Global Outlook on Financing for Sustainable Development 2021
A New Way to Invest for People and Planet
The Global Outlook on Financing for Sustainable Development 2021 calls for collective action to address both the short-term collapse in resources of developing countries as well as long-term strategies to build back better following the outbreak of the COVID-19 pandemic. The financing gap to achieve the Sustainable Development Goals (SDGs) in developing countries was estimated at several trillions of dollars annually before the pandemic. The report demonstrates that progress to leave no one behind has since reversed, and the international community faces unprecedented challenges to implement the holistic financing strategy set out in the Addis Ababa Action Agenda (AAAA). The report finds that trillions of dollars in financial assets held by asset managers, banks and institutional investors are contributing to inequalities and unsustainable practices. It highlights the need to enhance the quality of financing through better incentives, accountability and transparency mechanisms, integrating the long-term risks of climate change, global health, and other non-financial factors into investment decisions. The report concludes with a plan of action for all actors to work jointly to reduce market failures in the global financial system and to seize opportunities to align financing in support of the 2030 Agenda for sustainable development.
Overview
The Decade of Action for the Sustainable Development Goals (SDGs) starts with a crisis: as the COVID‑19 pandemic unfolds, progress toward the goals is in danger of slowing – and even reversing with poverty expected to rise for the first time in more than twenty years. The crisis has increased inequalities, and not all countries can raise the funds necessary on domestic or international markets to effectively respond and recover. Financing for the sustainable development of developing countries risks collapsing, with all resources available under stress, domestic and external, public and private. Even before COVID-19, financing for the SDGs was not enough. Now, external financing to developing countries could drop by an estimated USD 700 billion in 2020. Revenues will fall further than gross domestic product (GDP) (OECD, 2020[1]). The scissor effect of SDG financing – increasing needs and declining resources – has been magnified (). The USD 2.5 trillion annual SDG financing gap in developing countries is predicted to increase due to global economic uncertainty and an estimated USD 1 trillion gap in COVID-19 emergency and response spending in developing countries compared to OECD countries. As a result, the annual SDG financing gap in developing countries could increase by USD 1.7 trillion, i.e. about +70% in 2020. It is estimated that in addition to the USD 2.5 trillion annual SDG financing gap, developing countries as a whole would require an additional USD 1 trillion in recovery spending to match recovery spending carried out by OECD countries over the same period. Compounding the gap in both recovery spending and SDG financing, the report further estimates a potential drop of USD 700 billion in external private finance in 2020. These figures provide an order of magnitude of the growing financing needs and limitations to access financing in developing countries The estimation of additional recovery spending in developing countries to reach a similar magnitude of recovery spending in OECD countries, calculated on the basis of the recession as forecast at the time of this report’s publication.
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