Revolutionizing Finance for Sustainable Futures

The article explores how countries are leveraging Integrated National Financing Frameworks (INFFs) to align their financial systems with sustainable development goals, as detailed in the UN report, "Making Finance Work for People and Planet." Highlighting examples from Nigeria and Mongolia, it discusses the significant reforms in public and private sectors driven by these frameworks. The article emphasizes the role of international support and the promising outcomes achieved through INFFs, pointing towards a coordinated approach for sustainable and inclusive growth.

In a rapidly changing world, aligning global finance with sustainable development goals (SDGs) is more critical than ever. The United Nations report, "Making Finance Work for People and Planet: How Countries are Building their Sustainable Finance Ecosystem through Integrated National Financing Frameworks," highlights efforts to reconfigure financial ecosystems through Integrated National Financing Frameworks (INFFs). These frameworks aim to bridge the gap between available global capital and the funding required to meet the ambitious targets of the 2030 Agenda for Sustainable Development.

A New Financial Architecture

At the heart of these efforts is recognizing that the current global financial system is misaligned with the SDGs. Despite the availability of dollars 430 trillion in global capital, only a minuscule fraction is allocated to sustainable investments. Reforming this system is seen as a "game-changer" by UN Secretary-General António Guterres. The upcoming Summit of the Future and the Fourth International Conference on Financing for Development (FfD4) in Spain are crucial opportunities to advance these reforms.

Countries are not waiting for international changes to take effect. Over 85 countries proactively use INFFs to reconfigure their national financial ecosystems, aligning them more closely with sustainable development priorities. These frameworks are designed to integrate public and private finance, fostering long-term transformation and resilience.

Country-Led Innovations

Nigeria and Mongolia exemplify how countries are leveraging INFFs to drive sustainable development. Nigeria, grappling with an annual dollar10 billion financing gap for its SDG priorities, has taken significant steps to align its finances with sustainable development. By removing fossil fuel subsidies, which accounted for over 15 percent of its national budget, Nigeria is redirecting funds towards education, health, and infrastructure. Additionally, the country has developed a dollar 175 million pipeline of SDG investments, focusing on sectors like healthcare, agriculture, and finance.

Mongolia, facing high budget deficits and limited access to international markets, has implemented program budgeting and introduced SDG bonds to increase green lending. The country's efforts have led to increased SDG-aligned expenditure and the establishment of a sustainability risk management framework by the Development Bank of Mongolia.

Public and Private Sector Reforms

The success of INFFs lies in their ability to drive reforms across both public and private sectors. Countries embed SDG priorities into budget cycles, tax policies, and debt management strategies. Colombia, for example, has adopted an SDG budget-tagging system, increasing SDG-aligned expenditure significantly over the past few years. Uzbekistan's Citizen’s Budget presents public expenditure aligned with SDGs, highlighting a growing trend among countries using the INFF approach.

On the private finance front, countries are enhancing sustainability in financial markets through taxonomies, reporting standards, and innovative financial instruments. Thailand and Cabo Verde are leading examples, with Thailand introducing guidance for SDG impact-based reporting and Cabo Verde launching the world's first blue economy sustainable finance platform, Blu-X.

International Support and Future Prospects

The INFF Facility, launched in April 2022, provides critical support to countries developing and implementing these frameworks. It offers technical assistance, facilitates knowledge exchange, and provides access to guidance from partners like UNDP, DESA, UNICEF, and OECD. This support is essential for countries as they navigate the complexities of aligning their financial systems with sustainable development.

The progress achieved through INFFs is promising. Countries like Bangladesh, Colombia, and Kyrgyzstan already see significant financial outcomes, including increased revenue mobilization and aligned expenditures with SDG priorities. The potential for transformation is immense, with INFFs providing a blueprint for sustainable, inclusive growth.

Looking Ahead

As the world prepares for critical discussions on financing sustainable development at FfD4 and other international forums, the experiences of countries using INFFs highlight the importance of a coordinated approach. Strengthened national financing policies, supported by international reforms, can unlock new investments and ensure that finance truly works for people and the planet.

The INFF approach demonstrates that sustainable development is not just a global agenda but a local reality shaped by national strategies and reforms. Countries are paving the way for a more equitable and resilient future by aligning finance with sustainable goals.