Implementing the Task Force’s Action Agenda can close the gap in financing the SDGs. The task at hand is to direct financing towards countries, businesses, projects and products that help to achieve the SDGs. The Task Force has developed an Action Agenda to enable the call to action to be ambitiously and effectively implemented. The Action Agenda is multi-faceted and highlights the need to invest more in on-going efforts as well as taking forward an expanded, challenging agenda for change.
The Action Agenda sets out how digitalization can be harnessed to deliver the financing needed by investing in digital infrastructure, encouraging market developments, empowering citizens and securing the necessary governance innovations.
Realizing the opportunity of implementing the Action Agenda will be a challenge. The call is for systemic changes in finance, empowering citizens and enabled by investments and institutional innovations. Digitalization opens the way to this systemic change. Yet it has to be guided to overcome barriers and avoid risks, and to take advantage of the window of opportunity created by its current, disruptive effects. The current health and economic crisis due to COVID-19 increases the challenges in addressing such long-term needs. At the same time, its impact in accelerating all aspects of digitalization may ultimately make it easier to implement the Action Agenda.
Every country can and should advance digitally-enabled, citizen-centric financing of the SDGs. The Call to Action and Action Agenda are ambitious and achievable and are relevant to all countries. Specific aspects and focus areas, however, depend on national priorities, the maturity of digital infrastructure, public financing and financial markets, capabilities and financial governance arrangements. There is a sequencing dependent on a country’s stage of development:
- Less developed countries might focus on building affordable digital infrastructure, developing digital skills, providing secure digital IDs, and ensuring access to core financial services.
- Countries that have these foundations in place might place more emphasis on secure savings, SME borrowing and more transparent and efficient public finance and tax collection.
- Countries with significant pools of domestic savings might emphasize new channels for aggregating savings to be used for longer term sustainable development financing.
- Countries with more sophisticated financial and capital markets might prioritize improved risk pricing, impact investing, and operationalizing the rights of shareholders and pension policyholders in shaping investment policies.
Every country can and should advance digitally-enabled, citizen-centric financing of the SDGs, with less developed countries being able to harness catalytic opportunities in leapfrogging to more sophisticated, impactful financing arrangements.
International cooperation is essential to harnessing digitalization to finance the SDGs. While every country needs robust digital foundations and ecosystems, international cooperation will be of particular importance to different countries.
The UN and other international bodies should develop more integrated, leading edge international cooperation to support countries in developing and implementing strategies and policies that accelerate sustainable digital financing ecosystems.
Ambitious action requires connecting the dots between several communities across public and private actors. These actors are too often separated by tradition, inertia and a lack of shared knowledge. Policymakers and regulators, and market and civil society actors will have to work together to realize the catalytic opportunities, evolve sustainable digital financing ecosystems, and build inclusive international cooperation and governance innovations. Advocates of sustainable finance need to get more digital. Digital finance communities and data providers need to get more savvy about sustainable development. Examples include UK FCA’s Green Fintech Challenge, GSMA Mobile for Development Innovation Funds and the Future of Sustainable Data Alliance. Financial regulators need to place more emphasis on the SDGs.
More could be done to mainstream the SDGs into digital financing innovation. Regulatory sandboxes and innovation hubs need to place more emphasis on the SDGs that shine a light on tomorrow’s market opportunities, one example of this is the Pacific Islands Sandbox. Data providers to the investment community need to make better use of publicly available data to offer their clients better information on SDG-related risks and impacts. Financial regulators are starting to recognize the relevance of climate risks for financial stability, but they have a long way to go to take account of the wider SDG landscape in incentivizing and regulating digital finance.
Empowering citizens in financial decision-making will not happen automatically. The detachment of public and private finance from citizens has become an embedded feature of global finance. There is much to do in overcoming the resistance of those who are sceptical or cynical about citizens taking being agents of change, or who have vested interests in the status quo. Citizens need to be better educated to make informed decisions. Policy-makers and regulators will need to secure the data flows needed for SDG-aligned digital financing innovation, and the rights and opportunities of citizens in shaping financing decisions. Market actors have a key role to play in empowering citizens by offering specialized products and services.
Exemplary initiatives, including those the Task Force has catalysed, illustrate potential. The Task Force has identified many relevant and inspiring use cases as part of its landscape mapping and has highlighted some of these in its report. It has also catalysed a small portfolio of pathfinder initiatives that particularly exemplify ambitious and innovative action across key opportunity areas and digital foundation recommendations.
Collectively, these initiatives demonstrate how key features of digitalization – more and better data, cheaper transactions and financial intermediation, and innovative financial products – could be harnessed toward financing sustainable development by giving citizens more options to make informed and purposeful decisions.