Distinguished delegates and speakers,
Ladies and Gentlemen,
It is a great pleasure to welcome you today to this Second Committee’s side event on “New instruments of social finance”. I would like to thank the Financing for Development Office of UN DESA for helping in the organization of the event, which will serve as a useful input to the Financing For Development preparatory process.
Allow me to give a warm welcome to the distinguished panellists who have joined us today. This event is very timely if we look to the important dates that await us in the year ahead. In particular, we will soon be called to determine the post-2015 development agenda as well as give a significant boost to the Financing for Development process.
With this in mind, in June 2013 the General Assembly set up the Intergovernmental Committee of Experts on Sustainable Development Financing, with the aim of assessing financing needs related to sustainable development and considering the effectiveness and consistency of alternatives. The Committee’s report was clear in its approach: in order to achieve sustainable development countries must make full use of all financing flows in a holistic way. The objective should be the optimization of contributions coming from all flows, public or private, domestic or international.
The economic crisis also highlighted the need to generally look for new forms of investment. These are crucial to revamp the international economy and support growth and job creation, in developed and in developing countries alike.
In this context, social finance is one fast-growing area of finance that has the potential to support sustainable development. The instruments that are being developed under the heading “social finance” are numerous. They include impact investing, designed to generate social and environmental impact alongside a financial return, as well as social entrepreneurship, and other forms of innovative financial instruments.
The growing impact investment market aims at providing capital to support private sector solutions to the world’s most pressing challenges in sectors such as sustainable agriculture, affordable housing, affordable and accessible healthcare, clean technology, and financial services.
In fact, social impact investment is able to catalyze private sources of finance and, at the same time, reduce financial stress on public current expenditure and negative impact on public debt. It can also support employment by encouraging the start-up of micro-enterprises and self-employment.
As we look forward to a more universal sustainable development agenda, we should learn from the experience these instruments so far.
In developed countries, along with impact investing, social impact bonds (SIBs) have been launched to try to make inroads in achieving social development goals by combining the public and private sector, often with civil society involvement. Proponents of social finance instruments argue that they have the potential to not only improve efficiency and cost-effectiveness of products and services but also deliver environmental and social benefits. They may also spur innovation and improve service delivery. Overall, they may result in successful tools of international cooperation to fight inequalities between Countries, within Countries and geographic areas.
There are questions about the effectiveness of these instruments, and lessons to be learned. This is also why I share the idea that governments must commit themselves to supporting coordinated studies and subsequent actions to promote a new market of high social and environmental impact investment. Lessons learned from concrete cases should affect both public policies towards these developments, as well as the design of the instruments themselves. The use of these and any financial instruments needs to be strategically assessed so that the financing instruments match the needs of sustainable development.
Today we hope the panellists will shed some light on these issues, and help us learn about the benefits and possible risks associated with new instruments of social finance.