5.1 The SDG financing strategy and implementation architecture

Summary Message #18. UNDP should build on its role in supporting green and SDG bonds while attaching less weight to ESG standards. UNDP has supported the development of SDG bond frameworks. As investors, regulators and Governments seek to address concerns related to ‘greenwashing’ and ‘SDG washing’, UNDP is well placed to support the development of frameworks offering enhanced verification and monitoring standards linked to SDG delivery. The added value of current SDG Impact work on standard-setting is unclear given that: (1) this is a very crowded playing field; and (2) current initiatives are geared towards the consolidation of standards.

Summary Message #19. UNDP has provided leadership in several areas of green finance but needs to provide greater clarity in approaches to financing for clean energy. The organization has set a target to work with others to leverage finance to link 500 million people to modern energy by 2025. This is an ambitious target. Much of the increase will have to be achieved through off-grid and mini-grid solutions in Africa. UNDP should specify how – and where – it will contribute to wider efforts to remove bottlenecks to blended finance in these areas, including reform of regulatory systems.

This section assesses the UNDP strategic approach to SDG financing through its flagships, services and tools. The Sustainable Finance Hub, which encompasses the SDG Impact team and the Istanbul International Center for Private Sector in Development, provides an umbrella for delivery. Recognizing that some of these structures are still being rolled out and gaining traction following a partial consolidation of UNDP finance-related activities in 2019, the evaluation should be read as a preliminary assessment of work in progress. At the same time, the urgency of achieving the SDGs demands an emphasis on early delivery and the Strategic Plan period is to 2025. Moreover, while the Sustainable Finance Hub is of relatively recent origin, many of its activities are of longer standing and therefore more amenable to evaluation.

In the spirit of a formative assessment, the current UNDP financing toolkit is considered against the concrete goals articulated in the Strategic Plan, 2022–2025. In addressing this task, it is recognized that UNDP operates as part of the wider United Nations system and through a complex web of networks, partnerships and delivery channels. The organization’s modus operandi cautions against the application of simple attribution metrics. By the same token, it is important that the exacting ’moon shot’ and targets set in the Strategic Plan are underpinned by credible performance criteria and backed by strategies for delivery. The UNDP financing toolkit is evaluated with reference to the three categories of finance outlined in section 5: domestic resource mobilization, international public finance and private capital.

The UNDP strategic vision for SDG financing

Finding 6. The UNDP Strategic Plan, 2022–2025 set a bold ‘moon shot’ of promoting the investment of over $1 trillion of public expenditure and private capital in the Sustainable Development Goals, working with Governments, international agencies and the private sector to mobilize finance at scale.

Building on themes from the previous planning period, the Strategic Plan sets a course for UNDP to 2025. As one of five core objectives, the Plan includes a target for the organization to support the investment

and alignment of $1 trillion of public resources and private capital to the SDGs. If achieved, the target would materially change prospects for recovery.

The $1 trillion financing ‘moon shot’ spans the public and private actors. Beyond the headline number provided in the Strategic Plan, internal documents provide a more granular picture of planned delivery channels. Draft commentary provided to the evaluation team identifies three such channels:

• At least $500 billion in public finance aligned to the SDGs through application of SDG budget classifications in 70 countries as part of the INFF programme • $500 billion in private capital, with major private equity funds and enterprises adopting the

SDG Impact Standards • At least $42 billion leveraged directly by UNDP through partnerships, including debt instruments, risk capital and taxation. This envelope spans private capital, blended finance and public finance, and a range of initiatives, including a joint global finance flagship with UNICEF and blended finance through the Joint SDG Fund

It is worth highlighting that these objectives are to be achieved in the four-year window of the Strategic Plan, 2022–2025.

The financing goals lack metrics for tracking delivery and impact and appear to be weakly grounded in strategy. Much of the UNDP impact will be delivered through technical advice, leveraging and by working with Governments and the private sector to mobilize finance at scale. However, ‘leveraging’ is an activity that can give rise to exaggerated and unverifiable claims, often masking variable levels of attribution. On domestic public finance, data on the mobilization and alignment of new and additional resources need to be disaggregated and measured, with weight given to equitable and efficient public spending. Given the economic downturn facing many countries, the scope for raising additional revenue through tax reform may be limited. With respect to private capital, the three main units should develop shared metrics specifying indicators for impact. More broadly, the $500 billion goal needs to be backed by more detailed and concrete strategies for engaging with key capital market actors and Governments, detailing which markets and which actors UNDP will prioritize. The same question applies to the $42 billion in proposed leverage finance. While the ambition is credible, it marks a step-increase in current mobilization. For example, the Joint SDG Fund has mobilized $128 million.149 In all of these areas, UNDP is operating in very crowded playing fields with limited resources, and this places a premium on clear prioritization backed by the allocation of resources.

The UNDP SDG financing architecture

Finding 7. The Sustainable Finance Hub is positioned as a critical platform for UNDP to deliver its commitments on development financing, but it has a projectized approach to support the demand from programme countries.

The establishment of the Sustainable Finance Hub brought together what were disparate and unconnected projects and programmes from across UNDP bureaux, creating an opportunity to pool experiences, share knowledge and strengthen coordination. Prior to the establishment of the Hub, UNDP had an established track record of supporting SDG financing through its work on public finance, private sector development and private capital for the SDGs. The private sector development and partnership

149 Joint SDG Fund, https://www.jointsdgfund.org/sdg-financing, accessed 27 March 2022.,

strategy (2018–2022)150 established the Hub as a consolidated structure for UNDP financing approaches. The Hub brought together under a single framework the Istanbul International Center for Private Sector in Development, the SDG Impact team and a range of ongoing approaches and projects, including the INFF programme, Tax Inspectors without Borders, the new Insurance and Risk Finance Facility and a partnership with the United Nations Capital Development Fund for strengthening digital financial solutions.

The Sustainable Finance Hub has been structured around seven action areas which were developed through an early mapping of UNDP financing offers in the Asia-Pacific region. The mapping also identified a number of tools that could be brought under the umbrella of the Hub. At the time of writing, the number of SDG financing tools on offer had expanded to 128 (table 5) across 25 service areas. The seven action areas are:

• Action Area 1. Integrated national financing frameworks for the SDGs • Action Area 2. SDG budgeting • Action Area 3. SDG-aligned fiscal and debt instruments • Action Area 4. Leveraging international public finance for the SDGs • Action Area 5. Unlocking private finance for the SDGs • Action Area 6. Aligning business strategies and operations for the SDGs • Action Area 7. Impact measurements and SDG finance reporting

There may be scope for further consolidation and efficiency gains in the work of the Sustainable Finance Hub. The Hub’s flagships are built around major projects and partnerships, reflecting preexisting partner commitments and donor priorities within an envelope of SDG financing. A review of the organigram of the Hub shows 11 global initiatives including the Istanbul International Center for Private Sector in Development, Connecting Business Initiative, Business Call to Action, the SDG Philanthropy Platform, Tax Inspectors without Borders, INFFs, SDG Impact, Closing the Investment Gap in Sustainable Infrastructure, the Dialogue on Global Digital Finance, the Insurance and Risk Financing Facility and the Hub itself, delivered across all five UNDP regions – Latin America and the Caribbean, Africa, Asia-Pacific, Arab States and Europe and the Commonwealth of Independent States. It is not clear that the various teams have a shared understanding of how their work contributes to an organization-wide strategy for SDG financing. To some degree, this may reflect the project-based nature of much of the Hub’s work and the reporting/delivery requirements for individual projects. The approach is reliant on countries developing a portfolio of SDG financing tools which together combine to leverage an impact bigger than the sum of their parts. Country case studies saw mixed evidence of this. In Rwanda and Colombia, for example, there was some evidence of different projects coming together to form the basis for a cohesive portfolio approach to SDG financing, but elsewhere this was less clear. However, this could be due to the infancy of some activities.

Matrix management across projects and regions makes it difficult to establish clarity of the Hub’s organizational structure and the number of staff. An organigram dated June 2021 suggests current staffing at 52 positions,151 with just under half of these (24 by our estimate) project-focused for the Istanbul Center, Tax Inspectors without Borders, the Insurance and Risk Financing Facility, the INFF programme,

150 UNDP, ‘Private Sector Development and Partnership Strategy: Making Markets Work for the SDGs’, https://www.undp.org/ publications/undp-private-sector-strategy-2018-2022, accessed 27 March 2022. 151 It is difficult to calculate the fixed number of staff given that many staff are matrix-managed across projects and regions.

Connecting Business, SDG Impact and other projects. Staffing has grown steadily since the Hub was established, increasing from 11 in 2019 to 31 as of December 2021.

The broader delivery of the action areas, tools and coordination of support is provided through a small number of core staff and regional technical focal points. An imbalance of support across regions is apparent. The Bangkok Regional Service Centre has four advisers, covering general SDG finance advice, nature performance debt instruments, INFF and insurance and risk financing projects. The Latin American and Caribbean hub in Panama has two advisers covering finance and innovative finance and a tax specialist working on Tax Inspectors without Borders. In the Arab States region, SDG financing support is provided by the Regional Economic Adviser in coordination with the Sustainable Finance Hub. Teams in the Arab States and Latin America and the Caribbean are complemented by the regional inclusive growth teams. The Africa Sustainable Finance Hub in Pretoria has seven staff covering private sector support, insurance and risk financing, Tax Inspectors without Borders, investment and general SDG finance support. The support structure could better support the strategy by ensuring that resources are allocated against need and delivery criteria for the Strategic Plan. It is not clear that current allocations reflect this objective.

While UNDP stresses the importance of demand-driven service provision, in practice supply-driven approaches weigh heavily. The Sustainable Finance Hub oversees 25 service areas and 128 tools for delivering technical advice and support. Only a handful of these tools are in use across a significant number of countries, and the majority have been used in just one or two countries (table 5). The key tools being taken up remain strongly linked to flagships and projects offering financing to support uptake, such as the INFF, insurance and risk financing, Tax Inspectors without Borders and investor mapping. There is a recognized capacity constraint at the country-office level where support is often provided through regional focal points who are themselves limited in their ability to respond readily to all demands. Several country offices reported that they were not receiving the necessary support to take SDG financing forward. This is often despite strong demand from country offices, which reported that the limited regional technical support available did not allow for effective implementation of specific tools.

Delivery of support is further complicated given that advice and guidance for many of the 128 tools is delivered through the central Sustainable Finance Hub or regional advisers and supported through communities of practice. At the time of the evaluation, there was no clear mapping of either the delivery of services or demand from country offices. Though a comprehensive mapping had been undertaken in the Asia-Pacific region in 2019, the exercise was still under way in many other regions. The absence of a clearer articulation of demand makes it more difficult to plan, target support and evaluate delivery against the goals of the Strategic Plan. The Hub is currently developing a knowledge management system to help track activities. It is not clear if this will be linked to metrics and a monitoring framework to track achievement against the Strategic Plan objectives.