Crowding in funding for the SDGs: Reflections on the missing development trillions
Seventeen goals to transform our world, the Sustainable Development Goals, aka the SDGs, aka the Global Goals, encompass 169 targets and 230 indicators, and come with a price tag of $3-5 trillion per year.
Now that the world has agreed on 17 goals, 169 targets and 230 indicators for the SDGs, the dialogue is shifting towards the “price tag” the SDGs come with. Estimates on this abound, and are in the range of $3-5 trillion.
To kickstart a discussion on how we would meet this ambitious figure, the Guardian recently published a series The Missing Development Trillions. This series explored a range of perspectives on bridging the current gap in financing the SDGs. Citing the UNCTAD report (p.145), they place the annual investment gap in developing countries in key SDG sectors at $2.5 trillion, which is only partially bridged by current levels of private sector investment amounting to $900 billion. The remaining $1.6 trillion would need to be covered by some combination of increases in public sector budgets, official development assistance (ODA), and new investments from the private sector.
A preliminary calculation based on our SDGs widget reveals that during 2011-13, ODA (or aid in its strictest sense) towards the SDGs was around $140 billion on average. (This is a retrospective analysis, since the SDGs came into being only in 2015). If this trend continues into the post-2015 era, we would expect aid to account for less than 9% of the funding that the UNCTAD estimates is already committed to the SDGs. This implies that nearly 90% of the $1.6 trillion needs to come from national government budgets.
Whether this is feasible going forward or whether this calls for a greater role for the private sector beyond the current investment levels (as suggested by the UNCTAD) is an open question; however, it will be even more crucial to track financing towards each SDG, so we can ultimately draw the link between funding and outcomes. For instance, based on our widget that tracks ODA towards the SDGs, we find that three SDG goals received the most aid: health, sustainable cities and reduced inequalities. It is entirely possible that if we accounted for other sources of financing, the goals that receive the most funding will be entirely different.
Accordingly, we are expanding our widget to other sources such as FDI, remittances, and private foundations as well as all types of finance coming from non-DAC countries. Why is this important? Non-ODA sources are increasingly become more important for low- and middle-income countries, calling for more disaggregated data on these flows to better capture the various funding sources to each of the 17 goals.
As the UNCTAD notes in its report, the business case for private sector investment in certain sectors is stronger than in others. Similarly, in least developed countries (LDCs) where private sector financing needs are most acute, innovative solutions will be required to create proper incentives for private sector investment in infrastructure and climate change mitigation and adaptation.
The important questions of how to mobilize and channel financing for the SDGs are intricately tied to how to track all types of funding for each SDG. This implies that reporting data on domestic budgets, FDI projects, and private sector investment needs to become more open but also more granular. This kind of disaggregated data will help a broad range of stakeholders evaluate policy dilemmas such as resource transfers or cost-benefit tradeoffs, of private investments in SDG-related sectors like education and health care. It will also help connect the dots from financing to results - after all, isn’t that what we all ultimately want to know?
Tanya Sethi is a Policy Specialist at AidData.