Sep 30, 2024Catalyze sustainable financing through Capital Markets

"As concessional loans and public development aid dwindle, we must turn to innovative solutions that involve the private sector in financing sustainability and addressing climate challenges," said Adidjatou HASSAN ZANOUVI, President of the Benin Carbon Project Registration Authority.

Pouring multiple colors of paint into a single bucket produces a dull, grey puddle rather than a vibrant rainbow. Similarly, when it comes to discussions on financing the Sustainable Development Goals (SDGs), mixing too many topics in the same debate leads to political confusion rather than tangible progress. Precisely for this reason, during the event "How can sustainable financing be catalyzed through capital markets ?" organized by the Government of Benin and co-hosted by the Overseas Development Institute (ODI) and the UN Sustainable Development Solutions Network (SDSN), on September 20th, on the sidelines of the Summit of the Future and the 79th session of the United Nations (UN) General Assembly, the speakers and panelists focused on selected concrete best practices and opportunities in climate financing and capital market development to support low- and middle-income countries in achieving the SDGs’ rainbow colored framework.

At the discussion table there were: Sara Pantuliano, CEO of the ODI —the event's moderator; Adidjatou Hassan Zanouvi, President of the Benin Carbon Project Registration Authority; Constant Lonkeng Ngouana, Deputy Division Chief and Mission Chief at the International Monetary Fund (IMF); and Matthias Naab, Director of the UNDP Regional Service Center for Africa.

The event began with a brief presentation by Aristide Medenou, the Director General of the Economy of Benin, on high-impact projects financed by the SDG Eurobond, followed by Guillaume Lafortune, Vice President and Head of the Paris Office of the SDSN, who highlighted the valuable partnership between SDSN and the Government of Benin and congratulated Benin’s progress towards the SDGs.

On the occasion of this event, SDSN officially launched its 2024 Benin Sustainable Development Report, the result of a successful third year of partnership between the Government of Benin and SDSN. This third edition is the first co-produced with the SDSN Benin network launched in July 2023, and it reflects Benin’s commitment to implement the 2030 Agenda, and especially to achieve the SDG 6 (water and sanitation). According to the 2024 Benin Sustainable Development Report, Benin’s progress has been particularly notable in socio-economic dimensions, with significant advancements in SDG 1 on poverty, SDG 5 on gender equality, SDG 8 on decent work and economic growth, SDG 9 on industry, innovation and infrastructure, and in SDG 10 related to reduced inequalities, among others.

As highlighted by the Director General of the Economy of Benin, Aristide Medenou, flagship projects, funded by the SDG Eurobond issued by the country in 2021, had substantial impacts on achieving the SDGs in Benin. For example, the school feeding program has reduced the school dropout rate by 20%, has helped improve the primary school completion rate by about 30%, and has also contributed to better child nutrition, with a 16% increase in the consumption of iron-rich diets and a 13% reduction in the proportion of overweight children in urban areas. The school feeding program was also complemented by important efforts to improve water access. Thanks to this, Benin improved water access from 41% to approximately 80% between 2017 and 2023 in both rural and urban areas, with a consequent significant reduction in infant mortality. However, despite these encouraging achievements, ‘this does not mean that all goals are on track or that there are no challenges,’ as emphasized by Guillaume Lafortune, the Vice-President of SDSN.

The need to make even greater progress on the SDGs calls for innovative financing methods that can bring together all key stakeholders, including the private sector. Adidjatou Hassan Zanouvi, the President of the newly established Benin Carbon Project Registration Authority, emphasized the need for collaboration to mobilize capital for climate financing. She noted that the dwindling concessional loans and public development aid must be replaced by innovative means that involve the private sector in financing sustainability and climate challenges. She also shed light on the importance of using innovative means, such as carbon credits, in Benin, alongside creating a national and transparent framework that can attract private actors and investors, particularly to support the green transition in agriculture. In Benin, agriculture has been identified as a pillar of sustainable development and social stability and the established Sustainable Land Management Programs to train farmers in regenerative agriculture practices have led to significant increases in yields.

According to Constant Lonkeng Ngouana, Deputy Division Chief and Mission Chief at the IMF, Benin is at the forefront of the SDG agenda because it has a stable macroeconomic framework and sound public financial management. Benin currently benefits from three active IMF support instruments, including a program that backs SDG-centered reforms without cutting public spending. For the IMF representative, macroeconomic stability is a necessary step for countries to attract international investment for SDG financing.

Matthias Naab, Director of the UNDP Regional Service Center for Africa, explained that the UNDP operates in most developing countries, including Benin, providing expertise in reviewing the reforms implemented as well as support in accessing new sources of funding, such as the Green Climate Fund and other climate-related funds supported by donor countries. The UNDP is also committed to helping governments to structure effective partnerships with the private sector. According to Matthias Naab, the private sector is an area in which many countries do not tap, while they should start exploring it to form effective partnerships.

The various interventions underscore one key point: implementing public policies to address economic transition is already a major step in solving global challenges, but this progress must be achieved using all available means, including those offered by the international community. The panel of experts emphasized the need to focus on reforms and rigorous public financial management, diversify the sectors receiving funding, strengthen local capacities for managing high-impact projects, and innovate in financial instruments, for example through mechanisms like carbon credits.