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UN Commission on Sustainable Development
8th Session
New York, 24 April - 5 May 2000

UN Commission on Sustainable Development
6th Session
New York, 22 December & 20 April to 1 May 1998

D. Financial resources and mechanisms

  1. The Commission reaffirms that, as stated in the Programme of Action for the Further Implementation of Agenda 21, the current intergovernmental process on freshwater resources can only be fully fruitful if there is a proved commitment by the international community for the provision of new and additional financial resources to developing countries, in particular to the least developed countries, for the goals of this initiative. Such financial resources, from all sources, need to be mobilized for the development, management, protection and use of freshwater resources if the broader aims of sustainable development are to be realized, particularly in relation to poverty eradication. The effective and efficient use of resources currently allocated to the freshwater sector is also important and could contribute in helping to increase financial flows from both the public and the private sector.
  2. Official development assistance should be provided for and complement, inter alia, programmes and frameworks for promoting integrated water resources development, management, protection and use that (a) meet basic needs; (b) safeguard public health; (c) promote sustainable development and conservation and sustainable use of ecosystems; and (d) build capacity. Donors, including multilateral donor institutions, should be ready to continue, or even reinforce, the support for programmes and projects in the water sector that will contribute to eradicating poverty. In this context, the Commission recalls that all financial commitments of Agenda 21, particularly those contained in chapter 33, and the provisions with regard to new and additional resources that are both adequate and predictable need to be urgently fulfilled. Projects supported by donors should, where appropriate and possible, become financially self-sustaining. Donors should also continue to support the freshwater issues that are related to desertification, loss of biodiversity, loss of wetlands, drought, floods and climate change.
  3. The private sector represents one of the growing sources of investment in the water sector. Local and national water management systems should be designed in ways that encourage public and private partnerships. It is important to ensure that water management systems are organized so that they will be sustainable and, once established, can support themselves. It is important to encourage the participation of the private sector within the framework of appropriate national policies. The adoption of enabling financial frameworks contributes to promoting the mobilization of private sector finance. Official development assistance has an important role in assisting developing countries to adopt appropriate policy frameworks for water resources management.
  4. For developing countries, the role of government regulation in the allocation of freshwater resources remains important. Resources should be allocated and costs met in an accountable and transparent manner. Costs should be covered either through cost recovery or from public sector budgets. Cost recovery could be gradually phased in by water utilities or the public authorities, taking into account the specific conditions of each country. Transparent subsidies for specific groups, particularly people living in poverty, are required in some countries. Governments could benefit from sharing experience in this regard. Incentives may be necessary to promote land use practices appropriate to local conditions in order to protect or rehabilitate freshwater resources of particularly sensitive areas, such as mountainous regions and other fragile ecosystems.
  5. The Commission on Sustainable Development:
    1. Invites Governments to strengthen consultative mechanisms between bilateral and multilateral donors and recipient States aimed at improving or preparing schemes for the mobilization of financial resources in a predictable manner, for meeting the need of priority areas based on local and national programmes of action, with a special focus on integrated water resources development, management, protection and use, while recognizing the needs of vulnerable groups and people living in poverty;
    2. Calls for initiatives to be undertaken to help identify and mobilize more resources -- human, technical (know-how) and financial -- and take into account the 20/20 initiative, especially in the programme of poverty eradication, in accordance with national policies and in the light of specific provisions and commitments on resources related to water issues made at recent United Nations conferences. 14/ A fundamental aim must be to promote the generation of the resources needed for economically and environmentally sound water supply and recycling, irrigation, energy, sanitation and water management systems, including the control of aquatic weeds, especially water hyacinths, and their efficient and effective deployment;
    3. Invites Governments to allocate sufficient public financial resources for the provision of safe and sustainable water supply and sanitation to meet basic human needs and for waste-water treatment. These resources should be complementary to the technical and financial support of the international community;
    4. Urges Governments, when using economic instruments for guiding the allocation of water, to take into particular account the needs of vulnerable groups, children, local communities and people living in poverty, as well as environmental requirements, efficiency, transparency, equity and, in the light of the specific conditions of each country, at the national and local levels, the polluter-pays principle. Such instruments need to recognize the special role of women in relation to water in many societies;
    5. Urges Governments to initiate a review of existing financial support arrangements in order to enhance their efficiency and effectiveness. Such a review should aim at the mobilization of financial resources from all sources, particularly international financial resources, in a predictable manner, based on local and national action plans, with a specific focus on integrated water resources development, management, use and protection programmes and policies. In this context, both formal and informal arrangements could have a role to play. International financial support will continue to be important to the development of local and national water management systems. Governments, with the technical and financial support of the international community, need to promote the economic, social and environmental values provided by ecosystems and examine the short- and long-term cost of their degradation;
    6. Calls upon the international community to intensify its efforts and to consider new initiatives, within appropriate existing mechanisms, for mobilizing financial resources to promote efforts of developing countries in the integrated management, development, distribution, protection and use of water resources. Particular attention should be given to the following aspects:
      1. Promoting more effective donor coordination and more effective and creative use of existing resources;
      2. Generation of new and additional financial resources from all sources;
      3. Identification of appropriate sources of direct grants and loans on concessional terms;
      4. Quantification of the resources required to meet the needs of developing countries;
      5. Resources contributions by industrialized countries and international financial institutions, including regional institutions;
      6. Formulation of financial strategies that include possible partnerships with non-governmental organizations and the private sector and the promotion of conditions for increased private financial flows;
      7. Strengthening of consultative mechanisms, especially at the subregional and regional levels, by Governments and the international community aimed at making freshwater a development priority and at improving dialogue between industrialized and developing countries in a well-targeted and predictable manner, based on national action plans, with a special focus on sustainable and integrated water resources management that recognizes the needs of all stakeholders, especially vulnerable groups and people living in poverty. This could include exploring the potential of new financial arrangements.

Follow-up and assessment

  1. The Commission on Sustainable Development:
    1. Invites Governments to continue to provide voluntary national communication or reports on actions they have taken towards the development and implementation of national strategies and programmes in integrated water resources development, management and protection. Requests the Secretariat to continue collecting, analysing and disseminating national information on this implementation and to ensure that data is gender-differentiated whenever possible. Also requests the Secretariat, in reporting to the Commission, to make a more comprehensive use of the information already provided by Governments through their national reports and to promote exchanges of such information and further develop relevant databases;
    2. Encourages Governments to work together at appropriate levels to improve integrated water resources management. The overall aim should be to ensure effective arrangements for cooperation between Governments to promote the implementation of policies and strategies at the local and national levels. Possibilities should also be identified for joint projects and missions;
    3. Recognizes the important tasks for United Nations agencies and programmes and other international bodies in helping developing countries to implement their integrated water resources development, management and protection programmes and policies. It invites the Subcommittee on Water Resources of the Administrative Committee on Coordination, as task manager for chapter 18 of Agenda 21, to make its work more transparent through, inter alia, regular briefings to Governments, to enhance coordination within the United Nations system and to accelerate the implementation of chapter 18 by considering action to, inter alia:
      1. Identify gaps or inconsistencies in the implementation of programmes of its constituent organizations by assessing the main features and effectiveness of the implementation of those activities and ensure that the mainstreaming of gender perspectives is appropriately included;
      2. Increase efficiency in programme delivery and possibilities for joint programming;
      3. Explore the potential of cooperation arrangements and, where appropriate, take into account the experience gained in existing programmes in the United Nations system;
    4. Invites the Secretary-General to submit a report to the Commission, prior to its eighth session, on progress of the Subcommittee on Water Resources of the Administrative Committee on Coordination, as task manager of chapter 18 of Agenda 21, on the activities mentioned in the above paragraph;
    5. Stresses the importance of coordination of policies and activities of the specialized agencies and other bodies of the United Nations system related to freshwater, including clean and safe water supply and sanitation, and, given the seriousness of the situation, emphasizes the need to provide close attention to the effects of disposal of toxic substances, including arsenic contamination of drinking water supplies, and persistent organic pollutants upon water resources, as recommended by the Economic and Social Council at its substantive session of 1997;
    6. Invites the United Nations Environment Programme, in collaboration with other relevant United Nations bodies, to play a vital role in providing inputs through the provision of technical and scientific advice on environmental aspects of the sustainable development of freshwater resources. In the field of freshwater, the Programme could focus on assisting countries, especially developing countries, in strengthening their ability in this regard, in technology transfer and environmental institutional strengthening and in responding to requests for assistance in strengthening integrated river basin management. The potential of the Global Environment Monitoring System and other relevant global monitoring networks should be fully utilized. Such activities would provide an effective contribution to the work of the Commission;
    7. Encourages Governments, in cooperation with relevant organizations, to organize meetings aimed at identifying problems to be resolved, articulating priorities for action and exchanging experience and best practices and to facilitate progress in implementing the present decision. Such meetings are invited to inform the Commission of their conclusions in order to contribute to its work;
    8. Recognizes the need for periodic assessments of the success of strategic approaches to the sustainable development, management, protection and use of freshwater resources in achieving the goals described in chapter 18 of Agenda 21 and for a global picture of the state of freshwater resources and potential problems;
    9. Invites the Subcommittee on Water Resources of the Administrative Committee on Coordination, as task manager for chapter 18 of Agenda 21, to arrange the compilation and publication of such assessments.

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United Nations General Assembly
19th Special Session
New York, 23-27 June 1997

Resolution Adopted By the General Assembly for the Programme for the Further Implementation of Agenda 21

Financial resources and mechanisms
  1. Financial resources and mechanisms play a key role in the implementation of Agenda 21. In general, the financing for the implementation of Agenda 21 will come from a country's own public and private sectors. For developing countries, official development assistance is a main source of external funding, and substantial new and additional funding for sustainable development and the implementation of Agenda 21 will be required. Hence, all financial commitments of Agenda 21, particularly those contained in chapter 33, and the provisions with regard to new and additional resources that are both adequate and predictable need to be urgently fulfilled. Renewed efforts are essential to ensure that all sources of funding contribute to economic growth, social development and environmental protection in the context of sustainable development and the implementation of Agenda 21.
  2. For developing countries, particularly those in Africa and the least developed countries, official development assistance remains a main source of external funding; it is essential for the prompt and effective implementation of Agenda 21 and cannot generally be replaced by private capital flows. Developed countries should therefore fulfil the commitments undertaken to reach the accepted United Nations target of 0.7 per cent of gross national product as soon as possible. In this context the present downward trend in the ratio of official development assistance to gross national product causes concern. Intensified efforts should be made to reverse this trend, taking into account the need for improving the quality and effectiveness of official development assistance. In the spirit of global partnership, the underlying factors that have led to this decrease should be addressed by all countries. Strategies should be worked out for increasing donor support for aid programmes and revitalizing the commitments that donors made at the United Nations Conference on Environment and Development. Some countries already meet or exceed the 0.7 per cent agreed target. Official financial flows to developing countries, particularly the least developed countries, remain an essential element of the partnership embodied in Agenda 21. Official development assistance plays a significant role, inter alia, in capacity-building, infrastructure, combating poverty and environmental protection in developing countries, and a crucial role in the least developed countries. Official development assistance can play an important complementary and catalytic role in promoting economic growth and may, in some cases, play a catalytic role in encouraging private investment and, where appropriate, all aspects of country-driven capacity-building and strengthening.
  3. Funding by multilateral financial institutions through their concessional mechanisms is also essential to developing countries in their efforts to fully implement the sustainable development objectives contained in Agenda 21. Such institutions should continue to respond to the development needs and priorities of developing countries. Developed countries should urgently meet their commitments under the eleventh replenishment of the International Development Association.
  4. Continued and full donor commitment to adequate, sustained and predictable funding for Global Environment Facility operations is important for developing countries so that global environmental benefits can be further achieved. Donor countries are urged to engage in providing new and additional resources, with a view to equitable burden-sharing, through the satisfactory replenishment of the Facility, which makes available grant and concessional funding designed to achieve global environmental benefits, thereby promoting sustainable development. Consideration should be given to further exploring the flexibility of the existing mandate of the Facility in supporting activities to achieve global environmental benefits. With regard to the project cycle, further efforts should be made to continue streamlining the decision-making process in order to maintain an effective and efficient, as well as transparent, participatory and democratic framework. The Global Environment Facility, when acting as the operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change and the Convention on Biological Diversity, should continue to operate in conformity with those Conventions and promote their implementation. The Facility implementing agencies, the United Nations Development Programme, the United Nations Environment Programme and the World Bank, should strengthen, as appropriate and in accordance with their respective mandates, their cooperation at all levels, including the field level.
  5. The efficiency, effectiveness and impact of the operational activities of the United Nations system must be enhanced by, inter alia, a substantial increase in their funding on a predictable, continuous and assured basis, commensurate with the increasing needs of developing countries, as well as through the full implementation of General Assembly resolutions 47/199 of 22 December 1992 and 48/162 of 20 December 1993. There is a need for a substantial increase in resources for operational activities for development on a predictable, continuous and assured basis, commensurate with the increasing needs of developing countries.
  6. Private capital is a major tool for achieving economic growth in a growing number of developing countries. Higher levels of foreign private investment should be mobilized given its mounting importance. To stimulate higher levels of private investment, Governments should aim at ensuring macroeconomic stability, open trade and investment policies, and well-functioning legal and financial systems. Further studies should be undertaken, including studies on the design of an appropriate environment, at both the national and international levels, for facilitating foreign private investment, in particular foreign direct investment flows to developing countries, and enhancing its contribution to sustainable development. To ensure that such investments are supportive of sustainable development objectives, it is essential that the national Governments of both investor and recipient countries provide appropriate regulatory frameworks and incentives for private investment. Therefore further work should be undertaken on the design of appropriate policies and measures aimed at promoting long-term investment flows to developing countries for activities that increase their productive capability, and at reducing the volatility of these flows. Official development assistance donors and multilateral development banks are encouraged to strengthen their commitment to supporting investment in developing countries in a manner that jointly promotes economic growth, social development and environmental protection.
  7. The external debt problem continues to hamper the efforts of developing countries to achieve sustainable development. To resolve the remaining debt problems of the heavily indebted poor countries, creditor and debtor countries and international financial institutions should continue their efforts to find effective, equitable, development-oriented and durable solutions to the debt problem, including debt relief in the form of debt rescheduling, debt reduction, debt swaps and, as appropriate, debt cancellation, as well as grants and concessional flows that will help restore creditworthiness. The joint World Bank/International Monetary Fund Heavily Indebted Poor Countries Debt Initiative supported by the Paris Club creditor countries is an important development to reduce the multilateral debt problem. Implementation of the Initiative requires additional financial resources from both bilateral and multilateral creditors without affecting the support required for the development activities of developing countries.
  8. A fuller understanding of the impact of indebtedness on the pursuit of sustainable development by developing countries is needed. To this end, the United Nations Secretariat, the World Bank and the International Monetary Fund are invited to collaborate with the United Nations Conference on Trade and Development in further considering the interrelationship between indebtedness and sustainable development for developing countries.
  9. While international cooperation is very important in assisting developing countries in their development efforts, in general financing for the implementation of Agenda 21 will come from countries' own public and private sectors. Policies for promoting domestic resource mobilization, including credit, could encompass sound macroeconomic reforms, including fiscal and monetary policy reforms, review and reform of existing subsidies, and the promotion of personal savings and access to credit, especially micro-credit, in particular for women. Such policies should be decided by each country, taking into account its own characteristics and capabilities and different levels of development, especially as reflected in national sustainable development strategies, where they exist.
  10. There is a need for making existing subsidies more transparent in order to increase public awareness of their actual economic, social and environmental impact, and for reforming or, where appropriate, removing them. Further national and international research in that area should be promoted in order to assist Governments in identifying and considering phasing-out subsidies that have market distorting, and socially and environmentally damaging impacts. Subsidy reductions should take full account of the specific conditions and the different levels of development of individual countries and should consider potentially regressive impacts, particularly on developing countries. In addition, it would be desirable to use international cooperation and coordination to promote the reduction of subsidies where these have important implications for competitiveness.
  11. In order to reduce the barriers to the expanded use of economic instruments, Governments and international organizations should collect and share information on their use and introduce pilot schemes that would, inter alia, demonstrate how to make the best use of them while avoiding adverse effects on competitiveness and the terms of trade of all countries, particularly developing countries, and on marginalized and vulnerable sectors of society. When introducing economic instruments that raise the cost of economic activities for households and small and medium-sized enterprises, Governments should consider gradual phase-ins, public education programmes and targeted technical assistance as strategies for reducing distributional impacts. Various studies and practical experience in a number of countries, in particular developed countries, indicate that the appropriate use of relevant economic instruments may help generate positive possibilities for shifting consumer and producer behaviour to more sustainable directions in those countries. There is, however, a need to conduct further studies and test practical experience in more countries, taking into account country-specific conditions and the acceptability, legitimacy, equity, efficiency and effectiveness of such economic instruments.
  12. Innovative financial mechanisms are currently under discussion in international and national forums but have not yet fully evolved conceptually. The Secretary-General is to submit a report concerning innovative financing mechanisms to the Economic and Social Council at its substantive session of 1997. In view of the widespread interest in those mechanisms, appropriate organizations, including the United Nations Conference on Trade and Development, the World Bank and the International Monetary Fund, are invited to consider conducting forward-looking studies of concerted action on such mechanisms and to share them with the Commission on Sustainable Development, other relevant intergovernmental organizations and non-governmental organizations. In this regard, innovative funding should complement official development assistance, not replace it. New initiatives for cooperative implementation of environment and development objectives under mutually beneficial incentive structures should be further explored.

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UN Commission on Sustainable Development
4th Session
New York, 18 April – 3 May 1996

Report of the Commission on Sustainable Development on the Fourth Session

Decision 4/14. Financial resources and mechanisms*

(* Chapter 33 of Agenda 21. For the discussion, see chapter IV below.)

  1. The Commission on Sustainable Development welcomes the report of the Ad Hoc Inter-sessional Working Group on Finance and Changing Consumption and Production Patterns (E/CN.17/1996/7) and the report of the Secretary-General entitled "Financial resources and mechanisms for sustainable developments: overview of current issues and developments (E/CN.17/1996/4 and Add.1), and reiterates all decisions made at its second and third sessions on issues related to financial resources and mechanisms.
  2. Having reviewed the financing of sustainable development, the Commission reaffirms that the commitments made at the United Nations Conference on Environment and Development on new and additional resources remain a key element of financial resources and mechanisms. The Commission also reaffirms that chapter 33 of Agenda 21 provides the framework and guidance for the discussion of various current and emerging issues, and that that framework is clear enough to take into consideration new developments, including the decline in official development assistance (ODA) relative to gross national product (GNP) and the increase of private flows to some developing countries. The Commission further reaffirms that, in general, financing for the implementation of Agenda 21 will come from countries' own public and private sectors.
  3. As to mobilizing external financial resources for sustainable development, the Commission recognizes that ODA has a special role to play in promoting sustainable development in developing countries, particularly in the least developed countries. The Commission underlines the urgent need to fulfil all financial commitments of Agenda 21, especially those contained in chapter 33, and attaches importance to its decision at its third session to promote, inter alia, new approaches to enhancing the effectiveness of ODA and increasing it within relevant bilateral and multilateral mechanisms with the objective of achieving the United Nations target of 0.7 per cent of GNP, as reaffirmed in paragraph 33.13 of Agenda 21, as soon as possible. The Commission stresses that it is important that donor countries promote greater public awareness of commitments concerning ODA as set forth in chapter 33 of Agenda 21.
  4. The Commission emphasizes the need to improve the effectiveness of ODA by various means, including the leveraging of private-sector investments from national and external sources. Furthermore, where it is not already the case, the effectiveness of ODA could also be enhanced by tailoring it to the specific needs and circumstances of developing countries. ODA flows should be further examined on a continuing basis, particularly with respect to their overall levels and allocation among the interlinked components of sustainable development.
  5. The Commission acknowledges the positive aspects of the expansion of external private capital flows to some developing countries, and emphasizes the importance of their contribution to economic growth and sustainable development of those countries. However, it stresses its concern at the volatility of such flows, which has a negative bearing on the efforts of developing countries to achieve sustainable development. Therefore, both developed and developing countries should examine initiatives conducive to a stable and more favourable environment for enhancing the stability of external private capital flows.
  6. The Commission also acknowledges that the expansion of external private capital flows has been limited to some developing countries, and that therefore the great majority of developing countries are not benefiting from the expansion of such flows. The Commission recognizes that the further increase and more widespread distribution of external private capital flows should be encouraged through appropriate national economic, environmental and social policies and laws or regulations, as well as through a conducive international environment, including non-discriminatory trade and open investment.
  7. The Commission, having examined the issue of external capital flows and their impacts, notes that foreign investors, in particular transnational corporations, should be encouraged to consider the goals of sustainable development and environmental responsibility in their investment projects, and also recognizes the importance of host countries adopting appropriate sustainable development policies.
  8. The Commission welcomes the progress made in discussions on the debt problem of heavily indebted poor countries held at the meeting of the Development Committee of the World Bank and the International Monetary Fund (IMF) in Washington, D.C., on 23 April 1996. Consideration should be given to comprehensive approaches to assisting low-income countries with substantial multilateral debt problems through the flexible implementation of existing instruments and new mechanisms, where necessary. The Commission also recognizes that effective, equitable, development-oriented and durable solutions to the external debt and debt-service problems of developing countries, in particular the poorest and heavily indebted countries, can contribute substantially to the strengthening of the global economy and to the efforts of developing countries to achieve economic development, social development and environmental protection as interdependent and mutually reinforcing components of sustainable development.
  9. As to mobilizing national financial resources for sustainable development, the Commission emphasizes the importance of the participation of the private sector in sustainable development, in particular through increased investments. Sound and predictable macroeconomic and sustainable development policies at the national and international levels are important for promoting private-sector investment consistent with sustainable development objectives. Trade liberalization, an appropriate legal framework that protects private and intellectual property rights, and the development of appropriate domestic financial markets are also required.
  10. To further promote private-sector participation, the Commission calls for greater use of innovative mechanisms, such as build-operate-transfer and similar mechanisms for financing infrastructure projects for sustainable development. The privatization of public enterprises and contracting-out of services should be encouraged, as appropriate, taking into consideration the different conditions and circumstances of countries.
  11. The Commission encourages Governments to consider further studies and, on a voluntary basis, the gradual implementation of economic instruments, further examining the costs and benefits associated with the use of such instruments. The Commission also notes that in practice the application of economic instruments in a number of countries generally yields satisfactory results.
  12. The Commission recommends that pollution abatement funds should improve their performance by greater use of project evaluation techniques. Governments are encouraged to consider measures for enhancing the effectiveness and reach of such funds.
  13. As to financing the transfer of environmentally sound technologies (ESTs), the Commission emphasizes that financing for ESTs should come from national and external resources and innovative mechanisms in accordance with chapters 33 and 34 of Agenda 21. In pursuance of chapter 34 of Agenda 21, technology transfer efforts should be enhanced within a stable, predictable national and international economic and regulatory environment that will ensure the identification and development of markets for ESTs.
  14. As to the development of innovative mechanisms for the financing of sustainable development, the Commission welcomes the decision of the Economic and Social Council to include an item entitled "New and innovative ideas for generating funds" in the provisional agenda for its substantive session of 1996 (Council decision 1996/210), and recommends that the report of the Third Expert Group Meeting on Financial Issues of Agenda 21 be made available to the Council under that item. The Commission also emphasizes that the scope of the examination of such mechanisms should encompass all aspects - economic, social and environmental - of sustainable development.
  15. As to policy options and financial instruments in the matrix approach, the Commission recognizes that economic instruments need to be tailored to reflect individual countries' circumstances, and reiterates the decision contained in chapter I, section B, paragraphs 137-139 of the report on its third session. 13/ Furthermore, the Commission stresses that that approach should not divert attention from the commitments contained in chapter 33 of Agenda 21. The Commission also recommends that the coverage of the matrix be broadened by including such issues as benefits to the traditional holders of indigenous knowledge. The Commission encourages wider dissemination of information on the use of such instruments and the costs and benefits associated with their use so as to enable further work on the matrix approach.
  16. The Commission recognizes the relevant role to be played by major groups, including in financing the activities set out in Agenda 21, in particular the transfer of technology, and emphasizes that that contribution should be carried out in compliance with the policies and strategies of recipient countries.
  17. In its discussion of practical steps towards resolving the above-mentioned issues, the Commission calls attention to the need for further studies, the desirability of strengthening cooperation and the necessity of improving the exchange of information. As to further studies, which should complement the work being carried out in other forums, the Commission emphasized that:
    1. ODA flows should be further examined on a continuing basis, particularly with respect to their overall levels and allocation among the interlinked components of sustainable development;
    2. There is a need to conduct an in-depth analysis of external capital flows to developing countries in order to better understand their social, distributional, economic and environmental impacts on sustainable development.
      In addition, a detailed analysis of the options for a regulatory framework for improving the impact of such flows on sustainable development is required;
    3. A study of trends in capital flows, especially towards developing countries, including the connection between private foreign investments and the objectives of sustainable development, should be carried out in order to facilitate a comprehensive debate on that issue;
    4. Further studies of the effects, costs and benefits of economic instruments should be undertaken. In addition, further studies on the impact of subsidies on sustainable development should be promoted to provide a better basis for policy makers to identify and gradually abolish subsidies that have clear negative impacts on sustainable development. Such studies should assess the economic, social and distributional impacts of subsidy reduction, as well as the transfer of resources to more sustainable and efficient activities, taking into account the specific circumstances and economic, social and ecological conditions of countries. Such studies should also examine the viability of ecological tax reform, its impact on international competitiveness and the modalities that could facilitate such reforms;
    5. A detailed cross-country performance review should be undertaken to identify how conservation trust funds can be made more cost-effective mechanisms for environmental conservation. Such a review should also aim to simplify the administrative framework of such funds and to improve strategies for leveraging their financial resources with other sources of financing;
    6. As to innovative mechanisms for financing sustainable development, it is important to study the feasibility of various innovative mechanisms, while continuing to pursue efforts to increase ODA, secure the adequate replenishment of the Global Environment Facility and encourage private-sector investment. The Commission stresses the importance of exploring other innovative mechanisms, as well as of continuing studies on the possible roles for insurance companies and alternative banking in facilitating the financing of sustainable development;
    7. As stated in chapter I, section B, paragraph 131 of the report on its third session, 13/ the need for and effectiveness of environmentally sound technology rights banks and the practical feasibility of establishing such banks should be further studied, and action in that area is called for;
    8. The use of economic instruments in different countries and sectoral strategies and programmes should be studied and the results reported to the Commission.
  18. As to the desirability of strengthening cooperation, the Commission emphasizes that:
    1. Bilateral aid agencies, United Nations organizations, funds and programmes, the Bretton Woods institutions and other multilateral financial institutions should become more responsive to national priorities and sustainable development strategies, and should enhance their cooperation and coordination efforts for greater effectiveness in meeting the objectives of Agenda 21, particularly the mobilization of financial resources. In structural adjustment programmes, more consideration should be given to economic, social and environmental impacts, taking into account commitment 8 of the Copenhagen Declaration on Social Development; 15/
    2. Cooperation on developing innovative financial mechanisms is important, and the Commission would welcome an involvement of the World Bank, IMF, the Organisation for Economic Cooperation and Development, the United Nations Conference on Trade and Development, the United Nations Development Programme, the United Nations Environment Programme, the International Civil Aviation Organization and other institutions in making further progress towards understanding the prospects and requirements for the practical implementation of such mechanisms;
    3. In the context of promoting the transfer of ESTs, bilateral aid agencies, international organizations and financial institutions should cooperate with Governments to formulate and implement an enabling policy environment. In addition, the importance of the provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights of the World Trade Organization is recalled.
  19. As to the necessity of improving the exchange of information, the Commission emphasizes that:
    1. The United Nations Environment Programme should further disseminate its two recent statements on the banking and insurance services industries, noting that the financial services industry is taking a strong interest in improving the environmental management practices of its business clients;
    2. The sharing of national experiences in the use of economic instruments should be promoted, and countries are invited to report to the Commission on their experiences concerning the implementation of various financial mechanisms and the use of economic instruments. The Commission should explore ways and means of enhancing the sharing of experiences in consultation with all interested parties;
    3. In the context of promoting the transfer of ESTs, international organizations, in particular financial institutions, should assist Governments in developing and implementing appropriate technical assistance programmes that help buyers and sellers of technology to identify each other, reducing pre-investment costs by providing technical, financial and legal expertise, and identifying and supporting projects that demonstrate and commercialize ESTs in specific sectors.

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UN Commission on Sustainable Development
3rd Session
New York, 11-28 April 1995

Report of the Commission on Sustainable Development on the Third Session

B. Financial resources and mechanisms
  1. The Commission on Sustainable Development recalls the financial recommendations and commitments set out in chapter 33 of Agenda 21, especially those in paragraphs 33.13 and 33.14 thereof.
  2. The Commission emphasizes that, in general, the financing for the implementation of Agenda 21 will come from a country's own public and private sectors. For developing countries, particularly the least developed countries, official development assistance (ODA) is a main source of external funding; substantial new and additional funding for sustainable development and the implementation of Agenda 21 will be required. Furthermore, ODA plays a significant role in addressing sustainable development concerns in those areas of the world, as well as in addressing social and environmental concerns and meeting the needs of certain infrastructural sectors that currently are not favourably placed to attract private financial flows, including foreign direct investment. The decline of ODA, both in absolute terms and as a percentage of gross national product (GNP), remains a matter of great concern to the Commission.
  3. The Commission urges the developed countries to continue pursuing policies aimed at increasing the flow of ODA to developing countries, consistent with the commitments that they made at the United Nations Conference on Environment and Development.
  4. The Commission, in its work on monitoring the implementation of recommendations and commitments of Agenda 21 related to ODA, will promote:
    1. New approaches to enhancing the effectiveness of ODA and increasing it within relevant bilateral and multilateral mechanisms with the objective of achieving the United Nations target of 0.7 per cent of GNP, as reaffirmed in chapter 33.13 of Agenda 21, as soon as possible;
    2. Improved cooperation and coordination among national institutions in recipient and donor countries, international organizations (including financial institutions) and the private sector and the non-governmental organizations, as appropriate, inter alia, through the elaboration of national sustainable development strategies and plans, with a view to enhancing the effectiveness of ODA delivery and use;
    3. Use of ODA to leverage additional domestic and external financial resources, through various innovative schemes (such as co-financing and joint ventures, underwriting of country risks, and venture capital funds) in order to more efficiently mobilize new financial flows for sustainable development from all potential sources. In this context, the Commission could initiate case-studies of national experiences in this area;
    4. Public and political support in donor countries for raising the levels of ODA, including through highlighting its crucial role for sustainable development and reform measures, as appropriate, in recipient countries that increase its effectiveness; (e) International awareness of the importance of an adequate eleventh replenishment of the International Development Association (IDA), which is to come into effect from June 1996.
  5. The Commission welcomes the increase in private capital flows, while recognizing that they are concentrated in a few countries and sectors. However, the fact that their stability and sustainability and their environment and technology transfer content are not assured remains a cause for concern for the Commission and requires monitoring. Therefore, the Commission invites UNCTAD and the international financial institutions, in particular the Bretton Woods institutions, to carry out further studies in this regard, focusing on the high volatility and short-term nature of a substantial part of such flows and proposing measures to stimulate more long-term capital flows and to reduce the destabilizing effects of highly volatile short-term financial flows, and to share the results with the Commission.
  6. The Commission emphasizes that developed and developing countries should encourage policies to promote private foreign investment in developing countries that can contribute to sustainable development. In addition, consideration should be given to the establishment of mechanisms and international arrangements to address the effects of sudden outflows of private capital from developing countries.
  7. The Commission reiterates the fact that further progress is essential for the achievement of an effective, equitable, development-oriented and durable solution to the external debt problems of a large number of developing countries, particularly the poorest and most heavily indebted among them. The Copenhagen Declaration on Social Development of the World Summit for Social Development suggests even more favourable terms of debt relief measures. It highlights the importance of ensuring the urgent implementation of existing debt relief agreements and negotiating further initiatives, in addition to existing ones, to alleviate the debt of the poorest and heavily indebted low-income countries at an early date, especially through more favourable terms of debt forgiveness, including application of the terms of debt forgiveness agreed upon in the Paris Club in December 1994, which encompass debt reduction, including cancellation or other debt relief measures; where appropriate, these countries should be given a reduction of their bilateral official debt sufficient to enable them to exit from the rescheduling process and resume growth and development.
  8. The Commission further emphasizes that measures to tackle the problem of external debt should also include the consideration and implementation, where appropriate, of innovative mechanisms such as debt-for-nature and debt-for- social development swaps. The Commission takes note of successful examples of debt-for-sustainable development swaps and recommends their further promotion, as appropriate.
  9. The Commission urges international financial institutions and all relevant development agencies to continue to increase financial flows for sustainable development. Specifically, these institutions should extend their recent efforts beyond incorporating environmental and social considerations into their projects and activities by integrating economic, social and environmental goals of sustainability from the outset into their institutional mandate, overall development policies, strategy formulation, and priorities established by Agenda 21 and other related international instruments and agreements.
  10. The Commission notes the importance of the further development of sustainable development indicators and their possible application, once agreed, that aim at integrating economic, social and environmental goals. The further development of sustainable development indicators should be undertaken, with the effective participation of all relevant parties in particular developing countries.
  11. The Commission and the policy-making bodies of the international financial institutions (in particular the Interim and Development Committees) should strengthen communication, interaction and partnership with a view to promoting approaches and activities geared towards meeting the objectives of sustainable development under Agenda 21.
  12. The Commission notes that the restructured and replenished Global Environment Facility (GEF) will continue on an interim basis as the entity entrusted with the operation of the financial mechanisms of the Convention on Biological Diversity 18/ and the United Nations Framework Convention on Climate Change. The Commission emphasizes the importance of the speedy implementation of these commitments and the other responsibilities of GEF and recalls that, at its second session, in 1994, it stated that the first replenishment of the restructured GEF was a first step at a minimum level, and noted that there would be a need for further replenishment of its funds as the implementation of commitments under the various agreements and objectives envisaged for the Facility proceeded. 19/ Furthermore, the Commission recommends that GEF procedures be further improved to speed up project implementation without compromising the quality of appraisal and participation. It notes the fact that GEF procedures are being reviewed.
  13. The Commission stresses the need for the fulfilment of the financial commitments contained in Agenda 21. The Commission encourages the mobilization of domestic financial resources, inter alia, through the use of economic instruments and policy reforms in both developed and developing countries and the establishment of national environmental funds. It emphasizes that these measures should not be seen as a substitute for the needed increased international financial flows from all sources, including ODA, but that both channels of financing should supplement and mutually reinforce each other.
  14. The Commission's review of the use of economic instruments in developed countries, countries with economies in transition and developing countries demonstrates clearly that - depending on their specific conditions - they have in varying degrees attempted to achieve a less distortionary tax system by introducing environmental taxes. In addition, valuable experience is being gained in the use of the various other economic instruments. The Commission emphasizes that future discussions on economic instruments should explore ways and means of overcoming obstacles to their implementation in developed countries, developing countries and countries with economies in transition. Particular attention should be paid to specific country situations and the phasing out of environmentally unfriendly practices, as well as to problems of capacity-building in developing countries and distributional problems.
  15. The Commission underscores the importance of strengthening national capacities and capabilities in the use of economic instruments, including the elimination of environmentally unfriendly subsidies and other practices, within the context of national strategies and policies for sustainable development. It recommends that these efforts should be supported by Governments and international organizations, in particular UNDP, UNEP, UNCTAD, the International Monetary Fund (IMF), the World Bank and the regional commissions.
  16. The Commission's review of the usefulness of the national environment funds shows that in developed countries, countries with economies in transition and developing countries, there is a great variety of different types of funds at work. In many countries these funds play an important and constructive role as effective financial mechanisms. Their role should be evaluated from the perspective of searching for optimal solutions. In this context, particular attention should be given to the advantages and disadvantages of earmarking funds for environmental expenditures.
  17. The Commission will provide leadership in developing further proposals for promoting the exchange of experiences in the implementation of policy reforms for sustainable development.
  18. The Commission, in its discussion of innovative mechanisms for resource mobilization, noted that the Ad Hoc Inter-sessional Working Group on Finance considered in a preliminary manner the feasibility and utility of such measures as an environmental user charge on air transport, activities implemented jointly and internationally tradable carbon dioxide (CO2) permits.
  19. The Commission notes that the air transport of passengers and cargo is a source of environmentally damaging emissions and would consider it worthwhile to examine in detail a properly designed environmental user charge on air transport if an in-depth study demonstrated its need and feasibility. The Commission recommends that such a study be undertaken in cooperation with the International Civil Aviation Organization (ICAO) and other relevant bodies. It also recommends that the study address the environmental, economic, legal, administrative, and political aspects of such a mechanism, taking into account the particular needs and conditions of developing countries.
  20. The Commission's discussion on internationally tradable CO2 permits and activities implemented jointly reflects concerns and recognition about their extreme complexity and makes it clear that work undertaken in this regard should be pursued in the context of the United Nations Framework Convention on Climate Change, taking into account the situation of countries, particularly the developing countries, as specified in the relevant paragraphs of the Convention. In the context of its discussion, the Commission noted the outcome of the first Conference of the Parties to the Convention, in particular the launching of a pilot phase for activities implemented jointly. The Commission noted that participation in the pilot phase is voluntary and that activities implemented jointly should be compatible with and supportive of national environment and development priorities and strategies, contribute to cost effectiveness in achieving global benefits and be conducted in a comprehensive manner covering all relevant sources, sinks and reservoirs of greenhouse gases. It notes that no credits are to be provided to any party as a result of greenhouse gas emissions reduced or sequestered during the pilot phase, and that developed and developing countries and countries with economies in transition can be involved in the pilot phase on a voluntary basis.
  21. The Commission emphasizes that financing the transfer of environmentally sound technology and biotechnology should be considered within the context of the relevant chapters of Agenda 21. The transfer of environmentally sound technology, on favourable terms, including concessional and preferential terms, as mutually agreed, taking into account the need to protect intellectual property rights as well as the special needs of developing countries for the implementation of Agenda 21, in accordance with chapter 34 of Agenda 21, is highlighted by the Commission as having a particularly important role to play in realizing the goals of sustainable development.
  22. The Commission notes that fostering investments in environmentally sound technologies (ESTs) requires that Governments promote a favourable environment for the transfer of technology, the adoption of favourable policies for business development and the creation of a wider framework to encourage investments in the technology development process, including research, development and adaptation of technology. The particular problems of small- and medium-sized enterprises were emphasized.
  23. The Commission notes that financing of the transfer of ESTs can also be promoted by partnerships between the private and public sector, such as publicly funded intermediaries for EST transfer and publicly sponsored investment funds with a focus on these technologies. Venture capital funds were particularly noted. Furthermore, the Commission recommends that the need for and effectiveness of environmentally sound technology rights banks 20/ and the practical feasibility of establishing such banks should be further studied.
  24. The Commission encourages the use of ESTs and such innovative private sector financing mechanisms as build-operate-transfer (BOT) schemes for promoting EST transfer, including building the capacities of developing countries and countries with economies in transition to negotiate BOT contracts.
  25. In addressing the financing of biotechnology, the Commission takes note of proposals for several funding support mechanisms such as (a) the establishment of an international biosafety trust fund, (b) the establishment of an international venture capital fund for biotechnology and (c) creation of an expert volunteer corps in biotechnology. These actions require further study and consultations among interested Governments before concrete proposals can be made.
  26. The Commission recognizes that many of the sources of finance, economic instruments and innovative mechanisms considered in the report of the Secretary-General on financial resources and mechanisms for sustainable development: overview of current issues and developments (E/CN.17/1995/8) are also applicable to financing the transfer of technology and biotechnology sectors. Nevertheless, detailed study would be required on the application of the "matrix approach" and countries may choose the most appropriate mix of instruments and mechanisms.
  27. The Commission notes that the analytical framework presented by the matrix contained in the annex to the above-mentioned report of the Secretary-General is illustrative and may help to integrate the application of the range of financial and policy options with individual sectors and cross-sectoral activities, and could prove valuable in identifying the appropriate and most promising options, as well as complementarities, taking into account the social, economic and distributional impact of policy options and the principle of common but differentiated responsibilities.
  28. The Commission emphasizes that the matrix approach deserves further detailed study, including efforts at making the analysis more pragmatic and comprehensive, quantifying the potential resources generated by the use of different economic instruments and by policy reform measures. Studies should exploit the full potential of the matrix as an analytical tool to assist policy makers, including in examining the appropriate role of public and private actors, and ways and means of promoting interaction and cooperation between them. The Commission encourages Governments, United Nations organizations, international financial institutions, academic and research communities and other actors, including the private sector, to support and participate in these efforts.
  29. The Commission recognizes that in pursuing studies on economic instruments, innovative mechanisms and the matrix approach, full consideration should be given to the concerns of developing countries stated above, including the mobilization of resource flows, and to promoting national capacities and capabilities, taking into account the social, economic and distributional impacts of policy options and keeping in mind the principle of common but differentiated responsibilities.
  30. The Commission expresses its appreciation of the inter-sessional work that has been undertaken to prepare for its deliberations on financial resources and mechanisms. It takes note in particular of the role of the Ad Hoc Inter-sessional Working Group on Finance and its report (E/CN.17/1995/11).
  31. The Commission invites international financial institutions and development agencies and, as far as practicable, private enterprise, research organizations and non-governmental organizations to participate in its work, including its inter-sessional work. Furthermore, the Commission will seek out valuable national experiences as case-studies, encourage informal technical group meetings and promote pilot projects in order to enhance the effectiveness of its work.

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UN Commission on Sustainable Development
2nd Session
New York, 16-27 May 1994

Report Of The Commission On Sustainable Development on Its Second Session

B. Financial resources and mechanisms
  1. The Commission on Sustainable Development appreciates the inter- sessional work that has been undertaken to prepare its deliberations on financial resources and mechanisms. It takes note in particular of the role of the inter-sessional Ad Hoc Open-ended Working Group on Finance and the report it has submitted.
  2. Having reviewed the availability of financial resources necessary for the implementation of the sustainable development programmes of Agenda 21 and the developments that have taken place in this regard since its last session, the Commission considers the response to the financial recommendations and commitments of Agenda 21, including those regarding official development assistance (ODA), to be short of expectations and requirements. The Commission is concerned that the current availability of financial resources for sustainable development and the limited provision of adequate and predictable, new and additional financial resources will constrain the effective implementation of Agenda 21 and could undermine the basis of the global partnership for sustainable development. This needs to be addressed urgently.
  3. The Commission welcomes the restructuring of the Global Environment Facility (GEF) and takes note of its replenishment by US$ 2 billion. It considers this replenishment to be a first step at a minimum level. As the implementation of commitments under the various agreements and objectives envisaged for the Facility starts, there will be a need for further replenishment of its funds.
  4. The Commission reiterates that increased efforts are needed to bring ODA levels in line with the 0.7 per cent target, as reaffirmed in Agenda 21, as soon as possible. In this context, the Commission emphasizes that the other financial instruments and mechanisms for the financing of Agenda 21 complement the funding from ODA and cannot be a substitute for it. The Commission underscores that there is an urgent need for effective and early implementation of all commitments contained in chapter 33 of Agenda 21, including through substantial early commitments of concessional funding to accelerate the initial implementation phase of Agenda 21.
  5. The Commission welcomes the increase in private flows to developing countries. However, it recognizes the need to enhance the contribution of these flows to sustainable development and to achieve a more even distribution across countries and sectors through appropriate policies.
  6. The Commission takes note of the ongoing preparations for a convention to combat desertification and calls for suitable and adequate financing provisions in view of the seriousness of the problem, particularly in the developing countries affected. It urges the Intergovernmental Negotiating Committee to finalize the convention at the forthcoming session in Paris and to make arrangements for its early implementation.
  7. The Commission also welcomes the Declaration of Barbados and the Programme of Action for the Sustainable Development of Small Island Developing States. It calls for the implementation of the priority areas of the Programme of Action through the provision of effective means, including adequate, predictable, new and additional financial resources, in accordance with chapter 33 of Agenda 21.
  8. The Commission notes that following the conclusion of the Uruguay Round, efforts need to be undertaken to ensure that all countries, particularly developing countries, reap the benefits from trade liberalization, including gains through improved market access and better terms of trade for developing countries. To this end, it will be necessary to assist developing countries, particularly in Africa and the least developed countries, to diversify their economies and to make the necessary adjustments to take advantage of new market opportunities. It will also be important to make trade and environment policies mutually supportive and to further promote an open, equitable and non-discriminatory multilateral trading system that is consistent with the goals of sustainable development.
  9. The debt burden continues to remain a major constraint to the sustainable development efforts of countries, particularly developing ones. Many of the least developed, low- and lower-middle-income countries continue to experience severe debt-service difficulties, inhibiting their sustainable development efforts. Additional debt reduction operations, debt cancellation, more debt relief and other innovative schemes need to be considered and implemented, as appropriate.
  10. The goal of mobilizing financial resources for sustainable development makes it necessary to act on all possible fronts, seeking domestic and international sources, developing innovative approaches and instituting national policy reforms, as appropriate. Policy reforms to mobilize resources for sustainable development should, in particular in developed countries, be complemented, as appropriate, by the use of economic instruments aimed at changing unsustainable production and consumption patterns. The use and impact of financial resources should be optimized so as to increase their availability for meeting sustainable development goals and priorities.
  11. The integration of environment and development strategies should be promoted at the outset of decision-making processes so as to ensure that macroeconomic policies are supportive of sustainable development goals and priorities.
  12. The Commission notes the value of national sustainable development strategies and encourages their preparation and use.
  13. The Commission recognizes the complexity and the difficult nature of the task facing developing countries and it notes in this context the efforts they have undertaken to promote accelerated economic growth and sustainable development in the face of an unfavourable external environment.
  14. The Commission also recognizes the complex and difficult nature of the process of transition which the countries with economies in transition are facing in their integration into the world economy and notes their efforts in promoting environment policies and economic instruments aimed at the mobilization of financial resources for sustainable development.
  15. The Commission urges the international community, in particular the donor countries, to undertake efforts to further strengthen the funding capacity of international financial institutions, regional banks and other international organizations and emphasizes that greater efforts need to be undertaken by them to effectively and demonstrably provide resources for the implementation of Agenda 21. They are also invited to assess, in a transparent fashion, using inputs from other organizations and major groups where appropriate, the impact of their activities on sustainable development, and to report thereon through relevant channels.
  16. The Commission notes that some innovative financial mechanisms and financial policy instruments and reforms have been discussed and included in the report of the inter-sessional Ad Hoc Open-ended Working Group on Finance. These and other evolving innovative mechanisms need to be further considered in order to determine their feasibility, their socio- economic consequences, their impact on the environment and their administrative arrangements, with a view to having the Secretary-General report to the Commission at its third session on the outcome of this consideration.
  17. The Commission emphasizes the need to increase the availability of funding for sectors in the framework of global, regional and national sustainable development strategies on the basis of clearly identified needs. It notes that it would be useful to develop a matrix of policy options and financial instruments and mechanisms that would facilitate the formulation of optimal financing strategies for the sectors under review. The matrix would also include policies for encouraging stronger involvement of the private sector in the financing of sustainable development.
  18. The Commission also recommends the following to increase the effectiveness of its work through the inter-sessional Ad Hoc Open-ended Working Group on Finance: (a) involvement of experts from the private sector and non-governmental organizations, as appropriate; (b) greater use of national experiences (lessons learned) in developing policy options for the financing of Agenda 21, having due regard to the specific problems of countries or groups of countries; (c) encouraging the convening of informal expert group meetings, launching pilot projects, preparing case studies and inviting experts and engaging consultants to prepare detailed studies on the feasibility and impact of innovating financial instruments and mechanisms, as mentioned above; and (d) continuing cooperation with OECD on the monitoring of financial flows, including ODA, for the implementation of Agenda 21.
  19. The Commission recognizes that the vital goal of bringing about sustainable development can best be attained through broad public support for and participation in generating the political momentum that will be necessary to augment financing for Agenda 21 and to provide developing countries with the substantial new and additional financial resources required for the implementation of the huge sustainable development programmes of Agenda 21. The Commission has an important role to play in this process. It confirms its full commitment to the task. In the implementation of the sustainable development programmes of Agenda 21, a further complementary role could be played by foreign direct investment, private capital flows and related efforts to diversify production in the developing countries.

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