While there is no obvious gap in standard-setting or reporting principles, there is a potential gap in SDG-related offers and reporting systems. Notwithstanding the extent of greenwashing, there is currently a mismatch in ESG-related reporting systems between the relatively robust monitoring tools available to track national, municipal and corporate reporting on greenhouse gas emissions and environmental goals, and the far weaker standards applied to SDG reporting. That gap represents a threat to the mobilization of financial resources through private capital markets because of investor concerns over exposure to SDG washing. But it also represents an opportunity for UNDP. Currently, debt-financing markets – including ESG fund managers, banks and credit agencies – use ‘second opinion’ agencies to verify the credibility of corporate and sovereign bond frameworks. As noted above, these agencies have a limited understanding of SDG processes, weak levels of engagement with Governments and a restricted capacity to provide advice on reporting systems. These are all areas in which UNDP may be well placed to support Governments in developing SDG frameworks which could incentivize investment and reduce capital costs by providing investors with robust evidence of impact. SDG Impact needs to develop a ‘theory of change’ setting out the pathways through which it will unlock private capital investment by drawing effectively on the organization-wide assets of UNDP. The organization should drive this endeavour through strategic analysis, rather than donor or partner funding. Setting new standards in an already overcrowded playing field on which investors, regulators and Governments are pressing for consolidation and more consolidated reporting through existing apex institutions (such as the International Capital Market Association in the case of bond markets) would appear to close to a zero-sum game. One strand of the UNDP comparative advantage in engaging with Governments and bond market actors is its presence at the country level and standing as an authoritative source on matters relating to the SDGs. This is the bedrock for a compelling offer building on the experience documented in this section, and it is where resources should be concentrated.
BOX 7. ESG standard-setting agencies Apex standard-setting institutions provide an array of principles and reporting standards used as a reference point for ESG investment and bond issuance. Key actors include: • The International Capital Markets Association, which reports that 97 percent of 2020 bond issuance was aligned with its principles, has informed the Climate Bonds Standard and Certification Scheme, European Union Green Bond Standards and other global, regional, national and subnational initiatives. • In 2020, five standard-setting agencies adopted a shared vision for comprehensive corporate reporting, with the Sustainability Accounting Standards Board (SASB) providing a framework for investor reporting across 77 industries and financial service sectors. • The Financial Stability Board’s Task Force on Climate-related Disclosures has established a reporting framework on climate risk and reporting which, according to its 2021 report, spans 89 countries or jurisdictions and over 1,000 financial institutions (with assets of over $194 trillion and actors with a market capitalization of over $25 trillion). • The Climate Disclosure Standards Board, a consortium of business and non-governmental organizations, offers companies a framework for reporting environmental information. • Over 4,000 companies managing reported assets of $130 trillion have endorsed the Principles for Responsible Investment (PRI). The institution provides advice on impact and reporting systems linked to the SDGs.
CHAPTER 5. THE UNDP FINANCING TOOLKIT
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