Image: The Blue Diamond Gallery

This blog series takes a look at the new landscape of financing for development, the focus of our upcoming Istanbul Development Dialogues, an annual a global development forum where policy-makers, business leaders, and experts discuss issues of our time.

In 1987, I spent some time backpacking around Europe and for the first time took interest in the way countries grow and develop. 1987 was an eventful year. Environmental issues were coming to the fore as global warming entered mainstream conversations.

That same year, the UN released “Our Common Future”. A forerunner to the current sustainable development agenda, the report showed how closely related poverty, inequality and natural resources were. It was a foundation for the U.N. to encourage more responsible ways of developing.

It was around the same time the global economy faltered - starting in Hong Kong and spreading to Asia, Europe and the Americas. By the end of October, some markets had fallen by an eye watering 40 percent.  On Black Monday alone, the Dow Jones index lost 22% and hospital admissions around the world spiked 5 percent.

In short, the world was facing mounting challenges amid deeply unstable financial circumstances. How would we foot that bill?

Fast forward to 2019 and the world is infinitely more prosperous than in 1987. Now at US$ 77 trillion, the size of the world economy has more than tripled since 1985. Fewer people are living in extreme poverty around the world and more people have access to doctors or drinkable water than has ever been the case.

Admittedly, the picture is much more complex than that. Inequality seems to be increasing as well. The impacts of climate change are catastrophic. And though we now have the Sustainable Development Goals (SDGs), many governments seem ill-equipped to deliver the agenda, while vested interests restrict policy options. In addition, ensuring cooperation in a world that that becomes more divided and insecure is increasingly challenging.

One of the most puzzling questions development experts have to address is how to finance such a growing agenda. The financial costs of meeting the SDGs is estimated at US$5-7 trillion annually, with about half of these needs in developing economies.

Just last week, the UN warned that unless national and international financial systems are revamped, the world’s governments will fail to keep their promises on such critical issues as combatting climate change and eradicating poverty by 2030.

The question isn’t just how to raise additional money. It’s how to re-purpose the monumental amount of investment currently available in the world to continue to grow the economy and raise living standards for everyone. A recent JPMorgan funded study reports that there are now US$23 trillion in assets under management using various sustainability frameworks. The question is how to align and certify these investments with the ideals of the sustainable development and meeting the needs of the next generations.

Public - and particular fiscal policies – is an aspect which I have examined in my own research. For example, if we reduce harmful fossil fuel subsidies to address climate change or introduce carbon taxes, then who will bear the price of the transition to a greener economy?  

The good news is that the global economy has had to change with the times. For example, since 2009 the benchmark cost of electricity for a utility-scale solar panel has dropped by 72 percent, creating new commercial opportunities. Rolling back subsidies, providing safety nets for vulnerable people and creating new markets for renewables should be easier than it once was. Not to mention that such new industries could create more jobs than fossil fuels.

To be sure, there will be more clouds ahead. The International Monetary Fund calculates that between 1970 and 2011, the world has suffered 147 banking crises. How do we achieve predictable financing in such circumstances?

Under the overall theme of “Putting money to work for sustainable development”, the Istanbul Development Dialogues, taking place 27-28 May 2019, will seek to tackle some of these issues.

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