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- Digitization could help achieve the Sustainable Development Goals (SDGs).
- The impact depends on how digital disruption reshapes finances.
- The UN Task Force on Digital Finance for the SDGs highlights the importance of putting citizens at the center of finance.
Digital is the clear winner of the COVID crisis, as hundreds of millions of people have migrated to the world of bytes to socialize, work and consume. While only part of this unprecedented behavioral change will be sustained in the long term, there is no doubt that COVID has catapulted us into the digital future.
The digital dividend from COVID could be huge, from helping us achieve our climate goals to improving access to health and education. However, whether we can really get this dividend depends on how digitization reconfigures finances.
Whether digitization is the foundation for a transition to a more inclusive, climate-resilient and low-carbon development path depends on whether it contributes to “returning the financial services industry to what it is supposed to be: an industry that serves to the people”, how IMF Managing Director Kristalina Georgieva pointed out in January 2020. The digital dividend will be positively transformative if digitization can fulfill requests from former Bank of England Governor Mark Carney to restore finances to establish a “sustainable financial system. to stop uncontrolled climate change “and meet the 17 global goals.
The time has come for the financial system to meet the needs of the people, the ultimate owners of the world’s financial assets. Digitization can drive that change.
With this in mind, UN Secretary-General António Guterres established the SDG Digital Finance Task Force in late 2018. He asked its 17 extraordinary members – leaders in finance, technology, governance and development – to “ make recommendations and catalyze actions to take advantage of digitization in the financing of the SDGs ”.
Almost two years later, in a world transformed by COVID, the Task Force has released its landmark report, People’s Money: Leveraging Digitization to Fund the SDGs, which sets out the state of the art, opportunities and recommendations, as well as a roadmap to improve. ideas and innovation in practice at scale.
It traces for the first time the many hundreds of innovative developments around the world in the nexus of digital, financial and sustainable development, leveraging big data, artificial intelligence, blockchain and mobile platforms. It points to five multi-trillion dollar catalytic opportunities to harness digital in aligning finance with the SDGs. It establishes an Agenda for Action focused on accessing such opportunities, building national ecosystems of sustainable digital finance and building a more inclusive international financial governance.
The Task Force describes how digitization can help channel the huge growth in domestic savings, which tripled in two decades to $ 23 trillion in 2019, into long-term development investments. For example, Kenya’s M-Akiba is the world’s first public bond subscribed exclusively by citizens through their mobile devices. As another example, Bangladesh could reduce the cost of financing sustainable infrastructure by approximately 20% by substituting domestic savings for international capital, as well as paying dividends to Bangladeshi citizens instead of external financial institutions.
It highlights the role of digitization in expanding the volume of financial assets led by ESG from the current level of $ 30 trillion in the world’s $ 185 trillion capital markets. It illuminates how digital can increase the transparency and accountability of public finances, which account for about 20% of global spending. It shows us how algorithmic lending can unlock the $ 5 trillion needed annually to finance SMEs, the source of much of the world’s employment and livelihoods.
The key message of the Task Force for world leaders is that digitization will be a force for good, if it offers citizen-centric financing. As Co-Chair Maria Ramos, former CEO of Absa South Africa, commented at the launch: “We have a historic opportunity to accelerate and expand the transformative impact of digitization … pushing the boundaries of financial inclusion by empowering citizens as savers, investors, borrowers, lenders and taxpayers in a way that gives them choice and power over their money. ”
Still, the Task Force recognizes the barriers and risks involved. Coupled with exclusion gaps in digital infrastructure and unequal distribution of skills, digitization risks perpetuating discrimination against women and marginalized groups. In addition, it presents new possibilities for data breach, embezzlement and fraud, and could intensify short-termism and market concentration.
As Patrick Njoroge, Governor of the Central Bank of Kenya and member of the Task Force put it, “[T]The COVID-19 crisis is a tragedy. But it is also an opportunity for change. After decades of growing inequality and unsustainable investment, we have the tools and knowledge to do better. We just need the will to use them. ”
The choice is ours. Let’s make sure the digital dividends of COVID-19 shape the world we want to live in.
It is an annual meeting that presents the best examples of public-private cooperation and technologies from the Fourth Industrial Revolution that are used to develop the sustainable development agenda.
It runs in conjunction with the United Nations General Assembly, which this year features a one-day climate summit. This is timely given growing public fears – and citizen action – about weather conditions, pollution, the health of the oceans and declining wildlife. It also reflects an understanding of the growing business case for action.
The UN Strategic Development Goals and the Paris Agreement provide the architecture to solve many of these challenges. But to achieve this, we need to change the patterns of production, operation and consumption.
The work of the World Economic Forum is key, and the summit offers the opportunity to debate, debate and participate on these issues at the global policy level.
