Global Goals Yearbook 2018
The future of the United Nations is more uncertain than at any time before. Like his predecessors, UN Secretary General, Antonio Guterres, has promised to reform the United Nations. Drivers are two major agreements: The 2030 Agenda for Sustainable Development and the Paris Climate Accord. Both stand for a move away from statal top-down multilateralism towards new form of partnership between the public and the private sector as well as the civil society. The Global Goals Yearbook, published under the auspices of the macondo foundation, therefore covers „Partnership for the Goals“ as its 2018 main topic. Our world is truly not sustainable at this time. To make the 2030 Agenda for Sustainable Development a success story, we need an enormous increase in effort. This cannot happen without help from the private sector. But businesses need a reason to contribute as well as attractive partnerships that are based on win-win constellations. We have no alternative but to rethink the role that public–private partnerships can play in this effort. That is why United Nations Secretary-General António Guterres is calling upon UN entities to strengthen and better align their private-sector engagement. In every change there is a new chance. The Global Goals Yearbook 2018 discusses the multiple aspects of how private sector engagement can be improved. Recommendations are, among others, to revise multilaterism, partnership models and processes and to invest more in trust, a failure culture as well as metrics and monitoring. When businesses engage in partnerships for the Goals, this is more than just signing checks. It means inserting the “do good” imperative of the SDGs into corporate culture, business cases, innovation cycles, investor relationships, and, of course, the daily management processes and (extra-)financial reporting. The Yearbook includes arguments from academic and business experts, the World Bank and the Club of Rome as well as UN entities, among them UNDP, UNSSC, UNOPS, UN JIU, and UN DESA.
The future of the United Nations is more uncertain than at any time before. Like his predecessors, UN Secretary General, Antonio Guterres, has promised to reform the United Nations. Drivers are two major agreements: The 2030 Agenda for Sustainable Development and the Paris Climate Accord. Both stand for a move away from statal top-down multilateralism towards new form of partnership between the public and the private sector as well as the civil society. The Global Goals Yearbook, published under the auspices of the macondo foundation, therefore covers „Partnership for the Goals“ as its 2018 main topic.
Our world is truly not sustainable at this time. To make the 2030 Agenda for Sustainable Development a success story, we need an enormous increase in effort. This cannot happen without help from the private sector. But businesses need a reason to contribute as well as attractive partnerships that are based on win-win constellations.
We have no alternative but to rethink the role that public–private partnerships can play in this effort. That is why United Nations Secretary-General António Guterres is calling upon UN entities to strengthen and better align their private-sector engagement. In every change there is a new chance.
The Global Goals Yearbook 2018 discusses the multiple aspects of how private sector engagement can be improved. Recommendations are, among others, to revise multilaterism, partnership models and processes and to invest more in trust, a failure culture as well as metrics and monitoring.
When businesses engage in partnerships for the Goals, this is more than just signing checks. It means inserting the “do good” imperative of the SDGs into corporate culture, business cases, innovation cycles, investor relationships, and, of course, the daily management processes and (extra-)financial reporting.
The Yearbook includes arguments from academic and business experts, the World Bank and the Club of Rome as well as UN entities, among them UNDP, UNSSC, UNOPS, UN JIU, and UN DESA.
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REFINANCING PARTNERSHIPS<br />
Act<br />
Plan<br />
Check<br />
Do<br />
payment for environmental services, better<br />
labor and community relations, and<br />
even improving a project’s prospects for<br />
financing are all factors. Projects such as<br />
Brazil’s Mato Grosso do Sul State Road<br />
Transport Project are good examples; in<br />
that case, the sustainable approach to<br />
erosion control saved about $46 million.<br />
Underweight on infrastructure<br />
Notwithstanding these benefits, relatively<br />
few institutional investors – who<br />
manage around $100 trillion in global<br />
assets under management – have direct<br />
exposure to alternative assets. Today, infrastructure<br />
makes up less than 1 percent<br />
of institutional investor portfolios. Critically,<br />
only a fraction of this is going into<br />
developing countries or being deployed<br />
for “sustainable” infrastructure.<br />
There is no shortage of investment capital<br />
looking for long-term, stable returns, for<br />
which sustainable infrastructure could<br />
be an attractive asset class. The growth<br />
of the green bond market – from $7<br />
billion in 2012 to an estimated $295<br />
billion outstanding at the start of <strong>2018</strong><br />
– shows appetite among investors for<br />
this kind of product.<br />
But infrastructure – whether equity or<br />
debt, in both developed and emerging<br />
markets – can be a difficult asset class.<br />
It is illiquid. Regulatory frameworks<br />
limit the potential for many institutional<br />
investors to play. The business<br />
models often involve substantial risks for<br />
counterparts. FX hedges in international<br />
markets are expensive and typically only<br />
available over a relatively short time<br />
frame. Infrastructure remains a sector<br />
that is prone to corruption.<br />
Institutional weaknesses and missing<br />
markets also act as barriers to matching<br />
large-scale capital with sustainable<br />
investment opportunities. All this compounds<br />
to limit capital flows, especially<br />
cross-border capital into developing<br />
countries. For emerging markets, the<br />
high perception of country risk adds to<br />
the complexity.<br />
But to deliver the SDGs by 2030, we need<br />
to rapidly accelerate investment into<br />
resilient economic, social, and natural<br />
infrastructure around the world. Mitigating<br />
some of the investor risks associated<br />
with sustainable infrastructure investment<br />
by “blending” public and private<br />
capital can help.<br />
Mitigating risks, mobilizing investors<br />
At its simplest, “blended finance” is the<br />
use of development capital to mobilize<br />
additional private finance for SDGrelated<br />
investments. Blending may be<br />
one of the most important ways to<br />
“tip the scales,” making assets such as<br />
sustainable infrastructure in emerging<br />
markets “investable” for mainstream<br />
capital providers.<br />
There are already some good examples<br />
of blended finance at work. Instruments<br />
such as guarantees, insurance, currency<br />
hedging, technical assistance grants, and<br />
first-loss capital from development agencies,<br />
development banks, and forwardleaning<br />
foundations are crowding in<br />
commercial investment for developing<br />
countries. The Emerging Africa Infrastructure<br />
Fund (EAIF) is one example of<br />
a “blended” vehicle that has attracted<br />
commercial investment for sustainable<br />
infrastructure by using first-loss development<br />
capital from countries, including<br />
the United Kingdom, Sweden, Germany,<br />
and the Netherlands. EAIF investments<br />
range from a water supply project in<br />
Rwanda to solar in Uganda. <strong>Global</strong> insurer<br />
Allianz recently committed €120<br />
million to the EAIF as part of a $385<br />
million fundraising round. As the first<br />
institutional investor, the 12-year loan<br />
arguably signals a shift in appetite for<br />
emerging-market risk.<br />
The Danish DKK 4.1 billion SDG Fund is<br />
another good example. It has attracted<br />
six pension funds to invest in emerging<br />
markets. Torben Pedersen, CEO of PensionDanmark,<br />
one of the investors in<br />
the fund, said that it “is a good example<br />
how to mobilize private capital on a large<br />
scale to fund the investments needed<br />
to fulfill the [SDGs]. This initiative is<br />
underlining that the best development<br />
aid is sustainable business.”<br />
The SDG Fund is the third “blended<br />
finance” vehicle in which PensionDanmark<br />
has partnered with Danish development<br />
agency IFU. Pedersen said that<br />
he is “expecting good returns from these<br />
investments and at the same time proud<br />
of contributing to the solution of the<br />
greatest societal issues ...”<br />
Blended vehicles, which can use development<br />
capital to mobilize mainstream<br />
private investment for sustainable infrastructure<br />
in emerging markets, need<br />
to be scaled and replicated as a matter<br />
of urgency.<br />
Why isn’t capital flowing?<br />
Despite growing momentum, these examples<br />
are still “one-offs”; there are<br />
barriers that prevent the blended finance<br />
market from scaling. These barriers affect<br />
different actors in the market but<br />
combine to limit flows of private investment<br />
for SDG-related assets, especially<br />
in developing countries.<br />
Investors are hampered by regulatory<br />
restrictions and face a range of >><br />
<strong>Global</strong> <strong>Goals</strong> <strong>Yearbook</strong> <strong>2018</strong><br />
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