Paper 2.8 Key questions for an interlinked and coherent governance for the review and follow-up of the post 2015 agenda and its SDG and the Addis Ababa commitments
Key questions for an interlinked and coherent governance for the review and follow-up of the post-2015 agenda and its SDG and the Addis Ababa commitments
Finance has always been a vital issue in the Rio process. In 1992 at the original Rio Conference the Secretary-General of the Conference Maurice Strong was asked how much would it cost to implement Agedna21. He and the UN worked out that it would be $625 billion a year with $125 billion from developed to developing countries. The head of the US delegation to Rio, Buff Bohlan (under President Bush), made the commitment:
There is no question that developing countries and countries in transition must have new resources. I would like to make it absolutely clear the US is committed to working with other industrial countries to mobilize new and additional resources for a new partnership.
It’s a shame the US did not fully that commitment but neither did any of the developed countries. Aid in 1992 was around $54 billion at that time and actually fell in the 1990s only returning to 1992 levels in 2002.
The 1990s were a decade of lost opportunities and broken promises.
Underpinning Agenda 21 was the concept of Common But Differentiated Responsibilities (CBDR). There has been some discussion on if CBDR is relevant to the SDGs I would just refer governments to Agenda 21, the Johannesburg Plan of Implementation, Rio+20 and most CSD meeting for them to see that there is nothing in the SDGs that wasn’t covered by these documents. CBDR is a critical part of the SDG agenda and its implementation this will require not only developed countries but also developing countries to look at this through a 2015-2030 lens.
In 1997 at the Five Year Review of Agenda 21 there was an attempt led by Norway and the US to set up an Intergovernmental Panel on Financing Sustainable Development (IPFSD). Its main areas of work would have been in:
- Review the quantity and quality of aid
- Mobilization of domestic resources
- The role of FDI
- New Financial Mechanisms
The mood of developing countries was not pleasant at Rio+5 from their perspective there had been five years of broken promises. The idea of the IPFSD was rejected though it did survive in a different form. Norway and the US took it to the UNGA where it became a set of GA discussions on the same themes. This ultimately became the Monterey process. It had been put on a trajectory to originally finance the outcome from the Millennium Summit and the Johannesburg World Summit on Sustainable Development (WSSD). It was only in September 2011 ten days after 9/11 that the EU gave up that hope of a new deal on sustainable development finance. The 2000s saw aid flows increase to over $130 billion and much of those funds did focus on the MDGs implementation.
That brings us nearly up to date. We have in 2015 three processes that focus on finance. These are:
- The Financing for Development (FfD) Conference.
- The United Nations Summit to Adopt the Post 2015 Development Goals.
- The UNFCCC Conference and climate financing.
Linking Sustainable Development Goals Means of Implementation to Financing for Development
The question that has been prominent in both the Post 2015 process and the FfD is what is needed to ensure a better complementarityÂ between the two negotiating processes.
The zero draft of the FfD did contain some of the ideas that are in SDG17 but not by any means all of them and as far as the MOIs under the different SDGs there were no corresponding paragraph in the FfD Addis Ababa Action Agenda text (1). This continued up to and including Addis Financing for Development Conference.
What would have helped enormously, and made it much clearer, is if ALL the SDG MOI text had been included in the FfD zero and subsequent text. My suggestion had been that then they would be bracketed. They would be what I would call reference text and would be taken out at the final stage. Such a structure would do two very important things.
The first is it would ensure that member states negotiating in the FfD process had always as guidance the SDG OWG text and should they decide to deviate they would do so clearly knowing that. The second is that the text would HAVE to address all the SDG MOIs which it did not.
There may be some argument that this could have been done through some generic text. But unless the reference text is there to guide negotiators then it turned out that they will miss out some of the MOIs from the SDG-OWG or not address them fully which was the case.
The FfD process draft text for Addis had this commitment for Follow Up:
- We appreciate the role played by the United Nations Financing for Development follow-up process. We recognize the inter-linkages between the Financing for Development process and the means of implementation of the post-2015 development agenda, and emphasize the need of a dedicated follow-up and review for the Financing for Development outcomes as well as all the means of implementation of the post-2015 development agenda, which is integrated with the post-2015 follow-up and review process to be decided at the United Nations summit for the adoption of the post-2015 development agenda. The follow-up process should assess progress, identify obstacles and challenges to the implementation of the Financing for Development outcomes, and the delivery of the means of implementation, promote the sharing of lessons learned from experiences at the national and regional levels, address new and emerging topics of relevance to the implementation of this agenda as the need arises, and provide policy recommendations for action by the international community. We will also enhance coordination, promote the efficiency of UN processes and avoid duplication and overlapping of discussions.
- We commit to staying engaged in this important agenda through a dedicated and strengthened follow-up process that will use existing institutional arrangements and will include an annual ECOSOC Forum on Financing for Development follow-up with universal, intergovernmental participation, to be launched during the council current cycle. The Forum’s modalities of participation will be those utilized at the international conferences on Financing for Development. The Forum consisting of up to 5 days will include a one day special high-level meeting with the Bretton Woods institutions (BWIs), WTO and UNCTAD, as well as additional institutional and other stakeholders depending on the priorities and scope of the meeting, and a meeting dedicated to discuss the follow-up and review of the Financing for Development outcomes and the means of implementation of the post-2015 development agenda. Its intergovernmentally agreed conclusions and recommendations will be fed into the overall follow-up and review of the implementation of the post-2015 development agenda in the high-level political forum (HLPF) on sustainable development. In addition, the deliberations of the Development Cooperation Forum, according to its mandate, will also be taken into account. The High-level Dialogue of the General Assembly on Financing for Development will be held back to back with the HLPF under the auspices of the GA when the HLPF is convened every four years.
I had hoped for a closer link between the HLPF and a standalone finance discussion for implementing the SDGs. The above txt (not agreed as this paper is written) could enable this to happen. One very good example of how would be to adopt the approach of the first two cycles of the Commission on Sustainable development (CSD). In 1993 governments adopted the following:
- The Commission, recognizing its mandate to review the adequacy of the financial resources available for the implementation of Agenda 21, decides to establish an inter-sessional ad hoc, open-ended working group composed of Governments, which will nominate experts in order to assist the Commission in the following tasks:
(a) To monitor and review the requirements, availability and adequacy of financial resources for the implementation of different clusters of Agenda 21, taking into account the multi-year thematic program of work, as well as projects, programs, activities and sustainable development strategies prepared by Governments, in order to provide a suitable and common basis for action on the part of all Governments, bilateral funding agencies and States members of the governing bodies of the agencies and programs of the United Nations system, as well as multilateral regional and sub-regional development banks and funds dealing with the issues of environment and development;
(b) To monitor and analyze various factors that influence the flow of financial and economic resources, such as debt relief, terms of trade, commodity prices, market access and private foreign investment, as well as to review mechanisms for innovative financing in the context of paragraph 33.16 of Agenda 21, taking into account activities at the national level;
(c) To develop, on the basis of the above, a policy framework for the mobilization of financial resources towards a balanced implementation of all aspects of Agenda 21 that would, inter alia, assist Governments, where appropriate, to implement their sustainable development strategies.
The CSD recognized that it had a role in monitoring the financing commitments for Agenda 21. To enable it to do this it added an additional week of preparation for the CSD focused on that agenda. This could be developed as the implementation of Addis is undertaken. For the SDGs to be taken seriously there needs to be a clear space in the UN architecture where finance and development Ministries discuss that. Perhaps the September Summit will give clearer instructions. The present suggestion is a week but to cover both the FfD process and the MOI for the SDGs. Surely this is not enough time.
I have since 2002 advocated an approach to intergovernmental text which would automatically ensure the right conversations are had. It is based on the South African Non-Paper from 2002 it
A version of this could have offered a coherent and agreed structure and delivered a coherent and complementary set of outcomes from the FfD process and the SDG process.
- proposed targets and time-frames (SDG MOIs)
- proposed actions
- institutional mechanisms
- stakeholder involvement
- implementation plan sustainability
Not everything can be covered by the HLPF and for this reason, the ECOSCO High-level meeting with the Bretton Woods Institutions, WTO and UNCTAD as is suggested should be expanded. It is interesting that it is suggesting it should be a universal meeting similar to the HLPF.
The UN System Chief Executives Board for Coordination (CEB) comprises 29 Executive Heads of the United Nations and its Funds and Programmes, the Specialized Agencies, including the Bretton Woods Institutions (The World Bank and IMF), and Related Organizations – the WTO and the IAEA. Under the UN Development Group, it could be tasked with producing an annual report on the implementation of FfD and fed into both the HLPF ad hoc open-ended working group and the ECOSOC High-Level Event. The final text going to Addis suggested something similar
- To ensure a strengthened follow-up process at the global level, we encourage the Secretary-General to convene an inter-agency Task Force, including the major institutional stakeholders and the UN-system, including funds and programmes and specialized agencies whose mandates are related to the follow-up, building on the experience of the MDG Gap Task Force. The inter-agency Task Force will report annually on progress in implementing the Financing for Development outcomes and the means of implementation of the post-2015 development agenda and to advise the intergovernmental follow-up thereto on progress, implementation gaps and recommendation for corrective action while taking into consideration the national and regional dimensions.
Climate Change Finance
Addis has not added anything significant to the climate finance discussion prior to Paris. This was a huge missed opportunity. The main text on climate finance is:
- We welcome the successful and timely initial resource mobilization process of the Green Climate Fund, making it the largest dedicated climate fund and enabling it to start its activities in supporting developing country parties to the UNFCCC. We welcome the decision of the Board of the Green Climate Fund to aim to start taking decisions on the approval of projects and programmes no later than its third meeting in 2015 as well as its decision regarding the formal replenishment process for the Fund. We also welcome the Board’s decision to aim for a 50:50 balance between mitigation and adaptation over time on a grant equivalent basis and to aim for a floor of 50 percent of the adaptation allocation for particularly vulnerable countries, including LDCs, SIDS, and African countries. We note the importance of continued support to address remaining gaps in the capacity to gain access to and manage climate
What could have been a very useful for informal non-binding discussion outside the UNFCCC and then inputting to it at the relevant time was not undertaken.
National level addressing the investment chain
Governments should commit to develop and apply integrated reporting frameworks for all capital market intermediaries that is appropriate to the nature of their business, including but not limited to large investment banks, stock exchanges, asset managers, investment consultants and asset owners such as pensions and insurance companies.
Governance needs to be strengthened in the investment chain which was not fully reflected in detail in either the FfD or the SDG documents. In addition, regarding the other “strong regulatory frameworks on Environment Social Governance (ESG) practices, ” that may be created. This was a real opportunity lost to set a date when all Stock Exchanges should have made it a requirement for listing to explain or report on their ESG. The final text at Addis suggested:
- We will promote sustainable corporate practices, including integrating environmental, social, and governance factors into company reporting as appropriate, with countries deciding on the appropriate balance of voluntary and mandatory rules. We encourage businesses to adopt principles for responsible business and investing, and we support the work of the United Nations Global Compact in this regard. We will work towards harmonizing the various initiatives on sustainable business and financing, identifying gaps, including in relation to gender equality, and strengthening the mechanisms and incentives for compliance.
This is the first time that elements of the investment chain are highlighted within the Financing for Development document. While it is welcome to see it here, to be actionable, the investment chain needs to be much more clearly defined with systemic recommendations as to how each stage of the chain can better embed sustainability thinking and ESG issues within its business practices, investment decision, and corporate culture. What we ended up on investment and capital with:
- We also recognize the potential of new investment vehicles, such as development-oriented venture capital funds, potentially with public partners, blended finance, risk mitigation instruments, and innovative debt funding structures with appropriate risk management and regulatory frameworks. We will also enhance capacity building in these areas.
- We encourage long-term institutional investors, such as pensions funds and sovereign wealth funds, which manage large pools of capital, to allocate a greater percentage to infrastructure, particularly in developing countries. In this regard, we encourage investors to take measures to incentivize greater long-term investment such as reviews of compensation structures and performance criteria.
- We recognize that both public and private investment have key roles to play in infrastructure financing, including through development banks, development finance institutions and tools and mechanisms such as public-private partnerships, blended finance, which combines concessional public finance with non-concessional private finance and expertise from the public and private sector, special purpose vehicles, nonrecourse project financing, risk mitigation instruments and pooled funding structures. Blended finance instruments including PPPs serve to lower investment-specific risks and incentivize additional private sector finance across key development sectors led by regional, national and sub-national government policies and priorities for sustainable development. For harnessing the potential of blended finance instruments for sustainable development, careful consideration should be given to the appropriate structure and use of blended finance instruments. Projects involving blended finance, including PPPs, should share risks and reward fairly, include clear accountability mechanisms and meet social and environmental standards. We will, therefore, build capacity to enter into PPPs, including as regards planning, contract negotiation, management, accounting and budgeting for contingent liabilities. We also commit to hold inclusive, open and transparent discussion when developing and adopting guidelines and documentation for the use of PPPs, and to build a knowledge base and share lessons learned through regional and global fora.
What we could have had as well was proposed by AVIVA in their submission to the FfD process on the investment chain they suggested the following:
- Investment banks should be required to include a view on a company’s performance on corporate governance, corporate sustainability, culture and ethics when they make recommendations to investors regarding their Buy, Sell and Hold recommendations.
- Fund managers should publish a report to their clients showing how they have considered sustainability when voting. Fund Managers should – on a comply or explain basis – publish a report to their clients explaining how they have behaved as good stewards of their clients money and how they have considered sustainability in their voting decisions at Annual Stewardship Meetings with their clients.
- Investment consultants should be required to include an analysis of how well corporate governance, corporate sustainability, cultural and ethics issues are integrated into investment decisions by fund managers in their recommendations of which fund manager to select. Investment consultants should also be required to report to their clients annually on how well they think fund managers are performing in this area, or again, explain why they have not done so.
- UNCTAD should provide guidance to encourage Member states to make sure financial literacy on the of the capital market and the role of the individual in promoting shareholder democracy is a key component of each Member State’s secondary and tertiary educational syllabus.
- UNCTAD should help Governments develop national Stewardship Codes that promote voting and engagement.
- An ISO stewardship standard should be developed lt for asset managers that can be used by institutional asset owners as well as individual investors and their advisors to ascertain whether certain minimum standards and procedures in stewardship are being adhered to by an asset manager.
- Governments could integrate long-term sustainability factors in the mandates of the financial stability board and other supervision agencies.
- Fiduciary duty (legal requirements) should be clarified so that all intermediaries are aware of their Environmental, Social and Governance (ESG) duties to clients and the end beneficiaries.
AVIVA suggested a fitness test for the final outcome from Addis as far as the finance sector is concerned:
While it includes elements of some of the tests, none are met in full on some are overlooked entirely.
Test 1: Getting Prices Right: Does the debate recognize the central importance of ensuring that the price mechanism promotes sustainable development in order to ensure that unsustainable business finds it hard to attract capital?
Test 2: Getting Incentives Right: are there measures that will change the business models and personal incentives of the institutional participants in the capital supply chain, in particular, sell-side brokers, stock exchanges, fund managers, investment consultants and asset owners?
Test 3: Securing Capital: are there investment instruments that will be sufficiently attractive to markets and/or does it look likely to generate a plausible capital raising plan?
Test 4: Systemic Transparency: do the means of implementation include measures that will promote the transparency of companies on their sustainability performance as well as all the transparency of all the investment intermediaries that connect the end investor to the companies that they own?
Test 5: Sustainable Finance Standards: will the means of implementation create the right kind of hard and soft standards that facilitate sustainable capital markets? For example, will they ensure Foreign Direct Investment by multinational compiles with generally accepted standards and norms such as the Global Compact, the ILO tripartite labour declaration, the Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises? Will they confer onto the owners of these businesses – investors – a responsibility for ensuring that they behave as responsible long-term owners and promote such standards within the companies that they invest? Will they develop a responsible investment International Standard (ISO) in order to ensure that their clients can see quickly and easily whether their investment firms are good long term owners?
Test 6: Sustainable Demand for Sustainable Finance: does the debate ensure that there is sufficient demand for sustainable finance and sufficient accountability of financial intermediaries by promoting financial literacy measures among the investing public?
The problem was that governments had not really engaged with the financial sector. Small changes could have had huge impacts. The problems why this wasn’t undertaken go back to the Intergovernmental Committee of Experts on Sustainable Development Finance and it being closed to stakeholders. The difference in the outcome from the open working group on SDGs and the outcome from the Finance for Development are clear to see. The lessons maybe hard for some governments but the reality is that governments make better-informed decisions when they engage with the stakeholders and the stakeholders feel a commitment to engage in the implementation of those decisions.
The final landscape of how FfD and the SDGs will be linked in the Follow-Up will be the litmus test to the success of these processes.
- This paper has been written before the final txt for FfD has approved
- Suggestions from the AVIVA paper The Post 2015 Financial Fitness Test: is the Financing for Development Zero Draft fit for Purpose? aviva.com/roadmap
Felix Dodds is a Senior Fellow at the Global Research Institute at the University of North Carolina at Chapel Hill and is an Associate Fellow at the Tellus Institute. He was the co-director of the 2014 Nexus Conference on Water, Food, Energy and Climate.
Dodds was the Executive Director of Stakeholder Forum for a Sustainable Future from 1992-2012. He played a significant role in promoting multi-stakeholder dialogues at the United Nations and proposed to the UN General Assembly the introduction of stakeholder dialogue sessions at the United Nations Commission on Sustainable Development.
He has been active at the UN since 1990, attending and actively participating in UNFCCC, UNCBD, the World Summits of Rio Earth Summit, Habitat II, Rio+5, Beijing+5, Copenhagen+5, World Summit on Sustainable Development and Rio+20, while also attending the UN Commissions for Sustainable Development and UNEP Governing Councils.
In 2011, he chaired the United Nations DPI 64th NGO conference â€“ ‘Sustainable Societies Responsive Citizens’. From 1997-2001, he co-chaired the UN Commission on Sustainable Development NGO Steering Committee.
Dodds has written, or edited, eleven books prior to Rio+20 and with Michael Strauss and Maurice Strong, wrote Only One Earth: The Long Road via Rio to Sustainable Development. After Rio+20 with Jorge Laguna Celis and Elizabeth Thompson, he wrote From Rio+20 to a New Development Agenda Building a Bridge to a Sustainable Future and The Plain Language Guide to Rio+20.
He is also an International Ambassador for the City of Bonn.