflected in the behaviour of international capital flows, particularly commercial bank lending and portfolio flows from institutional investors. International capital inflows also remain subject to periodic episodes of high volatility, often triggered by global systemic risks.
Achieving the SDGs will require policies and regulatory frameworks that incentivize changes in investment patterns to better align investment with sustainable development. Despite the challenging global economy, public and private actions can effect change. Changes in public policies and regulatory frameworks have to be accompanied by increases in and more effective use of public finance. Official development assistance (ODA) and other international public finance is a critical complement to domestic revenue mobilization. Development banks, both national and multilateral, are also well-placed to contribute to the mobilization of additional resources, in particular in the provision of long-term capital for sustainable infrastructure investments.
Find the full WESP 2017 publication here.
The World Economic Situation and Prospects is a joint product of the United Nations Department of Economic and Social Affairs, the United Nations Conference on Trade and Development and the five United Nations regional commissions. Staff of the Financing for Development Office lead the writing of the third chapter in the report on “Finance for Sustainable Development”.
