This research is a continuation of a previous academic consultancy project for the United Nations Department of Economic and Social Affairs (UN DESA); it builds on previous work performed by SIPA students on identifying solutions to mobilize additional capital to achieve the Sustainable Development Goals (SDGs). The research team created a framework for UN DESA to assess projects that both quantitatively and qualitatively satisfy both requirements of selecting a fundable project that 1) meets SDG goals and 2) have attractive Return on Investments (ROIs) for private funding. To that end, the research combined the review and analysis of the Voluntary National Reviews (VNRs) of Ghana, Cambodia, Jamaica, South Africa, and Brazil as well as desk research on private sector finance and investments in sustainable development; and the interviews financial market experts.
The research methodology leverages a top-down and bottom-up approach to prioritizing projects listed in the VNRs. The bottom-up approach is a qualitative method that uses a robust framework to dynamically calculate project scores based on predetermined qualifications set forth by UN DESA. The top-down approach is a quantitative method that leverages country benchmarks to measure the returns of potential project ROIs. By triangulating the results of these two methods, the methodology provides a holistic approach to assessing priority projects that are investable for private investors.
As a way forward, policies recommended for consideration include the use of sustainability linked loan, first-lost mechanisms, private-public partnerships (PPP), bundling mechanisms and sovereign green/”SDG” strip bond issued for financing development. To that end, UN DESA would create a working group comprised of finance ministers, government representatives, bond underwriters, regulators, central bankers, rating agencies and asset management firms to identify the necessary factors contributing to a robust underwriting and trading framework of “SDG commitment” strips. Experts would speak to the need for liquidity, minimizing operational risks, excessive speculations and the artificial greening of investment portfolios.
The final report is available here.