Financing the SDGs to build back better from the COVID-19 Pandemic in Asia & the Pacific

The 2021 issue of ESCAP’s Financing for Development Series, Financing the SDGs to build back better from the COVID-19 pandemic in Asia and the Pacific, reviews a range of financing instruments, strategies and mechanisms that can help Asia-Pacific economies recover from the pandemic and effectively pursue the SDGs. In particular, the report takes a “deep dive” on the role of innovative climate and digital finance strategies to address the financing gaps and support the achievement of the SDGs, and it suggests key regulatory and solution-oriented policy actions that can help scaling up financing in support of the SDGs. While countries prioritize speedy economic recovery from the COVID-19 pandemic, it is critical that financial flows are not diverted away from the SDGs and climate action and that policymakers “build back better” by enhancing the resilience of their economies. However, the rising debt burden faced by developing countries in the region is becoming a daunting challenge and squeezing fiscal space considerably. Therefore, innovative financing instruments are required to both streamline existing financial flows and generate additional financial resources in a fiscally responsible and sustainable manner. The “deep dive” chapter on innovative climate financing covers policy instruments and mechanisms such as thematic bonds, including green, sustainability, and SDG-linked bonds, climate risk disclosure and reporting, and debt-for-climate swaps. It also discusses the importance of enabling policy frameworks for climate action. The other “deep dive” chapter looks at the potential of digital finance to support the achievement of the SDGs. Digital finance has the potential to transform how we engage in economic activities and do business. New innovative solutions in the digital space are enabling unbanked and underbanked individuals to access financing and engage in the real economy. Digital platforms linked with digital payment systems have also supported businesses to swiftly transition during the pandemic to online means of doing business. Despite the global shift towards digital finance, barriers still remain. Digital infrastructure, interoperable payment systems, the ability for financial clients to meet customer due-diligence processes are just a few of the critical challenges still faced by the policymakers and regulators in ensuring an inclusive and competitive digital finance ecosystem. The publication takes a critical look at these challenges and identifies opportunities and innovations which can drive digital finance adoption in the Asia Pacific region.