Carrying out the United Nations 2030 Agenda for Sustainable Development, with its Sustainable Development Goals (SDGs), calls for more than $90 trillion in investments by 2030 – half of which must be provided by the private sector, according to a 2015 United Nations Conference on Trade and Development. Malango Mughogho, founder and managing director of ZeniZeni Sustainable Finance, explains how the private sector can assist governments with this essential development work.
How has the pandemic affected investments required to meet the SDGs, and are the goals realistic and achievable?
Before the pandemic, the financing gap to achieve the SDGs in developing countries by 2030 was estimated to be $2.5 trillion per year. And this figure may be underestimated for SDGs which are affected by climate change impacts, since there is no certainty of the upper level of global warming that countries will guarantee. The Covid-19 pandemic, with its unprecedented socioeconomic impacts, has only increased this financing need. That said, the pandemic is a big, dark cloud with a silver lining. The dark cloud is obvious, given the lives lost and the long-term economic impact. But the pandemic has focused our attention on our connectedness as we strive to attain the health and wellbeing-related Global Goals in particular.
It was always assumed that communicable diseases were not a threat to wealthier countries as they had enough hospitals and healthcare workers to cope, but the pandemic has shown that everyone is vulnerable. Every country needs to develop better infrastructure and response mechanisms, and value essential workers in both healthcare and the care industries. Sharing technology and intellectual property will be necessary to address both healthcare and climate- related issues.
What are the different financing mechanisms available for SDG- related investments? And which do you think should be prioritised?
The International Finance Corporation, the private sector arm of the World Bank Group, holds to the principle that an intent to create impact is impact investing, whether it takes the form of a loan, grant or some other instrument.
Strategic intent, alongside key principles such as monitoring and redesign, is the key issue here – identifying a need, then working out how to finance it. Blended finance – where public and private money is blended to fund the same project – can help address some of the budgetary constraints that governments experience, and after-profit CSI money can be used to take on some risk in finding new ways to fund the SDGs.
The private sector has the time, capacity and skills to test various approaches – it is more likely to innovate and find better ways to do things as we recover from the pandemic and successful initiatives can be rolled out at scale, in partnership with other businesses and, when needed, the government. Instruments such as thematic bonds for SDGs are popular but these are still just bonds, which have been around for a long time. What has changed is a stronger critique of where the money invested in the bond is sourced from, how it is used and what real-world impacts it has.
How is South Africa funding its commitment to the SDGs? What are the challenges?
Alongside its own national plans, the South African Government is the main funder of the SDGs in the country and is reliant on the usual sources of government revenue to do so: taxes and tariffs, transfers and borrowing. The private sector can support government’s efforts to achieve the goals and targets of the SDGs provided it aligns with government policy and partners with other stakeholders rather than competing with them.
South Africa could learn from Botswana, where a centralised budget is set aside to fund service delivery by non-profit organisations. This guaranteed funding has led to important strides in education and health in that country.
How can companies and NPOs tap into sustainable development financing?
It makes more sense to ask how companies and NPOs are contributing to sustainable development and then thinking about funding. This is straightforward for companies because, if a company aligns itself with the Principles for Impact Management, for example, it can use traditional sources of funding to put those principles into practice, such as approaching its bank to provide a low-interest, sustainability- linked loan. Through public-private cooperation, they can leverage funding to help deliver a project or programme of work. And there are impact funders that may take equity in businesses that deliver sustainable impact.
NPOs that are also public benefit organisations deliver sustainable development by definition. Accessing funding can be challenging because NPOs need grant funding. However, an NPO can partner with the government or a private-sector company and receive funding to deliver a project or programme on their behalf. This is the model used in the Inclusive Youth Employment Pay for Performance Platform in South Africa, where the NPO Harambee was paid by government and other funders to identify employment opportunities and deliver training to 600 excluded young people nationally.
Source: Trialogue Business in Society Handbook 2021