How can green finance and investment mobilize resources and incentives for sustainable development goals?

1 Aligning policies and regulations

One of the main challenges for green finance and investment is to overcome the market failures and policy distortions that favor carbon-intensive and environmentally harmful activities. To create a level playing field and a consistent signal for investors, policymakers need to align their policies and regulations with the SDGs, such as by phasing out fossil fuel subsidies, pricing carbon emissions, enforcing environmental standards, and integrating sustainability criteria into public procurement and financial regulation. For instance, the European Union has adopted a taxonomy of sustainable activities, a green bond standard, and a disclosure regulation to guide and incentivize green finance and investment.

2 Leveraging public and private finance

Another challenge for green finance and investment is to mobilize sufficient and affordable capital for the large-scale and long-term investments needed to achieve the SDGs. To address this challenge, public and private finance need to work together to leverage their respective strengths and complementarities. Public finance can provide catalytic funding, risk-sharing mechanisms, technical assistance, and policy support to reduce the barriers and costs of green finance and investment, while private finance can bring innovation, efficiency, and scale to the market. For example, the Green Climate Fund (GCF) is a global fund that supports developing countries in implementing low-emission and climate-resilient projects, by blending grants, loans, equity, and guarantees from public and private sources.

3 Engaging stakeholders and beneficiaries

A third challenge for green finance and investment is to ensure that they are inclusive, participatory, and responsive to the needs and preferences of the stakeholders and beneficiaries of the SDGs. To achieve this, green finance and investment need to engage with a wide range of actors, such as civil society, local communities, women, youth, indigenous peoples, and vulnerable groups, and incorporate their views and interests into the design, implementation, and evaluation of the projects and programs. For example, the Global Environment Facility (GEF) is a multilateral fund that supports environmental initiatives in developing countries, by involving civil society organizations, indigenous peoples, and the private sector in its governance, operations, and partnerships.

4 Measuring impacts and outcomes

A fourth challenge for green finance and investment is to monitor and evaluate their impacts and outcomes on the SDGs, and to communicate them effectively to the relevant audiences. To do this, green finance and investment need to adopt robust and consistent methodologies, indicators, and standards to measure and report on their environmental, social, and economic performance, and to disclose their risks and opportunities. For example, the International Finance Corporation (IFC) is a global development institution that invests in private sector projects in emerging markets, by applying its performance standards on environmental and social sustainability, and by publishing its annual impact report.

5 Fostering collaboration and learning

A fifth challenge for green finance and investment is to foster collaboration and learning among the various actors and initiatives involved in the SDGs, and to share best practices, lessons learned, and innovative solutions. To do this, green finance and investment need to participate in networks, platforms, and forums that facilitate dialogue, coordination, and knowledge exchange among different stakeholders, sectors, and regions. For example, the Partnership for Action on Green Economy (PAGE) is a global partnership that supports countries in advancing green economy policies and practices, by providing policy advice, capacity building, and knowledge sharing among its partners and members.

6 Scaling up and mainstreaming green finance and investment

The final challenge for green finance and investment is to scale up and mainstream their activities across the economy and society, and to make them the norm rather than the exception. To do this, green finance and investment need to demonstrate their value proposition, competitiveness, and attractiveness to a broader range of investors, consumers, and policymakers, and to create a positive feedback loop that reinforces their impact and sustainability. For example, the Principles for Responsible Investment (PRI) is a global network of investors that commit to integrating environmental, social, and governance (ESG) factors into their investment decisions, by following six voluntary principles that enhance their long-term returns and alignment with the SDGs.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?