Sat, Dec 22, 2018 - Page 9 News List

Harnessing the digital revolution for sustainable development

By Maria Ramos and Achim Steiner

Financial digitalization — the digital revolution’s system-level transformation of the entire financial ecosystem — could catalyze global efforts to finance sustainable development.

According to the McKinsey Global Institute, the expanded use of financial technology (fintech) could drive growth across developing countries by up to US$3.7 trillion by 2025, thanks mainly to increased productivity gains and broader financial inclusion.

However, if the promises of digitalization are to be fulfilled, the world will need to align financing and investment strategies more tightly to sustainable development outcomes.

Last month, UN Secretary-General Antonio Guterres convened a task force on digital financing to tackle this complex challenge. We are honored to serve as cochairs for this global effort.

For obvious reasons, financing is key to achieving the Sustainable Development Goals (SDGs) and meeting the emissions targets set by the 2015 Paris Agreement.

However, although global savings are more than adequate to fuel the transition to sustainable development, the global financial system has so far failed to effectively intermediate supply and demand. The modest success that some countries have achieved in financing sustainable development has not been commensurate with the need.

Many factors can influence sustainable development outcomes. For example, the global financial and economic crises that began in 2008 — and the subsequent responses by regulators and policymakers — have impacted economic growth, job creation and income equality.

Likewise, ventures such as China’s Belt and Road Initiative can unlock fresh funds for infrastructure investment. Any number of national and international policies can determine whether financing delivers, or diverts us from, sustainable development.

However, it is digitalization that could make the biggest long-term difference by harnessing the power of new business models driven by technologies, including mobile connectivity, artificial intelligence, big data, blockchain and the Internet of Things.

However, that immense potential is not guaranteed. Ultimately, the impact of digitalization on sustainable development will depend on whether the advent of more and cheaper data, together with faster analytics, results in financing decisions that take greater account of today’s social and environmental costs.

Fintech can place citizens center stage in delivering good development outcomes.

Kenya’s digital revolution has helped poor households gain access to everything from solar energy to government bond markets. Crowdfunding platforms such as the UK’s Abundance, Germany’s EcoCrowd and Japan’s NPO Bank are unlocking responsible, sustainable lending solutions. In China, Ant Financial’s Ant Forest platform has helped more than 300 million people reduce their ecological footprint. Bicycle-sharing services use app-based fintech payment solutions to make their low-carbon, healthier transportation option available to millions of people in cities all over the world.

In short, there are already tantalizing hints of the power of the digital revolution in advancing finance for sustainability.

Changing how people bank and invest, and democratizing access to the financial system is essential to spurring development more broadly.

According to the UN Capital Development Fund, financial inclusion for the unbanked and underserved is a direct enabler for at least eight of the SDGs.

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