unmitigated, the financial effects of the pandemic could set achievement of the SDGs back a decade.106 The financing gap estimate tells only a partial story. Analysis by IMF staff indicates that low-income developing countries will require close to $200 billion in spending over five years to combat the pandemic and $250 billion to regain the convergent paths they were on prior to the pandemic – an implausible level of investment without increased aid and debt relief.107 Global estimates may underestimate the real costs of an ‘SDG recovery’ for two reasons. First, reversals of progress have added to immediate investment costs. For example, research by UNESCO suggests the rising costs of remedial education and wider support for children returning to school and projected reductions in government budgets could increase the financing gap for SDG 4 by one third.108 Second, current studies may have underestimated the cost of acting on commitments to leave no one behind. As coverage rates expand in areas such as health and education, the marginal costs of delivery rise above average costs (which most of the research highlighted above uses to estimate financing gaps). Travelling the next mile towards the SDG targets involves reaching hard-to-reach populations and addressing the social determinants of disadvantage. Unlike average costs, marginal costs are non-linear, with important implications for SDG financing. This is no less the case for the funding of climate change, with one estimate suggesting that emerging markets (excluding China) and developing countries will need to mobilize an additional $0.8 trillion annually by mid-decade and $2 trillion by 2030, if the Paris Agreement targets are to be achieved.109 Meanwhile, the annual costs of climate adaptation have been estimated by the United Nations Environment Programme (UNEP) at around $300 billion – between 5 and 10 times current financing levels.110 Achieving universal electricity access in sub-Saharan Africa will require investments of $135 billion in cumulative investment to 2030. These financing gap estimates underscore the relevance of the ambitions of the UNDP Strategic Plan and the challenges the organization will face in achieving them. Doing so would materially improve the fiscal environment facing developing countries and make a distinctive contribution to an ‘SDG recovery’. However, in many countries UNDP will be swimming against a financial tide. Changing this picture will require a combination of technical advice and engagement on wider development financing issues (See below and section 7).
4.3 Aligning finance with SDG purpose Viewing the SDGs through the prism of global finance highlights the ‘affordability’ of the SDGs and large inequalities in wealth. While SDG financing gaps are large in relation to the fiscal resources of many Governments, they are modest when measured against international capital markets. The $4.2 trillion SDG financing gap estimated by the OECD represents111 just 1 percent of the $404 trillion 106 107 108
109 110 111
Benedek, Dora et al, ‘A Post-Pandemic Assessment of the Sustainable Development Goals’, IMF Staff discussion note, SDN/2021/003, April 2021. IMF Policy Paper, March 2021, Macroeconomic Developments and Prospects in low-Income Countries-2021 UNESCO, ‘UNESCO warns that the funding gap to reach SDG4 in poorer countries risks increasing to US$200 billion annually due to COVID-19 if we do not take urgent action’, Press release, 4 September 2020, https://en.unesco.org/news/unesco-warnsfunding-gap-reach-sdg4-poorer-countries-risks-increasing-us-200-billion-annually, accessed 25 March 2022. Bhattacharya, Amar and Nicholas Stern, ‘Beyond the $100 billion: financing a sustainable and resilient future’, London School of Economics and Political Science, Policy Note, November 2021. United Nations Environment Programme (2021). The Gathering Storm: Adapting to Climate Change in a Post-pandemic World Adaptation Gap Report 2021: Executive Summary. https://wedocs.unep.org/20.500.11822/37312. OECD (2020), Global Outlook on Financing for Sustainable Development 2021: A New Way to Invest for People and Planet, OECD Publishing, Paris, https://doi.org/10.1787/e3c30a9a-en.
CHAPTER 4. FINANCING FOR AN SDG RECOVERY: BRIDGING THE GAP
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