UNEP Finance Initiative: Rethinking Impact to Finance the SDGs

Rethinking Impact is a product of UNEP Finance Initiative’s Positive Impact Initiative. The paper (2018) reviews the scope and nature of the financing gap for sustainable development and the Sustainable Development Goals (SDGs) in order to propose new solutions for finance, business and a broader set of stakeholders. It builds on the Initiative’s earlier Manifesto (2015) and Principles for Positive Impact Finance (2017), clarifying the concepts of impact-based business models, impact-based economy and holistic impact analysis. Rethinking Impact is both a position and a discussion paper.

Key points:

Investment needs for the SDGs are huge, with the bulk in developing countries and their infrastructure. The scale of current financial flows is insufficient: private finance is constrained by risk and return requirements, while public finance is in scarce supply. If the resulting financing gap remains unresolved, investment needs will grow over time because of a cumulative effect.

Impacts have an as yet under-explored potential to generate financial revenues. New, impact-based business models can be developed, where the delivery of positive impacts is a driver of business success. The two core features of an impact-based economy are to work back from impacts to come to the right investment decision, and to achieve as many impacts as possible through each investment. Impact-based business models can also serve to mitigate risk, while their digital components can help reduce costs.

There is pressure from policy-makers and civil society on business and finance to deliver positive social, environmental and economic impacts. At the same time, positive impacts can generate new financial revenues. The finance sector has a strategic interest in understanding impacts and can play a central role in facilitating the transition to an impactful and impact-based economy. Accordingly, it needs to improve its capacity for impact analysis.

No one will achieve the SDGs in isolation. We need an impact-focused ecosystem involving all stakeholders – the private and financial sector, but also the public sector, academia, civil society as well as individuals and their communities. It’s time for the growing impact movement to accelerate; more coordination and collaboration between stakeholders are needed to create an impact ecosystem. Key focus areas should be: consolidating finance sector impact frameworks, organising impact demand and supply, and further developing impact metrics.

More information: https://www.unepfi.org/wordpress/wp-content/uploads/2018/11/Rethinking-Impact-to-Finance-the-SDGs.pdf