Short-term thinking can undermine progress against the SDGs
The report finds that the majority of the financing flows for the development have increased in 2017. There is tangible progress across all the areas of the AAAA. Both trends are rooted in the moderate growth of the world economy. The authors of the report warned, however, that the risks and structural impediments associated with the short-term thinking can derail development progress.
The Inter-agency Task Force on Financing for Development
The assessments of the 2018 report draw on the expertise, analysis and data from almost 60 agencies and international institutions that make up the Task Force, which is led by UN DESA and includes the World Bank Group, the International Monetary Fund and the World Trade Organisation, as well as UN agencies such as UNCTAD and UNDP.
Why short-term thinking undermines sustainable development?
As the global economy experiences moderate upturn, the interest for and momentum around sustainable investing is growing. On the other hand, the report makes it clear that there is still a long way to go to a broader transformation in the global financial system. Socially responsible investing remains a niche. Moreover, the report states that the current system rewards those who prioritise short-term profits.
The same thinking pattern is characteristic for the policy-making, where stress is increasingly put on the short-term considerations. Combined, these trends create structural impediments, which undermine sustainable development
Beyond the quick fixes
The 2018 report suggests policy options with the potential to put the world back on sustainable growth and development path. Overcoming the short-term outlook of many investors is a complex but urgent issue. To address both complexity and urgency, a multifaceted approach is proposed. First, it involves decoupling the compensation of financial advisors and portfolio managers from the short-term results. Another important issue is transparency. For instance, listed companies can be required to disclose financial risks they face from climate change. There is also a way to address short-sighted policies when it comes to insufficient access to finance for countries in urgent need. The authors of the report suggest innovative insurance-like financial instruments. Additionally, loans can be set up to reduce repayments automatically during crises.
Overall, the report highlights that it takes leadership to overcome short-term political cycles and remove structural impediments that undermine sustainable development.
Link
Financing for Development: Progress and Prospects 2018
To read the full report, please click on the link above.