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Is Sustainable Finance the Solution to Funding Sustainable Development Goal 13: Climate Action?

Written by Amanda Scheichet | December 16, 2024

 

It has been almost ten years since the SDGs (Sustainable Development Goals) were adopted in 2015 by the United Nations General Assembly as a call to action to end poverty, protect the planet, and ensure prosperity for all by 2030. These 17 interconnected goals address a wide range of issues, spanning across ESG (Environmental, Social, Governance) topics, including gender equality, industry and infrastructure, climate action, environmental degradation, and eradicating extreme poverty1. With only six years to go to reach these ambitious goals, the 2024 Financing for Development Report outlines that nearly half are “moderately or severely off track,” and over 30 percent have either stagnated or regressed since 20152. The report partially attributes these setbacks to the compounded effects of the climate crisis, a strained global economy “awash with debt”, the COVID-19 pandemic, and the war in Ukraine, all which have hindered progress towards the SDGs3.

Additionally, one of the most significant impediments to meeting these goals is inadequate financing, with both public and private capital proving insufficient4. Estimates show that achieving the SDGs will require annual funding from $5.4 trillion to $6.4 trillion, with an additional $7 trillion to cover the cost of developing countries in need5. The 2024 Financing for Development Report suggests that this gap can be addressed by domestic and international private businesses through sustainable finance mechanisms like impact investing, socially responsible investing, and the alignment of ESG principles to business operations6. These financial systems may be able to support sustainable investments at a scale and pace aligned with the SDGs and the Paris Agreement, stemming from their potential to mobilize substantial private and public capital for environmental and social projects, while integrating sustainability considerations into financial decision-making7. 

UN Sustainable Development Goal 13: Climate Action (SDG 13), whose main objective is to limit global temperature rise to 1.5°C above pre-industrial levels. It is imperative to address as the target year approaches with more frequent and intense extreme weather that threatens humans and natural ecosystems8. The Sixth Intergovernmental Panel on Climate Change Assessment Report underscores an urgent need to address climate change drivers, particularly through reducing carbon dioxide and other greenhouse gas emissions9. SDG 13 comprises four targets: 1) strengthening resilience and adaptive capacity to climate related disasters or hazards in all countries, addressing disaster risk through strategies on the local and national levels in response to the rise in extreme weather events and natural disasters; 2) integrating climate change measures into national and international policies, aligning with existing legal obligations under the Paris Agreement and the UN Framework Convention on Climate Change (UNFCCC); 3) enhancing education and awareness on climate change mitigation and adaptation; and 4) mobilizing $100 billion annually to support developing countries in mitigation efforts, with emphasis on marginalized communities in developing countries, especially women and children10. 

Measuring the impact of sustainable finance on this goal is challenging, as it was not primarily designed for private, non-state investors. SDG 13 may be measured, in part, by tracking the number of investee companies that have committed to net-zero emissions and other initiatives related to clean energy and low-carbon manufacturing.