When the United Nations sustainable development goals (SDGs) for 2030 were launched in 2015, the call was for private capital to step up where public sector budgets could not – five years on, the heads of financial institutions have now turned that call back to governments. To reach these goals, governments are going to need to do a few things too.
This was recently laid out in the Global Investors for Sustainable Development report. The heads of 30 global financial institutions made 64 specific recommendations calling for greater public sector engagement to support the financing of the SDGs. The recommendations include: support of a strong carbon price; the mandating of the Task Force on Climate-related Financial Disclosures; a reconsideration of subsidies that artificially keep brown industries in business; and new blended finance vehicles.
A louder voice calling for greater co-design of solutions is exactly what is needed. A new era of far greater collaboration between private finance and the public sector will have important implications – from the creation of new national green banks to the cross-pollination of the public sector and private finance workforce.
According to the Natural Resources Defense Council, more than 35 countries and jurisdictions now are exploring the use of green banks, compared with 12 just a couple of years ago
The growth of green banks shows that this is already happening. Several countries have joined the likes of Australia, Japan and Malaysia to create national green banks that effectively de-risk green infrastructure and investments in order to crowd in private capital. According to the Natural Resources Defense Council, more than 35 countries and jurisdictions now are exploring the use of green banks, compared with 12 just a couple of years ago.
New Zealand launched its green investment bank at the end of 2018, for example, and began investing this year. Among its investments was a $15 million green credit facility for low-carbon projects at the port of Wellington. Its board and management have all worked in the finance sector. The UK is reportedly considering a second green investment bank – having sold the last one to a consortium led by Macquarie – while Democrats in the US are pushing for a National Climate Bank in addition to some state-led banks.
Governments taking a more proactive and innovative role in creating new markets is going to be crucial. So if we hope to close the gap in financing the SDGs, we also have to close the gap between the public sector and private finance.