International leaders, cabinet-level ministers, institutional stakeholders, nongovernmental organizations, business entities, and other representatives gathered this week at the Third International Conference on Financing for Development in Addis Ababa, Ethiopia. The meeting has played a key role in shaping discussions over financing for climate change mitigation and adaptation. (Video here.)
The UN first convened the conference in 2002 and has held high-level dialogues on financing for development every two years in the General Assembly. This time around, representatives have agreed on important measures to overhaul global finance practices and generate investments that will address a range of economic, social, and environmental challenges associated with climate change.
Among the major achievements:
- A new global framework for financing sustainable development that aligns all financing flows and policies with economic, social, and environmental priorities.
- A comprehensive set of policy actions by member states, with a package of over one hundred concrete measures that draw upon all sources of finance, technology, innovation, trade and data in order to support mobilization of the means for a global transformation to sustainable development.
The solid policy framework will realign financial flows with public goals. In general terms, the agreement addresses all sources of finance: public and private, domestic and international. It sets out the financing needed to achieve a large post-2015 development agenda (on the order of trillions of dollars annually). Fortunately, the report also finds that global public and private savings will be sufficient to address this—“but only if financial resources are invested in and aligned with areas of greatest global need.”
The agreement sets forth commitments, means, and goals that encourage countries to define national domestic targets and timelines for enhancing revenue, commits international support and strengthens international cooperation in tax matters, steps up the fight against illicit financial flows, and speeds up the return of stolen assets. It also commits to transparent and gender-responsive budgeting and public procurement, rational fossil fuel subsidies, and national development banks to finance long-term investments necessary for achieving sustainable development.
For domestic and international private business and finance, the agreement encourages a core business model that takes account of environmental, social, and governance impacts, integrates reporting, and encourages impact investing. Participants have committed to enhance international support and capacity building for local capital market development. They have set a target to reduce the transaction costs of remittances to below 3% and to commit countries to ensure that no corridor requires charges higher than 5% by 2030, while ensuring adequate service coverage.
The agreement also encourages private foundations to use their endowments actively through impact investment, bringing these resources into use as sustainable development investments, and calls on nations to mainstream financial inclusion as a policy goal in regulations. Furthermore, it commits countries to develop policies and strengthen regulatory frameworks to better align private sector incentives with public goals.
Other sections of the agreement cover these areas:
- International development cooperation,
- International trade as an engine for development,
- Defining debt and debt sustainability,
- Addressing systemic issues, and
- Collecting data, monitoring, and follow-up.
Although the conference went far to reform global finance in order to spur development and channel funds to fight worldwide poverty and climate encroachment, ActionAid and Oxfam International criticized the agreement for falling short of fixing unjust global tax rules, according to the US news agency Associated Press. The Guardian points out further unfinished business here.
Nonetheless, Secretary-General Ban Ki-moon called the adoption of the Addis Ababa Action Agenda a “major step forward in building a world of prosperity and dignity for all.”
Many view the the Addis Ababa Action Agreement as the first of three critical financial milestones relating to climate this year. AAAA is significant because it provides a solid basis for countries to ratify the proposed sustainable development agenda in New York in September (milestone 2), and to reach a binding agreement on global carbon emissions at the UNFCCC COP21 climate negotiations in Paris in December (milestone 3).
You will find blog posts from the conference at this link. More background here. Also, the United Nations Department of Economic and Social Affairs provides a useful overlook of the conference in this pdf.