Sustainable Finance word is used interchangeably by Sustainable Investing and ESG. This report includes videos focused on sustainable finance/sustainable investing/ESG. Before we begin our journey on sustainable finance developments, let’s understand the actors within the sustainable development sector. The report is update with recent figures since it was first published.
Actors within the Sustainable Development Sector
United Nations is the principal actor driving sustainable development goals supported by the following actors. UN as an umbrella brand networked into different specialized agencies like UNDP (global development arm for sustained development), UN/DESA (home and pioneer of SDGs) and UN Capital Development Fund which focuses on mobilizing both private and public capital for least developed countries.
Organization for Economic Co-operation and Development (OECD), a Supranational Organization headquartered in Paris, with 38 high-income members, is a major international organization driving sustainable development globally. It captures quantum of international aid through Official Development Assistance (ODA), a term coined by OECD’s Development Cooperation Directorate (DAC) in 1969 and a gold standard in international aid. Official development assistance (ODA) is defined by the OECD Development Assistance Committee (DAC) as government aid that promotes and specifically targets the economic development and welfare of developing countries. ODA is the largest source of external finance flows for emerging economies for funding development projects. The definition of ODA grants is revised from time to time and includes a minimum of 25 percent grant elements, among other parameters. (Beyond ODA flows: definition and research framework). UN stipulates a grant ratio of 0.7 percent of GNI for OECD countries towards contribution to ODA. Only a few countries meet the grant ratio target with Sweden leading the group in terms of participation as a percentage of GNI while the US leads in the total amount. In recent years, China, although not a part of the OECD group, is a significant contributor to development assistance. Apart from foreign direct investments and personal remittances which are tuned towards the private sector, the core responsibility of government borrowings is through the issuance of sovereign bonds. (Refer Masala Bond section in this report).
Other significant forms of external financing assistance in development sector include philanthropic assistance through foundations, international sovereign bond issuance across various multilateral institutions, climate finance through PPP (public-private partnerships) as a critical enabler in forging multi-stakeholders’ alliances among different sets of actors within the development arena. (Beyond ODA flows: definition and research framework). The rise of sustainable finance is a result of the rise in different sources of development external funding facilitated by the PPPs. OECD works with multiple actors within the development sector, including multilateral banks, policymakers and think tanks to layout foundation for social and economic well-being. Multilateral Development Banks or MDBs further form the most vital component of fostering public private partnerships, a key partnership to attract $5-7 trillion worth of capital per year in meeting SDGs target by 2030.
MDBs work along Government-backed institutions and are the most critical enablers presently and include multilateral institutions, especially Multilateral development banks, bilateral aid agencies, development institutions, supranational organizations, sovereigns, agencies, among others. These are chief actors who define and promote sustainable finance globally, pivotal to financial innovation. Civic societies through non-profits, think tanks, philanthropists, activists and social change enablers are catalysts in promoting social issues.
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