Financing Sustainable Development

• Date: 01 April 2009

39 ELR 10316 ENVIRO NMENTAL LAW REPORT ER 4-2009

Financing

Sustainable

Development

by Smita Nakhooda, Frances Seymour,

and Sabina Ahmed

Smita Nakhooda is a senior associate in the

Institutions and Governance Program of the World Resources

Institute. Frances Seymour is the Director General of the

Center for International Forestry Research. Sabina Ahmed is

a program coordinator at the World Resources Institute.

Editor’s Summary

Although the United States led sustainability reforms

in international nancial institutions in the 1980s and

1990s, these environmental and social considerations

were not given sucient attention during the last presi-

dential administration. e United States is still in

a position to continue positive change on these issues,

however, and can do so by encouraging multilateral

development banks and export credit agencies to inte-

grate social and environmental considerations into their

lending decisions.

It has been 26 years since the Brundtland Commis-

sion presented the world with the concept of susta inable

development, recognizing that environmental a nd social

well-being contribute directly to poverty alleviation and are

essential to the economic development and welfare of cur-

rent and future generations. At the United Nations Confer-

ence 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 achievement would require an annua l

investment of $600 billion primarily in the form of public

overseas development assistance (ODA).1 At the World Sum-

mit on Sust ainable Development in Johannesburg in 2002,

the international community explicitly recognized for the rst

time that nongovernmental actors, particularly business and

the private sector, would have to work together with public

and multilateral institutions to rea lize these goals. In 2003,

governments adopted the Millennium 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.2 Nevertheless, commitments have

fallen far short of this requirement.

Private nancial ows to developing countries now dwarf

development assistance: In 2005, total development assistance

was $106.5 billion, whereas net private ows were $491 bil-

lion (see Figure 1).3 But only limited progress has been made

in aligning either public or private capital ows with either

Agenda 21 or the Millennium Development Goals. Private

nancial ows to developing countries are concentrated in a

few emerging economies. Brazil, China, India, Mexico, and

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

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

telecommunications, rather than in sectors that have more

direct developmental impacts such a s health care, sanitation,

or education.

1. U.N. Conference on Environment and Development (UNCED), Agenda 21,

the Rio Declaration on Environment and Development, and the Statement of

Principles for the Sustainable Management of Forests, available at http://www.

un.org/esa/sustdev/documents/agenda21/index.htm.

2. U.N. D. P, H D R 2003, M

D G: A C A N  E H P

(2003).

3. W B, G D F 2006 (2006).

4. J H  ., D P: W F  E C

A  D F (2005), at 3.