There is an historic opportunity to reshape finance. It must be grasped now, given the urgency to finance the SDGs, and the short window of change resulting from technological disruption and the current crisis. The Task Force sets out practical agenda for action for governments, regulators, business leaders and other actors.
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:
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. |
![]() “We recommend … a ‘Global Commitment for Digital Cooperation’ to enshrine shared values, principles, understandings and objectives for an improved global digital cooperation architecture“ UN Secretary General’s High-Level Panel on Digital Cooperation
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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.
The Task Force identified as series of critical barriers and risks to harnessing digital financing for the sustainable development goals. The following tables illustrate how the recommendations in the Action Agenda address these systemic obstacles and challenges.
Barriers | How existing barriers are approached in the recommendations |
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Access to digital financial services: 750 million people lack broadband connectivity, 1 billion lack formal IDs | Accelerating citizen-centric inclusive digital foundations that advance connectivity, access to digital IDs, interoperable systems and adequately governed data markets, particularly leveraging COVID-19 stimulus packages, addresses the main barriers to digital financing of the SDGs.Furthermore, progressing incentives and institutional arrangements in support of digital financing ecosystem development will likely drive market and product innovations that serve citizens’ needs and interests, potentially enhancing citizen participation in digital financing of the SDGs. |
Access to data is critical for financial decision-making and digital financing innovation | |
Siloed and non-interoperable IT systems hinder use of data to price risk, describe impacts and underpin accountability | |
Access to appropriate digital financial services: lack of affordable, secure, relevant digital financial services | |
Demand-side inadequate digital and/or financial capabilities, including illiteracy and poverty and social norms, undermine demand and usage | Empowering citizens, individually and collectively, in securing rights and capabilities by advancing digital financial literacy programs, access to information, increased transparency, including addressing barriers for specific groups such as women and older people, can drive greater usage of digital finance and citizen involvement in financing decisions. |
Supply-side talent shortage hinders digital financing innovation, particularly in less developed countries | Regional approaches to the development of digital financing ecosystems combined with robust governance approaches to oversight of global digital financing platform will stimulate regional cooperation and private sector partnerships which facilitate local talent development and knowledge exchange. |
Weak regulatory capabilities undermine the establishment of enabling policy and regulatory environment for digital financing innovation | International cooperation in governance and policy dialogue, as well as development of domestic regulatory sandboxes and other tools will build regulatory capabilities. |
Incumbent resistance to disruption, disintermediation, and digitally-enabled transparency of their activities and rewards | Deliberate pursuit of catalytic opportunities will result in increased disruption, disintermediation and transparency as ensuing digital innovations emerge. Strengthened by adequate regulatory approaches, the potential is there to establish new norms and practices that may lead to overcoming incumbent resistance. |
Barriers | |||||||
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Access to digital financial services: 750 million people lack broadband connectivity, 1 billion lack formal IDs | Access to data is critical for financial decision-making and digital financing innovation | Siloed and non-interoperable IT systems hinder use of data to price risk, describe impacts and underpin accountability | Access to appropriate digital financial services: lack of affordable, secure, relevant digital financial services | Demand-side inadequate digital and/or financial capabilities, including illiteracy and poverty and social norms, undermine demand and usage | Supply-side talent shortage hinders digital financing innovation, particularly in less developed countries | Weak regulatory capabilities undermine the establishment of enabling policy and regulatory environment for digital financing innovation | Incumbent resistance to disruption, disintermediation, and digitally-enabled transparency of their activities and rewards |
How existing barriers are approached in the recommendations | |||||||
Accelerating citizen-centric inclusive digital foundations that advance connectivity, access to digital IDs, interoperable systems and adequately governed data markets, particularly leveraging COVID-19 stimulus packages, addresses the main barriers to digital financing of the SDGs.Furthermore, progressing incentives and institutional arrangements in support of digital financing ecosystem development will likely drive market and product innovations that serve citizens’ needs and interests, potentially enhancing citizen participation in digital financing of the SDGs. |
Empowering citizens, individually and collectively, in securing rights and capabilities by advancing digital financial literacy programs, access to information, increased transparency, including addressing barriers for specific groups such as women and older people, can drive greater usage of digital finance and citizen involvement in financing decisions. | Regional approaches to the development of digital financing ecosystems combined with robust governance approaches to oversight of global digital financing platform will stimulate regional cooperation and private sector partnerships which facilitate local talent development and knowledge exchange. | International cooperation in governance and policy dialogue, as well as development of domestic regulatory sandboxes and other tools will build regulatory capabilities. | Deliberate pursuit of catalytic opportunities will result in increased disruption, disintermediation and transparency as ensuing digital innovations emerge. Strengthened by adequate regulatory approaches, the potential is there to establish new norms and practices that may lead to overcoming incumbent resistance. |
Risks | How potential risks are approached in the recommendations |
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Data security and privacy risks are amplified as digital financing relies on growing volumes of (personal) data and a handful of IT providers | Securing rights and capabilities of citizens by advancing citizen awareness and knowledge building programs, but also ensuring adequate consumer protection mechanisms and enhanced supervisory practices will contribute to reducing fraud and building trust.
Specific attention to data management and data governance, core to the development of robust digital foundations, will help mitigate data privacy and monopolization risks. Some of these risks will be best addressed by the pursuit of catalytic opportunities, which will drive innovation and the development of the required rules and governance arrangements. |
New fraud and money laundering, for example on digital marketplaces, cryptocurrency exchanges, crowdfunding platforms | |
Irresponsible digital financial products with opaque or misleading terms and conditions and insufficient recourse measures | |
Data monopolization or exploitative use of data can stifle future digital financing innovation and undermine consumer trust | In addition to the above, addressing data monopolization may also be achieved by advancing corporate governance innovations and fostering international cooperation on data governance issues. In particular, empowering developing nations to have a say in the governance of global digital financing platforms originating from outside of their jurisdiction will help mitigate adverse effects of such platforms, such as data monopolization. |
Cybersecurity creates user and systemic risk in digital financial services as providers resort to cloud infrastructure providers | Advancing international cooperation on the governance of digital finance and in particular BigTech players will help advance solutions to addressing systemic risks caused by these platforms. This would be strengthened by embracing relevant global standards and practices that facilitate information exchange on threats. |
Unfair treatment can arise from discriminatory algorithms based on biased data or hyper-personalization of financial services | Development of local regulatory and supervisory capabilities in shaping digital financing ecosystems and addressing the new challenges brought by digitalization is an essential part of advancing digital financing ecosystems. This can be eased by promoting sandboxes and other regulatory and supervisory technology (RegTech / SupTech) solutions that will be essential in mitigating such risks as algorithmic biases. |
Short-termism, volatility trading and herd behaviour has grown with digitalization and algorithmic trading | Catalytic opportunities indirectly alleviate this specific risk by repurposing and redirecting significant financial flows towards long-term, sustainable investments. The emergence of new norms and practices stemming from systematically aligning digital finance ecosystems with sustainable development priorities will further decrease short-termism. The advancement of stress-testing standards and mandatory disclosures might further contain such risks. |
Market concentration and rent-taking derives from ever increasing returns to scale and growing complexity and opacity | The pursuit of catalytic opportunities will drive innovation and undermine rent-taking. Market concentration issues can be addressed through adequate governance arrangements, resulting from greater international cooperation on such governance issues or concerted governance and regulatory approaches among local regulators from different domains. |
The pursuit of catalytic opportunities will drive innovation and undermine rent-taking. Market concentration issues can be addressed through adequate governance arrangements, resulting from greater international cooperation on such governance issues or concerted governance and regulatory approaches among local regulators from different domains.
Risks | |||||||
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Data security and privacy risks are amplified as digital financing relies on growing volumes of (personal) data and a handful of IT providers | New fraud and money laundering, for example on digital marketplaces, cryptocurrency exchanges, crowdfunding platforms | Irresponsible digital financial products with opaque or misleading terms and conditions and insufficient recourse measures | Data monopolization or exploitative use of data can stifle future digital financing innovation and undermine consumer trust | Cybersecurity creates user and systemic risk in digital financial services as providers resort to cloud infrastructure providers | Unfair treatment can arise from discriminatory algorithms based on biased data or hyper-personalization of financial services | Short-termism, volatility trading and herd behaviour has grown with digitalization and algorithmic trading | Market concentration and rent-taking derives from ever increasing returns to scale and growing complexity and opacity |
How potential risks are approached in the recommendations | |||||||
Securing rights and capabilities of citizens by advancing citizen awareness and knowledge building programs, but also ensuring adequate consumer protection mechanisms and enhanced supervisory practices will contribute to reducing fraud and building trust.
Specific attention to data management and data governance, core to the development of robust digital foundations, will help mitigate data privacy and monopolization risks. Some of these risks will be best addressed by the pursuit of catalytic opportunities, which will drive innovation and the development of the required rules and governance arrangements. |
In addition to the above, addressing data monopolization may also be achieved by advancing corporate governance innovations and fostering international cooperation on data governance issues. In particular, empowering developing nations to have a say in the governance of global digital financing platforms originating from outside of their jurisdiction will help mitigate adverse effects of such platforms, such as data monopolization. | Advancing international cooperation on the governance of digital finance and in particular BigTech players will help advance solutions to addressing systemic risks caused by these platforms. This would be strengthened by embracing relevant global standards and practices that facilitate information exchange on threats. | Development of local regulatory and supervisory capabilities in shaping digital financing ecosystems and addressing the new challenges brought by digitalization is an essential part of advancing digital financing ecosystems. This can be eased by promoting sandboxes and other regulatory and supervisory technology (RegTech / SupTech) solutions that will be essential in mitigating such risks as algorithmic biases. | Catalytic opportunities indirectly alleviate this specific risk by repurposing and redirecting significant financial flows towards long-term, sustainable investments. The emergence of new norms and practices stemming from systematically aligning digital finance ecosystems with sustainable development priorities will further decrease short-termism. The advancement of stress-testing standards and mandatory disclosures might further contain such risks. |
The United Nations has a key role to play in implementing the Action Agenda. The United Nations, as the champion of financing for the SDGs, has a role in supporting Member States to implement the Task Force recommendations. The UN provides the platform for developing and overseeing on behalf of Member States the implementation of Sustainable Development Goals. As part of this, the Member States have agreed on the Addis Ababa Action Agenda and tasked UN DESA’s Financing for Sustainable Development Office to issue annual progress reports. This Task Force, an initiative of the Secretary General, was established as part of that mandate but without an explicit mandate to identify roles for the UN. That said, UN can play an important part in supporting Member States in their roles in implementing many of the recommendations:
Beyond that, the Task Force recommendations may be relevant to the UN in its engagements with many parts of the private financial community, including impact investors, banks, institutional investors and insurers. There would be considerable value in bringing digitalization opportunities into its related programs and initiatives, including its financial sector-specific platforms such as the UNEP Finance Initiative and the Sustainable Stock Exchange initiative, and related platforms such as the Principles for Responsible Investment.
The Action Agenda involves several communities across public and private sectors, at local, national, regional and global level. It requires both ambitious individual action and ‘joining the dots’ between different groups of actors.
The report is supplemented by individual specific briefings on the Action Agenda for key sets of actors.
Actors | Key roles | Short Briefing |
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Policy makers and regulators | Provide standards and regulatory certainty, advance cooperation with innovators, steer market development in support of national sustainable development priorities, empower citizens and mitigate risks brought by digitalization of finance. | Policy makers and regulators briefing |
Member States, as part of the UN system | Cooperate to share experience, coordinate and advance ambition and develop common principles and approaches, while building capacity, infrastructure, regulations and industry support at home. | Member States briefing |
Fintech companies and global digital platforms | Innovate products and services which meet consumer demand to channel finance to sustainable development goals. Commit to principles of SDG-aligned digital financing and develop corporate governance mechanisms to ensure they operationalise them. | Fintech and global digital platforms briefing |
Financial institutions | Identify and advance opportunities in own products and systems, advance interoperable digital ID and data systems. Engage with international standard setting and explore corporate governance options for stewarding the SDGs. | Financial institutions briefing |
International development community | Technical assistance and disseminating learning, supporting governance innovation. Provide support for development of inclusive infrastructure and the capacity of citizens. | International development community briefing |
Development finance institutions | Offer solutions to share risk to enable the development of catalytic solutions. Share knowledge to help governments design risk capital projects aligned to sustainable development and provide incentives via conditionality for corporate governance innovations. | DFI briefing |
Civil society organisations | Across civic, religious, youth, women’s, worker, trader consumer and other interest groups: mobilise collective voice, documenting problems and solutions to hold the powerful accountable. Build the capacity of citizens. | Civil society briefing |
The United Nations | Support Member States in realising catalytic opportunities and establishing digital financing ecosystems aligned with SDG priorities. Advance inclusive international norm-setting and governance innovations to mitigate risks. Exemplify good practice on digital financing internally. Develop a mechanism for stewarding the implementation of Task Force recommendations. | UN briefing |