Excellencies,
Distinguished guests,
The need to realign and refocus development financing has never been more urgent.
The last few years have been marked by a series of interlinked challenges. A fast-paced pandemic halted economies overnight. The compounding socioeconomic impacts of the war in Ukraine, led to rising cost of living. And the risk of a wide-spread debt crisis is a real and growing threat.
The general response to these crises has lacked ambition. The short-term solutions put in place will make the situation worse in the long run and further compromise our efforts to achieve the Sustainable Development Goals.
Capital needs to go where it’s needed most. That’s why the Secretary-General introduced an SDG Stimulus. The Stimulus has called for injecting at least 500 billion dollars per year for SDG action, through a combination of concessional and non-concessional finance. This call to action, if answered, would fund renewable energy solutions, modern infrastructure, sustainable food systems, and digital connectivity at a much larger scale.
The SDG Stimulus encourages leveraging of innovative debt instruments to finance sustainable development, a pathway with growing interest among governments. We have to enhance the integrity and quality of these instruments. This can be done by supporting credible and transparent measurement and reporting, and better alignment with the SDGs. We need an objective assessment of this growing market that identifies lessons and best practices from both country and investor experiences. We have to encourage responsible and efficient use of these instruments.
That’s why we are gathered here today, to explore ways to better harness the potential of SDG bonds.
There are limitations attached to this nascent market, including the hurdles of debt distress, technical capacity and limited accountability. But the internal community is working to explore and overcome these issues.
Right now, the Global Investors for Sustainable Development Alliance is working with UN DESA and UNDP to provide guidance to enhance the Sovereign bonds market. This work will consolidate lessons learned and best practices so far in the issuance of SDG-linked sovereign bonds. It will also feature concrete and practical recommendations from the perspective of investors for enhancing the integrity of future SDG-linked sovereign bond issuance.
The recently launched Financing for Sustainable Development Report 2023 also makes important recommendations to improve this market. It proposes tax incentives for issuers and investors and mechanisms for mitigating risks.
Right now, the bulk of thematic bonds have been issued in developed economies. To make them successful in developing countries will require more effective and targeted incentives. Development partners could also introduce blended finance mechanisms to lower the financing cost of these bonds or link their issuance to technical assistance, investment management and adherence to standards and guidelines.
For governments these instruments are an effective strategy to signal their commitment to the SDGs and the Paris Agreement. Enhancing integrity and credibility of thematic bonds will attract more investor interest.
In closing, I want to thank you once again for participating in this rich dialogue. I look forward to the outcome of your discussion.
Thank you for your attention.