At the fourth preparation conference at the UN headquarters in New York for the Financing for Development Conference (FfD4) in Seville, IDOS researcher Dr Kathrin Berensmann emphasised the urgent need to promote the design and implementation of the international architecture for sustainable finance.
©UN Photo
In her input, she highlighted that financial markets are not aligned with the sustainability goals of the Paris Agreement and the 2030 Agenda because they still largely finance fossil fuel-intensive industries. At the same time, there is a significant financing gap to achieve the SDGs. An appropriate global sustainable finance architecture is needed to direct financial flows towards sustainable investments.
First, an FfD4 outcome document should commit to ambitious policies to increase transparency on sustainability impacts of investments. This includes reporting requirements and sustainable finance taxonomies or risk assessment rules. Second, the FfD4 outcome document should promote incentives to adopt sustainable finance strategies, including regulations for the implementation of sustainable finance instruments. Third, the FfD outcome document should support policy solutions that enhance the interoperability of sustainable finance policies, such as supporting an international recognition mechanism for sustainable finance standards or taxonomies. Fourth, the FfD4 outcome document should commit to providing capacity-building measures by multilateral and bilateral actors in the field of designing and implementing sustainable finance strategies. One call to action could be the establishment of a multilateral fund for capacity building in sustainable finance for the Global South, similar to the IMF/World Bank Debt Management Facility.
The FfD4 in Seville in 2025 is an essential component of the UN Financing for Development process, which fosters global cooperation in the context of current geopolitical tensions. The global architecture for sustainable finance is currently undergoing development. It is essential that commitments to design and establish this architecture are adequately incorporated in the outcome document of the FfD4 in Seville.
