Development Policy Committee: Sustainable development investments need clear criteria

This is the view of the Development Policy Committee, which commissioned a report on the topic, titled Financial transformation in sustainable development. The report discusses Finnish investors who are committed to responsible investing, how much is being invested and which of the least-developed countries are receiving Finnish investments. In addition, it examines the investors’ strategies for sustainable development investing.

Sustainable development needs a greater amount of responsible investments

According to the Development Policy Committee, there is a dire need for new investment as least-developed countries will not be able to reach the goals of the United Nations (UN) 2030 Agenda for Sustainable Development by 2030 if they do not receive significant amounts of external funding that supports the goals and principles of sustainable development.

The core principles of the 2030 Agenda include attention to the most vulnerable people and groups and gender equality and non-discrimination.

Private sources of funding play an important role, as the Official Development Assistance (ODA) is nowadays only a part of the total funding channelled to developing countries.

The Committee calls for more coherent guidelines at the EU level, too, when investments made in the name of sustainable development. The guidelines should take into account the impact of the investments on social, ecological and economic sustainability and on the principles of the 2030 Agenda.

Monitoring financial flows is difficult

According to the report, 51 investors in Finland are committed to responsible investment. These include authorised pension companies, investment banks and retail banks. A bulk of these investors report making investments in line with the UN Sustainable Development Goals.

However, currently it is difficult to monitor financial flows as investments are often made to international funds that invest the funds further in both developed countries and developing countries.

In the absence of common criteria, different investors can have very different approaches to sustainable development investing. It is difficult to assess the targeting and development effects of Finnish investments because there is no uniform method for monitoring their impact.

The Committee argues that currently there is a risk that sustainable development is being used for marketing purposes. Moreover, investors who put effort into the effectiveness and monitoring of funding do not gain a fair advantage over their competitors.

Private and public sectors should cooperate more

The report shows that the complementary role of private investment in relation to development cooperation funding is still slight. At the same time, the most fragile regions are still being overlooked. Investments are not allocated to sufficient degrees to the developing of local small- and medium-sized enterprises, which have after all great potential in creating sustainable and decent jobs.

The Committee hopes that the Finnish Government would adopt a more systematic approach to promoting and monitoring SDG-aligned investing in developing countries. The first steps would be to identify existing barriers, to chart best international practices and to strengthen dialogue with investors on systems that generate the highest added value.

At the same time, the Ministry for Foreign Affairs and the Ministry of Economic Affairs and Employment should consider ways to promote private investment in developing countries and in sustainable development by means of trade policy and existing development policy instruments.

Inquiries:

Marikki Karhu, Secretary General of the Development Policy Committee, tel. +358 50 525 8649, marikki.karhu@formin.fi

Inka Hopsu, Chairperson of the Development Policy Committee, tel. +358 40 758 9545, inka.hopsu@eduskunta.fi

The Development Policy Committee is the only body that conducts systematic and broad-based monitoring and analysis of Finnish development cooperation and development policy. The Government appoints the Committee for each government term. Its members include representatives of parliamentary parties, advocacy organisations, CSOs and universities in the UniPID network (Finnish University Partnership for International Development).