Financing Sustainable Development

• Author: Smita Nakhooda, Frances Seymour, and Sabina Ahmed
• Pages: 413-424

Chapter 27

Financing Sustainable Development

Smita Nakhooda, Frances Seymour, and Sabina Ahmed

It has been 26 years since the Brundtland Commission presented

the world with the concept of sustainable development, recognizing

that environmental and social well-being contribute directly to pov-

erty alleviation and are essential to the economic development and

welfare of current and future generations. At the United Nations Con-

ference on Environment and Development at Rio in 1992, known as

the Rio Summit, governments of the world formally charted out a map

to sustainability in the form of Agenda 21, concluding that its achieve-

ment would require an annual investment of $600 billion primarily in

the form of public overseas development assistance (ODA).1At the

WorldSummit on Sustainable Development in Johannesburg in 2002,

the international community explicitly recognized for the first time

that nongovernmental actors, particularly business and the private

sector, would have to work together with public and multilateral insti-

tutions to realize these goals. In 2003, governments adopted the Mil-

lennium Development Goals to address extreme poverty and hunger

by 2015, with a relatively modest price tag of $100 billion per year in

ODA to achieve these minimum standards.2Nevertheless, commit-

ments have fallen far short of this requirement.

Private financial flows to developing countries now dwarf develop-

ment assistance: In 2005, total development assistance was $106.5

billion, whereas net private flows were $491 billion (see Figure 1).3

But only limited progress has been made in aligning either public or

private capital flows with either Agenda 21 or the Millennium Devel-

opment Goals. Private financial flows to developing countries are

concentrated in a few emerging economies. Brazil, China, India, Mex-

ico, and Russia receive 80 percent of foreign direct investment (FDI),4

and it tends to be concentrated in sectors such as oil, gas, and telecom-

munications, rather than in sectors that have more direct developmen-

tal impacts such as health care, sanitation, or education.

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