Last week the world’s most prominent politicians, businessmen, intellectuals and philanthropists gathered in Davos. In the small town in the middle of the Alps, decisions that will affect billions of people worldwide were made.
Among the challenges considered was how the world would meet the UN’s Sustainable Development Goals with just a decade to go. Fundamental to making this happen is overcoming the funding barriers that we face and delivering measurable results.
Over the next 10 years charities, private investors and governments must collaborate and think of radical new ways to fund these goals.
SDGs, adopted in 2015 by the United Nations General Assembly, were meant to mark a new dawn in the age of international development by creating the ambition of “Transforming our World: the 2030 Agenda for Sustainable Development”.
The goals range from ending poverty and hunger to ensuring good health, quality education and gender equality. This agenda correctly recognises that it is no longer sufficient to focus only on economic growth and that a fairer and more equal society is also crucial.
Five years on, there is an annual £2.7 trillion black hole in terms of meeting the SDGs. Many of the world’s greatest issues are far from being solved: there are still 750 million illiterate adults in the world, 265 million children don't even go to school and about 10 per cent of the global population lives in extreme poverty. Faced with this challenge, it is clear that traditional philanthropy and grant giving to fund development initiatives can no longer solve these challenges alone.
The SDGs were accompanied by the optimistic “billions to trillions” vision: many believed that an abundance of commercially viable SDG-related investments were ready and waiting for trillions of private investment. However, the volume of money has not been forthcoming, and what there has been is all too frequently spent with little understanding of the results that the investment delivers. Many initiatives are driven by positive intentions but lack data and evidence to show what worked and what the initiative achieved.
It is now clear that the international development and charity sectors need to take a radical and innovative approach to using finance effectively. A potential solution would be linking funding models to defined and trackable outcomes that would help to ensure the right funding was provided to the right initiatives.
An example of this is the Development Impact Bond that the British Asian Trust launched in 2018, along with partners in the private and charity sectors. The DIB is the world’s largest education development impact bond, establishd to transform the way education is funded in India, focusing on the quality of education through the delivery of specific measured outcomes of improved literacy and numeracy, as opposed to simply measuring the number of children in schools.
Already the DIB is proving a success. In its first year it has enabled 30 per cent more students to overcome learning gaps and achieve basic literacy and numeracy skills.
The DIB is one example of how linking funding models to defined and trackable outcomes can help to ensure the right funding is provided to the right initiatives. In the long term, this approach can help deliver spending efficiencies at a government level, with clear outcomes on good and bad practice allowing governments to make the right decisions.
It will also mean that charitable funding is not wasted and could therefore be more forthcoming, given that the funder knows their valuable giving will help to deliver the results they intend.
While traditional funding streams are under severe pressure, innovative financing mechanisms such as DIBs are a complementary tool to attract new private capital and will play a major role in bridging the financing gap and achieve the UN’s ambitious SDGs.
Innovative finance is starting to gain traction across the international development sector. Gordon Brown, the former UK Prime Minister, is set to launch a $5bn International Finance Facility for Education this year, involving government, philanthropic and cooperative backers. The World Bank, meanwhile, has launched a new initiative to halve “learning poverty” over the coming decade. The idea is to improve systems of tracking students’ progress and use the resulting data to roll out the most effective programmes.
The UN this year kicks off its Decade of Action in an effort to meet the 2030 agenda. If it is to stand a realistic chance of success it must think outside the box and work with governments, private investors and charitable organisations to launch innovative new finance initiatives based on outcomes.
If so, perhaps we will have something to celebrate when the world gathers again in 2030.
Richard Hawkes is chief executive of the British Asian Trust