As Prepared for Delivery

Good morning, good afternoon, good evening, Excellencies, ladies and gentlemen. I’m Esther Pan Sloane, Head of Partnerships, Policy and Communications at the United Nations Capital Development Fund, and it’s an honor to address the Sustainable Investment Forum today on the topic of the UN SDGs and the Decade of Action. UNCDF makes public and private finance work for the world’s poorest countries, known as the Least Developed Countries, or LDCs, which will be the focus of my remarks today.

The Decade of Action to achieve the SDGs began with an unforeseen and unprecedented global pandemic that impacted everyone, but hit the Least Developed Countries the hardest. The more than 1 billion people who live in the LDCs already faced a range of challenges. Then Covid hit, causing LDC economies to shrink significantly in 2020 even while their external debt burdens and debt service obligations rose. Extreme poverty jumped from 32.2 per cent to 35.2 per cent, an increase of more than 32 million people, wiping out hard-won gains in poverty eradication. The pandemic reversed progress towards sustainable development in LDCs, which was uneven already before the crisis and not on a pace to achieve the Sustainable Development Goals by 2030.

Between October 2019 and October 2020, the economic growth forecast for LDCs fell from 5 percent to -0.4 per cent. This led to a 2.6 per cent reduction in per capita income in LDCs in 2020, with 43 out of 46 LDCs experiencing a fall in their average income levels, the worst result in 30 years.

The LDCs need capital to invest in infrastructure, human development, productive capacity and climate resilience. Yet capital is exactly what they lack. The 46 poorest countries in the world account for only 1.3 per cent of global GDP, 1.4 per cent of global foreign direct investment (FDI), and just 1 per cent of global merchandizing exports. LDCs face multiple structural impediments, including low levels of productive capacity and largely undiversified, informal economies heavily reliant on agriculture and natural resources. Only 53 per cent of the LDC population has access to energy, with this rate falling as low as 10 per cent in rural areas in some countries. And this time of ongoing health threats from the pandemic, the LDCs have an average of 3 doctors and 6 hospital beds per every 10,000 citizens.

And LDCs face significant obstacles in attracting the private sector investments they need. Underdeveloped local capital and financial markets severely limit domestic and foreign capital for productive investments, and most LDCs lack solid pipelines of bankable enterprises and projects with SDG impacts. The international financial architecture is not designed to support the smaller and riskier investments essential to building a thriving private sector in the LDCs. Domestic and international investors alike see key barriers to investment, including high transaction costs, local currency risk, and undifferentiated perceptions of political risk, along with a lack of local market knowledge.

At the same time, the global economy is shifting, with private consumer markets growing throughout the developing world and increased South-South and triangular cooperation. LDCs— with their younthful populations, growing labor forces, and access to natural resources –represent markets with enormous untapped potential for economic growth.

If we consider portfolio-level climate risks in this context, the LDCs - and emerging markets more generally - offer an opportunity for both geographic diversification and innovative ways to invest for impact. Investments in frontier markets – to build digital infrastructure, expand access to clean energy, boost climate resilience and support local entrepreneurs - can lead to both financial and social gains for the people and regions that most need support.

As investors assess the many risks climate change poses to their portfolios – including physical, transition or stranded asset risk – there is also the significant reputational risk for organizations or companies to be seen as laggards on addressing climate change, an issue that investors and consumers, particularly young people, are increasingly passionate about.

We are seeing this movement reflected in the markets. Nearly 2,000 businesses have committed or set science-based targets to reduce their carbon emissions. And over 250 asset owners, asset managers and banks — with combined assets over $80 trillion — have committed to transitioning their portfolios to net zero emissions by 2050 at the latest. They have agreed to use science-based guidelines to reach net zero emissions, cover all emission scopes, include 2030 interim targets and commit to transparent reporting and accounting.

Investors can and should reward those companies that make measurable progress on Net Zero commitments. As just one example: UNCDF has worked with the UN Secretary General’s Global Investors for Sustainable Development Alliance (GISD)— a group of 30 CEOs of some of the world’s biggest asset managers, insurance companies and pension funds— to create an Exchange Traded Fund that tracks the performance of a global equities index but contains no fossil fuels of any kind. The ETF, ticker NTZO, which will be launched October 19 at the GISD CEOs conference, is managed by Impact Shares, a nonprofit fund manager. UNCDF partnered with Impact Shares to launch the first UN-affiliated ETF in 2018, SDGA. This holds companies that create positive economic impacts in LDCs and donates its net management fee to UNCDF. The climate ETF has a similar fee donation, which UNCDF will use to help LDCs mitigate the impacts of and adapt to climate change.

As another example, UNCDF has launched blended finance funds to support small and medium enterprises in LDCs and help developing country municipalities tap the capital markets to build the critical infrastructure they need to cope with climate change. Increasingly, there are more and more financial vehicles that investors can choose to align their money with their values and create the change we all want to see.

Excellencies, ladies and gentlemen. One of the great inequities faced by LDCs is that, while they have done so little to contribute to climate change, they are the most vulnerable to its impacts while having the fewest resources to deal with them. The latest UNFCCC report released last week raises the risk that emissions could actually increase 16% by 2030, which would cause a 2.7 degree rise in global warming by the end of century. The report says there is “an urgent need for a significant increase in the level of ambition” of climate commitments by countries and stakeholders and identifies net zero CO2 emissions as a prerequisite for halting warming at any level. To halt global warming, to achieve the SDGs, and to ensure a better life for the 1 billion citizens of the LDCs, we must act.

The time is now. We have the tools, and there is no time to waste.

Thank you.