III. Recommendations of the Second Committee

13. The Second Committee recommends to the General Assembly the adoption of the following draft resolutions:

Draft resolution I

International financial system and development

The General Assembly,

6. Resolves to strengthen the coherence and consistency of multilateral financial, investment, trade and development policy and environment institutions and platforms and to increase cooperation between major international institutions, while respecting mandates and governance structures, and commits itself to taking better advantage of relevant United Nations forums for promoting universal and holistic coherence and international commitments to sustainable development, building on the vision of the Monterrey Consensus;

9. Urges, in this regard, the multilateral development banks to continue to move forward on flexible, concessional, fast-disbursing and front-loaded assistance that will substantially and quickly assist developing countries facing financing gaps in their efforts to achieve the Sustainable Development Goals, taking into consideration the individual absorptive capacities and debt sustainability of those countries;

10. Invites the multilateral development banks and other international development banks to continue providing both concessional and non-concessional stable, long-term development finance by leveraging contributions and capital and by mobilizing resources from capital markets, and stresses that development banks should make optimal use of their resources and balance sheets, consistent with maintaining their financial integrity, and should update and develop their policies in support of the 2030 Agenda for Sustainable Development, including the Sustainable Development Goals;

20. Urges all countries that have not yet done so to ratify and accede to the United Nations Convention against Corruption, and encourages parties to review its implementation, commits to making the Convention an effective instrument to deter, detect, prevent and counter corruption and bribery, prosecute those involved in corrupt activities and recover and return stolen assets to their country of origin, while encouraging the international community to develop good practices on asset return and supporting the Stolen Asset Recovery Initiative of the United Nations and the World Bank and other international initiatives that support the recovery of stolen assets, urges that regional conventions against corruption be updated and ratified, and reiterates the need to strive to eliminate safe havens that create incentives for transfer abroad of stolen assets and illicit financial flows and to work to strengthen regulatory frameworks at all levels to further increase transparency and accountability of financial institutions and the corporate sector, as well as public administrations, while strengthening international cooperation and national institutions to combat money-laundering and financing of terrorism;

39. Requests the Secretary-General to submit to the General Assembly at its seventy-first session a report on the implementation of the present resolution, to be prepared in cooperation with the Bretton Woods institutions and other relevant stakeholders, and decides to include, under the item entitled “Macroeconomic policy questions”, the sub-item entitled “International financial system and development” in the provisional agenda of its seventy-first session, unless otherwise agreed in the discussions on the revitalization of the Second Committee

1. At its 2nd plenary meeting, on 18 September 2015, the General Assembly, on the recommendation of the General Committee, decided to include in the agenda of its seventieth session the item entitled:

“Macroeconomic policy questions:
“(a) International trade and development;
“(b) International financial system and development;
“(c) External debt sustainability and development;
“(d) Commodities”

and to allocate it to the Second Committee.

II. Recommendation of the Second Committee

11. The Second Committee recommends to the General Assembly the adoption of the following draft resolution:

Follow-up to the International Conference on Financing for Development

The General Assembly,

7. Invites the President of the Economic and Social Council to consider appointing two co-facilitators, as appropriate, who will prepare the draft conclusions and recommendations of the forum and will facilitate consultations among Member States with a view to reaching its intergovernmentally agreed conclusions and recommendations;

8. Urges international, bilateral and other potential donors to consider contributing generously to the Trust Fund for the Follow-up to the International Conference on Financing for Development, in particular to support the travel and
participation of representatives from developing countries, and in particular the least developed countries, to the annual forum;

10. Requests the Secretary-General to submit to the General Assembly at its seventy-first session a report on the implementation of the present resolution, and decides to include the item entitled “Follow-up to and implementation of the outcomes of the International Conferences on Financing for Development ” in the provisional agenda of its seventy-first session, unless otherwise agreed in the discussions on the revitalization of the Second Committee, and taking into account that the inter-agency task force to be convened by the Secretary-General will report on progress in implementing the financing for development outcomes and the means of implementation of the 2030 Agenda for Sustainable Development.

53. Decides that, in the implementation of the Agreement, financial resources provided to developing countries should enhance the implementation of their policies, strategies, regulations and action plans and their climate change actions with respect to both mitigation and adaptation to contribute to the achievement of the purpose of the Agreement as defined in Article 2;
54. Also decides that, in accordance with Article 9, paragraph 3, of the Agreement, developed countries intend to continue their existing collective mobilization goal through 2025 in the context of meaningful mitigation actions and transparency on implementation; prior to 2025 the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement shall set a new collective quantified goal from a floor of USD 100 billion per year, taking into account the needs and priorities of developing countries;
55. Recognizes the importance of adequate and predictable financial resources, including for results-based payments, as appropriate, for the implementation of policy approaches and positive incentives for reducing emissions from deforestation and forest degradation, and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks; as well as alternative policy approaches, such as joint mitigation and adaptation approaches for the integral and sustainable management of forests; while reaffirming the importance of non-carbon benefits associated with such approaches; encouraging the coordination of support from, inter alia, public and private, bilateral and multilateral sources, such as the Green Climate Fund, and alternative sources in accordance with relevant decisions by the Conference of the Parties;
56. Decides to initiate, at its twenty-second session, a process to identify the information to be provided by Parties, in accordance with Article 9, paragraph 5, of the Agreement with the view to providing a recommendation for consideration and adoption by the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement at its first session;
57. Also decides to ensure that the provision of information in accordance with Article 9, paragraph 7 of the Agreement shall be undertaken in accordance with modalities, procedures and guidelines referred to in paragraph 96 below;
58. Requests Subsidiary Body for Scientific and Technological Advice to develop modalities for the accounting of financial resources provided and mobilized through public interventions in accordance with Article 9, paragraph 7, of the Agreement for consideration by the Conference of the Parties at its twenty-fourth session (November 2018), with the view to making a recommendation for consideration and adoption by the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement at its first session;
59. Decides that the Green Climate Fund and the Global Environment Facility, the entities entrusted with the operation of the Financial Mechanism of the Convention, as well as the Least Developed Countries Fund and the Special Climate Change Fund, administered by the Global Environment Facility, shall serve the Agreement;
60. Recognizes that the Adaptation Fund may serve the Agreement, subject to relevant decisions by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol and the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement;
61. Invites the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol to consider the issue referred to in paragraph 60 above and make a recommendation to the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement at its first session;
62. Recommends that the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement shall provide guidance to the entities entrusted with the operation of the Financial Mechanism of the Convention on the policies, programme priorities and eligibility criteria related to the Agreement for transmission by the Conference of the Parties;
63. Decides that the guidance to the entities entrusted with the operations of the Financial Mechanism of the Convention in relevant decisions of the Conference of the Parties, including those agreed before adoption of the Agreement, shall apply mutatis mutandis;
64. Also decides that the Standing Committee on Finance shall serve the Agreement in line with its functions and responsibilities established under the Conference of the Parties;
65. Urges the institutions serving the Agreement to enhance the coordination and delivery of resources to support country-driven strategies through simplified and efficient application and approval procedures, and through continued readiness support to developing country Parties, including the least developed countries and small island developing States, as appropriate;

Goal 17. Strengthen the means of implementation and revitalize the global partnership for sustainable
development Finance

17.1 Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection
17.2 Developed countries to implement fully their official development assistance commitments, including the commitment by many developed countries to achieve the target of 0.7 per cent of ODA/GNI to developing countries and 0.15 to 0.20 per cent of ODA/GNI to least developed countries; ODA providers are encouraged to consider setting a target to provide at least 0.20 per cent of ODA/GNI to least developed countries
17.3 Mobilize additional financial resources for developing countries from multiple sources
17.4 Assist developing countries in attaining long-term debt sustainability through coordinated policies aimed at
fostering debt financing, debt relief and debt restructuring, as appropriate, and address the external debt of highly indebted poor countries to reduce debt distress
17.5 Adopt and implement investment promotion regimes for least developed countries

102. We recognize that financing from all sources, domestic and international, public and private, the development and transfer of reliable, affordable, modern technology on mutually agreed terms, capacity-building assistance and enabling institutional and policy environments at all levels are critically important means of advancing sustainable development in small island developing States. As those States have unique and particular vulnerabilities that require dedicated attention, they will continue to make use of a wide range of available financing mechanisms to implement the Barbados Programme of Action, the Mauritius Strategy and the Samoa Pathway.

103. We recognize that international financing plays an important role in increasing the capacity of small island developing States to mitigate and effectively respond to multiple crises by increasing the impact of existing funds and mobilizing, catalysing and directly providing financial resources from a variety of public and private sources, including international financial institutions, to support the implementation of the Barbados Programme of Action, the Mauritius Strategy and the Samoa Pathway.

104. We urge all countries to fulfil their commitments to small island developing States, including through the provision of financial resources, to support the Barbados Programme of Action, the Mauritius Strategy and the Samoa Pathway. In this regard, the fulfilment of all official development assistance commitments to developing countries, including the commitments by many developed countries to achieve the target of 0.7 per cent of gross national income for official development assistance to developing countries by 2015, as well as the target of 0.15 to 0.20 per cent of gross national income for official development assistance to least developed countries, is crucial.

105. We welcome increasing efforts to improve the quality of official development assistance and to increase its development impact. We also recognize the need to improve development effectiveness, increase programme-based approaches, use country systems for activities managed by the public sector, reduce transaction costs and improve mutual accountability and transparency, and in this regard we call upon all donors to untie aid to the maximum extent. Furthermore, we will make development more effective and predictable by providing developing countries with regular and timely indicative information on planned support over the medium term. We recognize the importance of the efforts of developing countries to strengthen leadership regarding their own development, national institutions, systems and capacity to ensure the best results for effective development by engaging with parliaments and citizens in shaping those policies and deepening engagement with civil society organizations. We should also bear in mind that there is no one-size-fits-all formula that will guarantee development effectiveness. The specific situation of each country must be fully considered.

106. In this regard, we reaffirm our commitment to support the efforts of small island developing States:

(a) To strengthen the use of domestic policies and financing, with due consideration for their respective levels of indebtedness and national capacities;

(b) To gain access to international arrangements and modalities for the financing of development for developing countries, particularly small island developing States, including through capacity-building and a review of application procedures;

(c) To implement, with the provision of appropriate financial resources, in line with existing international commitments within the framework of the United Nations Framework Convention on Climate Change, climate change adaptation and mitigation projects;

(d) To reduce transfer costs related to remittances while pursuing the international targets and agreed outcomes of important international initiatives set by the United Nations system concerning remittances, given their importance for the economic growth of small island developing States.

1. We, the Heads of State and Government and High Representatives, gathered in Addis Ababa from 13 to 16 July 2015, affirm our strong political commitment to address the challenge of financing and creating an enabling environment at all levels for sustainable development in the spirit of global partnership and solidarity. We reaffirm and build on the 2002 Monterrey Consensus and the 2008 Doha Declaration. Our goal is to end poverty and hunger, and to achieve sustainable development in its three dimensions through promoting inclusive economic growth, protecting the environment, and promoting social inclusion. We commit to respecting all human rights, including the right to development. We will ensure gender equality and women’s and girls’ empowerment. We will promote peaceful and inclusive societies and advance fully towards an equitable global economic system in which no country or person is left behind, enabling decent work and productive livelihoods for all, while preserving the planet for our children and future generations.

2. In September 2015, the United Nations will host a summit to adopt an ambitious and transformative post-2015 development agenda, including sustainable development goals. This agenda must be underpinned by equally ambitious and credible means of implementation. We have come together to establish a holistic and forward-looking framework and to commit to concrete actions to deliver on the promise of that agenda. Our task is threefold: to follow-up on commitments and assess the progress made in the implementation of the Monterrey Consensus and the Doha Declaration; to further strengthen the framework to finance sustainable development and the means of implementation for the universal post-2015 development agenda; and to reinvigorate and strengthen the financing for development follow-up process to ensure that the actions to which we commit are implemented and reviewed in an appropriate, inclusive, timely and transparent manner.

3. We recognize that since the adoption of the Monterrey Consensus the world has made significant overall progress. Globally, economic activity and financing flows have increased substantially. We have made great progress in mobilizing financial and technical resources for development from an increased number of actors. Advances in science, technology and innovation have enhanced the potential to achieve our development goals. Many countries, including developing countries, have implemented policy frameworks that have contributed to increased mobilization of domestic resources and higher levels of economic growth and social progress. Developing countries’ share in world trade has increased and, while debt burdens remain, they have been reduced in many poor countries. These advances have contributed to a substantial reduction in the number of people living in extreme poverty and to notable progress towards the achievement of the Millennium Development Goals.

4. Despite these gains, many countries, particularly developing countries, still face considerable challenges, and some have fallen further behind. Inequalities within many countries have increased dramatically. Women, representing half of the world’s population, as well as indigenous peoples and the vulnerable, continue to be excluded from participating fully in the economy. While the Monterrey agenda has not yet been fully implemented, new challenges have arisen, and enormous unmet needs remain for the achievement of sustainable development. The 2008 world financial and economic crisis exposed risks and vulnerabilities in the international financial and economic system. Global growth rates are now below pre-crisis levels. Shocks from financial and economic crises, conflict, natural disasters and disease outbreaks spread rapidly in our highly interconnected world. Environmental degradation, climate change, and other environmental risks threaten to undermine past successes and future prospects. We need to ensure that our development efforts enhance resilience in the face of these threats.

5. Solutions can be found, including through strengthening public policies, regulatory frameworks and finance at all levels, unlocking the transformative potential of people and the private sector, and incentivizing changes in financing as well as consumption and production patterns to support sustainable development. We recognize that appropriate incentives, strengthening national and international policy environments and regulatory frameworks and their coherence, harnessing the potential of science, technology and innovation, closing technology gaps and scaling up capacity-building at all levels are essential for the shift towards sustainable development and poverty eradication. We reaffirm the importance of freedom, human rights, and national sovereignty, good governance, rule of law, peace and security, combating corruption at all levels and in all its forms, and effective, accountable and inclusive democratic institutions at the subnational, national and international levels as central to enabling the effective, efficient and transparent mobilization and use of resources. We also reaffirm all the principles of the Rio Declaration on Environment and Development.

14. Establishing a new forum to bridge the infrastructure gap. Investing in sustainable and resilient infrastructure, including transport, energy, water and sanitation for all, is a pre-requisite for achieving many of our goals. To bridge the global infrastructure gap, including the $1 trillion to $1.5 trillion annual gap in developing countries, we will facilitate development of sustainable, accessible and resilient quality infrastructure in developing countries through enhanced financial and technical support. We welcome the launch of new infrastructure initiatives aimed at bridging these gaps, including the Asian Infrastructure Investment Bank, the Global Infrastructure Hub, the New Development Bank, the Asia Pacific Project Preparation Facility, the World Bank Group’s Global Infrastructure Facility and the Africa50 Infrastructure Fund, as well as the increase in the capital of the Inter-American Investment Corporation. As a key pillar to meet the sustainable development goals, we call for the establishment of a global infrastructure forum building on existing multilateral collaboration mechanisms, led by the multilateral development banks. This forum will meet periodically to improve alignment and coordination among established and new infrastructure initiatives, multilateral and national development banks, United Nations agencies, and national institutions, development partners and the private sector. It will encourage a greater range of voices to be heard, particularly from developing countries, to identify and address infrastructure and capacity gaps in particular in least developed countries, landlocked developing countries, small island developing States and African countries. It will highlight opportunities for investment and cooperation, and work to ensure that investments are environmentally, socially and economically sustainable.

35. Private business activity, investment and innovation are major drivers of productivity, inclusive economic growth and job creation. We acknowledge the diversity of the private sector, ranging from micro-enterprises to cooperatives to multinationals. We call on all businesses to apply their creativity and innovation to solving sustainable development challenges. We invite them to engage as partners in the development process, to invest in areas critical to sustainable development, and to shift to more sustainable consumption and production patterns. We welcome the significant growth in domestic private activity and international investment since Monterrey. Private international capital flows, particularly foreign direct investment, along with a stable international financial system, are vital complements to national development efforts. Nonetheless, we note that there are investment gaps in key sectors for sustainable development. Foreign direct investment is concentrated in a few sectors in many developing countries and often bypasses countries most in need, and international capital flows are often short-term oriented.

36. We will develop policies and, where appropriate, strengthen regulatory frameworks to better align private sector incentives with public goals, including incentivizing the private sector to adopt sustainable practices, and foster long-term quality investment. Public policy is needed to create the enabling environment at all levels and a regulatory framework necessary to encourage entrepreneurship and a vibrant domestic business sector. Monterrey tasked us to build transparent, stable and predictable investment climates, with proper contract enforcement and respect for property rights, embedded in sound macroeconomic policies and institutions. Many countries have made great strides in this area. We will continue to promote and create enabling domestic and international conditions for inclusive and sustainable private sector investment, with transparent and stable rules and standards and free and fair competition, conducive to achieving national development policies.

37. We will foster a dynamic and well-functioning business sector, while protecting labour rights and environmental and health standards in accordance with relevant international standards and agreements, such as the Guiding Principles on Business and Human Rights and the labour standards of ILO, the Convention on the Rights of the Child and key multilateral environmental agreements, for parties to those agreements. We welcome the growing number of businesses that embrace a core business model that takes account of the environmental, social and governance impacts of their activities, and urge all others to do so. We encourage impact investing, which combines a return on investment with non-financial impacts. We will promote sustainable corporate practices, including integrating environmental, social and governance factors into company reporting as appropriate, with countries deciding on the appropriate balance of voluntary and mandatory rules. We encourage businesses to adopt principles for responsible business and investing, and we support the work of the Global Compact in this regard. We will work towards harmonizing the various initiatives on sustainable business and financing, identifying gaps, including in relation to gender equality, and strengthening the mechanisms and incentives for compliance.

38. We acknowledge the importance of robust risk-based regulatory frameworks for all financial intermediation, from microfinance to international banking. We acknowledge that some risk-mitigating measures could potentially have unintended consequences, such as making it more difficult for micro, small and medium-sized enterprises to access financial services. We will work to ensure that our policy and regulatory environment supports financial market stability and promotes financial inclusion in a balanced manner, and with appropriate consumer protection. We will endeavour to design policies, including capital market regulations where appropriate, that promote incentives along the investment chain that are aligned with long-term performance and sustainability indicators, and that reduce excess volatility.

39. Many people, especially women, still lack access to financial services, as well as financial literacy, which is a key for social inclusion. We will work towards full and equal access to formal financial services for all. We will adopt or review our financial inclusion strategies, in consultation with relevant stakeholders, and will consider including financial inclusion as a policy objective in financial regulation, in accordance with national priorities and legislation. We will encourage our commercial banking systems to serve all, including those who currently face barriers to access financial services and information. We will also support microfinance institutions, development banks, agricultural banks, mobile network operators, agent networks, cooperatives, postal banks and savings banks as appropriate. We encourage the use of innovative tools, including mobile banking, payment platforms and digitalized payments. We will expand peer learning and experience-sharing among countries and regions, including through the Alliance for Financial Inclusion and regional organizations. We commit to strengthening capacity development for developing countries, including through the United Nations development system, and encourage mutual cooperation and collaboration between financial inclusion initiatives.

40. We recognize the positive contribution of migrants for inclusive growth and sustainable development in countries of origin, and transit and destination countries. Remittances from migrant workers, half of whom are women, are typically wages transferred to families, primarily to meet part of the needs of the recipient households. They cannot be equated to other international financial flows, such as foreign direct investment, ODA or other public sources of financing for development. We will work to ensure that adequate and affordable financial services are available to migrants and their families in both home and host countries. We will work towards reducing the average transaction cost of migrant remittances by 2030 to less than 3 per cent of the amount transferred. We are particularly concerned with the cost of remittances in certain low volume and high cost corridors. We will work to ensure that no remittance corridor requires charges higher than 5 per cent by 2030, mindful of the need to maintain adequate service coverage, especially for those most in need. We will support national authorities to address the most significant obstacles to the continued flow of remittances, such as the trend of banks withdrawing services, to work towards access to remittance transfer services across borders. We will increase coordination among national regulatory authorities to remove obstacles to non-bank remittance service providers accessing payment system infrastructure, and promote conditions for cheaper, faster and safer transfer of remittances in both source and recipient countries, including by promoting competitive and transparent market conditions. We will exploit new technologies, promote financial literacy and inclusion, and improve data collection.

41. We are committed to women’s and girls’ equal rights and opportunities in political and economic decision-making and resource allocation and to removing any barriers that prevent women from being full participants in the economy. We resolve to undertake legislation and administrative reforms to give women equal rights with men to economic resources, including access to ownership and control over land and other forms of property, credit, inheritance, natural resources and appropriate new technology. We further encourage the private sector to contribute to advancing gender equality through striving to ensure women’s full and productive employment and decent work, equal pay for equal work or work of equal value, and equal opportunities, as well as protecting them against discrimination and abuse in the workplace. We support the Women’s Empowerment Principles established by UN-Women and the Global Compact and encourage increased investments in female-owned companies or businesses.

42. We welcome the rapid growth of philanthropic giving and the significant financial and non-financial contribution philanthropists have made towards achieving our common goals. We recognize philanthropic donors’ flexibility and capacity for innovation and taking risks, and their ability to leverage additional funds through multi-stakeholder partnerships. We encourage others to join those who already contribute. We welcome efforts to increase cooperation between philanthropic actors, Governments and other development stakeholders. We call for increased transparency and accountability in philanthropy. We encourage philanthropic donors to give due consideration to local circumstances and align with national policies and priorities. We also encourage philanthropic donors to consider managing their endowments through impact investment, which considers both profit and non-financial impacts in its investment criteria.

43. We recognize that micro, small and medium-sized enterprises, particularly those that are women-owned, often have difficulty in obtaining financing. To encourage increased lending to micro, small and medium-sized enterprises, financial regulations can permit the use of collateral substitutes, create appropriate exceptions to capital requirements, reduce entry and exit costs to encourage competition and allow microfinance institutions to mobilize savings by receiving deposits. We will work to strengthen the capacity of financial institutions to undertake cost-effective credit evaluation, including through public training programmes, and through establishing credit bureaux where appropriate. National development banks, credit unions, and other domestic financial institutions can play a vital role in providing access to financial services. We encourage both international and domestic development banks to promote finance for micro, small and medium-sized enterprises, including in industrial transformation, through the creation of credit lines targeting those enterprises, as well as technical assistance. We welcome the work of the International Finance Corporation and other initiatives in this area, and encourage increased capacity-building and knowledge-sharing at the regional and global levels. We also recognize the potential of new investment vehicles, such as development-oriented venture capital funds, potentially with public partners, blended finance, risk mitigation instruments, and innovative debt funding structures with appropriate risk management and regulatory frameworks. We will also enhance capacity-building in these areas.

44. To meet longer-term financing needs, we will work towards developing domestic capital markets, particularly long-term bond and insurance markets where appropriate, including crop insurance on non-distortive terms. We will also work to strengthen supervision, clearing, settlement and risk management. We underline that regional markets are an effective way to achieve scale and depth not attainable when individual markets are small. We welcome the increase in lending in domestic currencies by multilateral development banks, and encourage further growth in this area. We encourage development banks to make use of all risk management tools, including through diversification. We recognize that the nature of international portfolio investment has evolved over the past 15 years, and that foreign investors now play a significant role in some developing countries’ capital markets, and the importance of managing volatility associated with these. We will enhance international support in developing domestic capital markets in developing countries, in particular in least developed countries, landlocked developing countries and small island developing States. We will work to strengthen capacity-building in this area, including through regional, interregional and global forums for knowledge-sharing, technical assistance and data-sharing.

45. We recognize the important contribution that direct investment, including foreign direct investment, can make to sustainable development, particularly when projects are aligned with national and regional sustainable development strategies. Government policies can strengthen positive spillovers from foreign direct investment, such as know-how and technology, including through establishing linkages with domestic suppliers, as well as encouraging the integration of local enterprises, in particular micro, small and medium-sized enterprises in developing countries, into regional and global value chains. We will encourage investment promotion and other relevant agencies to focus on project preparation. We will prioritize projects with the greatest potential for promoting full and productive employment and decent work for all, sustainable patterns of production and consumption, structural transformation and sustainable industrialization, productive diversification and agriculture. Internationally, we will support these efforts through financial and technical support and capacity-building, and closer collaboration between home and host country agencies. We will consider the use of insurance, investment guarantees, including through the Multilateral Investment Guarantee Agency, and new financial instruments to incentivize foreign direct investment to developing countries, particularly least developed countries, landlocked developing countries, small island developing States and countries in conflict and post-conflict situations.

46. We note with concern that many least developed countries continue to be largely sidelined by foreign direct investment that could help to diversify their economies, despite improvements in their investment climates. We resolve to adopt and implement investment promotion regimes for least developed countries. We will also offer financial and technical support for project preparation and contract negotiation, advisory support in investment-related dispute resolution, access to information on investment facilities and risk insurance and guarantees such as through the Multilateral Investment Guarantee Agency, as requested by the least developed countries. We also note that small island developing States face challenges accessing international credit as a result of the structural characteristics of their economies. Least developed countries will continue to improve their enabling environments. We will also strengthen our efforts to address financing gaps and low levels of direct investment faced by landlocked developing countries, small island developing States, many middle-income countries, and countries in conflict and post-conflict situations. We encourage the use of innovative mechanisms and partnerships to encourage greater international private financial participation in these economies.

47. We acknowledge that impediments to private investment in infrastructure exist on both the supply and demand side. Insufficient investment is due in part to inadequate infrastructure plans and an insufficient number of well-prepared investable projects, along with private sector incentive structures that are not necessarily appropriate for investing in many long-term projects, and risk perceptions of investors. To address these constraints, we will imbed resilient and quality infrastructure investment plans in our national sustainable development strategies, while also strengthening our domestic enabling environments. Internationally, we will provide technical support for countries to translate plans into concrete project pipelines, as well as for individual implementable projects, including for feasibility studies, negotiation of complex contracts, and project management. In this regard, we take note of the African Union’s Programme for Infrastructure Development in Africa. We note with concern the decline in infrastructure lending from commercial banks. We call on standard-setting bodies to identify adjustments that could encourage long-term investments within a framework of prudent risk-taking and robust risk control. We encourage long-term institutional investors, such as pension funds and sovereign wealth funds, which manage large pools of capital, to allocate a greater percentage to infrastructure, particularly in developing countries. In this regard, we encourage investors to take measures to incentivize greater long-term investment such as reviews of compensation structures and performance criteria.

48. We recognize that both public and private investment have key roles to play in infrastructure financing, including through development banks, development finance institutions and tools and mechanisms such as public-private partnerships, blended finance, which combines concessional public finance with non-concessional private finance and expertise from the public and private sector, special-purpose vehicles, non-recourse project financing, risk mitigation instruments and pooled funding structures. Blended finance instruments including public-private partnerships serve to lower investment-specific risks and incentivize additional private sector finance across key development sectors led by regional, national and subnational government policies and priorities for sustainable development. For harnessing the potential of blended finance instruments for sustainable development, careful consideration should be given to the appropriate structure and use of blended finance instruments. Projects involving blended finance, including public-private partnerships, should share risks and reward fairly, include clear accountability mechanisms and meet social and environmental standards. We will therefore build capacity to enter into public-private partnerships, including with regard to planning, contract negotiation, management, accounting and budgeting for contingent liabilities. We also commit to holding inclusive, open and transparent discussion when developing and adopting guidelines and documentation for the use of public-private partnerships, and to build a knowledge base and share lessons learned through regional and global forums.

49. We will promote both public and private investment in energy infrastructure and clean energy technologies including carbon capture and storage technologies. We will substantially increase the share of renewable energy and double the global rate of energy efficiency and conservation, with the aim of ensuring universal access to affordable, reliable modern and sustainable energy services for all by 2030. We will enhance international cooperation to provide adequate support and facilitate access to clean energy research and technology, expand infrastructure and upgrade technology for supplying modern and sustainable energy services to all developing countries, in particular least developed countries and small island developing States. We welcome the Secretary-General’s Sustainable Energy for All initiative as a useful framework, including its regional hubs, and the development of action agendas and investment prospectuses at country level, where appropriate. We call for action on its recommendations, with a combined potential to raise over $100 billion in annual investments by 2020, through market-based initiatives, partnerships and leveraging development banks. We recognize the special vulnerabilities and needs of small island developing States, least developed countries and landlocked developing countries, and welcome Power Africa, the NEPAD Africa Power Vision and the Global Renewable Energy Islands Network of the International Renewable Energy Agency (IRENA).

93. Borrowing is an important tool for financing investment critical to achieving sustainable development, including the sustainable development goals. Sovereign borrowing also allows government finance to play a countercyclical role over economic cycles. However, borrowing needs to be managed prudently. Since the Monterrey Consensus, strengthened macroeconomic and public resource management has led to a substantial decline in the vulnerability of many countries to sovereign debt distress, as has the substantial debt reduction through the Heavily Indebted Poor Countries (HIPC) initiative and Multilateral Debt Relief Initiative. Yet many countries remain vulnerable to debt crises and some are in the midst of crises, including a number of least developed countries, small island developing States and some developed countries. We acknowledge that debt sustainability challenges facing many least developed countries and small island developing States require urgent solutions, and the importance of ensuring debt sustainability to the smooth transition of countries that have graduated from least developed country status.

94. We recognize the need to assist developing countries in attaining long-term debt sustainability through coordinated policies aimed at fostering debt financing, debt relief, debt restructuring and sound debt management, as appropriate. We will continue to support the remaining HIPC-eligible countries that are working to complete the HIPC process. On a case-by-case basis we could explore initiatives to support non-HIPC countries with sound economic policies to enable them to address the issue of debt sustainability. We will support the maintenance of debt sustainability in those countries that have received debt relief and achieved sustainable debt levels.

95. The monitoring and prudent management of liabilities is an important element of comprehensive national financing strategies and is critical to reducing vulnerabilities. We welcome the efforts of IMF, the World Bank and the United Nations system to further strengthen the analytical tools for assessing debt sustainability and prudent public debt management. In this regard, the IMF-World Bank debt sustainability analysis is a useful tool to inform the level of appropriate borrowing. We invite IMF and the World Bank to continue strengthening their analytical tools for sovereign debt management in an open and inclusive process with the United Nations and other stakeholders. We encourage international institutions to continue to provide assistance to debtor countries to enhance debt management capacity, manage risks, and analyse trade-offs between different sources of financing, as well as to help to cushion against external shocks and ensure steady and stable access to public financing.
96. We welcome the continuing activities in setting methodological standards and promoting public availability of data on public and publicly guaranteed sovereign debt and on the total external debt obligations of economies, and more comprehensive quarterly publication of debt data. We invite relevant institutions to consider the creation of a central data registry including information on debt restructurings. We encourage all Governments to improve transparency in debt management.

97. We reiterate that debtors and creditors must work together to prevent and resolve unsustainable debt situations. Maintaining sustainable debt levels is the responsibility of the borrowing countries; however we acknowledge that lenders also have a responsibility to lend in a way that does not undermine a country’s debt sustainability. In this regard we take note of the UNCTAD principles on responsible sovereign lending and borrowing. We recognize the applicable requirements of the IMF debt limits policy and/or the World Bank’s non-concessional borrowing policy. The OECD Development Assistance Committee has introduced new safeguards in its statistical system in order to enhance the debt sustainability of recipient countries. We recall the need to strengthen information-sharing and transparency to make sure that debt sustainability assessments are based on comprehensive, objective and reliable data. We will work towards a global consensus on guidelines for debtor and creditor responsibilities in borrowing by and lending to sovereigns, building on existing initiatives.
98. We affirm the importance of debt restructurings being timely, orderly, effective, fair and negotiated in good faith. We believe that a workout from a sovereign debt crisis should aim to restore public debt sustainability, while preserving access to financing resources under favourable conditions. We further acknowledge that successful debt restructurings enhance the ability of countries to achieve sustainable development and the sustainable development goals. We continue to be concerned with non-cooperative creditors who have demonstrated their ability to disrupt timely completion of the debt restructurings.

99. We recognize that important improvements have been made since Monterrey in enhancing the processes for cooperative restructuring of sovereign obligations, including in the Paris Club of official creditors and in the market acceptance of new standard clauses of government bond contracts. However we acknowledge the existence of stocks of sovereign bonds without those collective action clauses. We recognize that there is scope to improve the arrangements for coordination between public and private sectors and between debtors and creditors, to minimize both creditor and debtor moral hazards and to facilitate fair burden-sharing and an orderly, timely and efficient restructuring that respects the principles of shared responsibility. We take note of the ongoing work being carried out by IMF and the United Nations system in this area. We recognize the recent “Paris Forum” initiative by the Paris Club that aims to foster dialogue among sovereign creditors and debtors on debt issues. We encourage efforts towards a durable solution to the debt problems of developing countries to promote their economic growth and sustainable development.

100. We are concerned by the ability of non-cooperative minority bondholders to disrupt the will of the large majority of bondholders who accept a restructuring of a debt-crisis country’s obligations, given the potential broader implications in other countries. We note legislative steps taken by certain countries to prevent these activities and encourage all Governments to take action, as appropriate. Furthermore, we take note of discussions in the United Nations on debt issues. We welcome the reforms to pari passu and collective action clauses proposed by the International Capital Market Association, and endorsed by IMF, to reduce the vulnerability of sovereigns to holdout creditors. We encourage countries, particularly those issuing bonds under foreign law, to take further actions to include those clauses in all their bond issuance. We also welcome provision of financial support for legal assistance to least developed countries and commit to boosting international support for advisory legal services. We will explore enhanced international monitoring of litigation by creditors after debt restructuring.

101. We note the increased issuance of sovereign bonds in domestic currency under national laws, and the possibility of countries voluntarily strengthening domestic legislation to reflect guiding principles for effective, timely, orderly and fair resolution of sovereign debt crises.

102. We recognize that severe natural disasters and social or economic shocks can undermine a country’s debt sustainability, and note that public creditors have taken steps to ease debt repayment obligations through debt rescheduling and debt cancellation following an earthquake, a tsunami and in the context of the Ebola crisis in West Africa. We encourage consideration of further debt relief steps, where appropriate, and/or other measures for countries affected in this regard, as feasible. We also encourage the study of new financial instruments for developing countries, particularly least developed countries, landlocked developing countries and small island developing States experiencing debt distress, noting experiences of debt-to-health and debt-to-nature swaps.

253. We call on all countries to prioritize sustainable development in the allocation of resources in accordance with national priorities and needs, and we recognize the crucial importance of enhancing financial support from all sources for sustainable development for all countries, in particular developing countries. We recognize the importance of international, regional and national financial mechanisms, including those accessible to subnational and local authorities, to the implementation of sustainable development programmes, and call for their strengthening and implementation. New partnerships and innovative sources of financing can play a role in complementing sources of financing for sustainable development. We encourage their further exploration and use, alongside the traditional means of implementation.

254. We recognize the need for significant mobilization of resources from a variety of sources and the effective use of financing, in order to give strong support to developing countries in their efforts to promote sustainable development, including through actions undertaken in accordance with the outcome of the United Nations Conference on Sustainable Development and for achieving sustainable development goals.

255. We agree to establish an intergovernmental process under the auspices of the General Assembly, with technical support from the United Nations system and in open and broad consultation with relevant international and regional financial institutions and other relevant stakeholders. The process will assess financing needs, consider the effectiveness, consistency and synergies of existing instruments and frameworks, and evaluate additional initiatives, with a view to preparing a report proposing options on an effective sustainable development financing strategy to facilitate the mobilization of resources and their effective use in achieving sustainable development objectives.

256. An intergovernmental committee, comprising 30 experts nominated by regional groups, with equitable geographical representation, will implement this process, concluding its work by 2014.

257. We request the General Assembly to consider the report of the intergovernmental committee and take appropriate action.

258. We recognize that the fulfilment of all commitments related to ODA is crucial, including the commitments by many developed countries to achieve the target of 0.7 per cent of gross national product (GNP) for ODA to developing countries by 2015, as well as a target of 0.15 to 0.20 per cent of GNP for ODA to the least developed countries. To reach their agreed timetables, donor countries should take all necessary and appropriate measures to raise the rate of aid disbursements in order to meet their existing commitments. We urge those developed countries that have not yet done so to make additional concrete efforts towards the target of 0.7 per cent of GNP for ODA to developing countries, including the specific target of 0.15 to 0.20 per cent of GNP for ODA to the least developed countries, in accordance with their commitments. To build on progress achieved in ensuring that ODA is used effectively, we stress the importance of democratic governance, improved transparency and accountability, and managing for results. We strongly encourage all donors to establish, as soon as possible, rolling indicative timetables that illustrate how they aim to reach their goals, in accordance with their respective budget allocation process. We stress the importance of mobilizing greater domestic support in developed countries towards the fulfilment of their commitments, including through raising public awareness, providing data on the development impact of aid provided and demonstrating tangible results.

259. We welcome increasing efforts to improve the quality of ODA and to increase its development impact. We also recognize the need to improve development effectiveness, increase programme-based approaches, use country systems for activities managed by the public sector, reduce transaction costs and improve mutual accountability and transparency and, in this regard, we call upon all donors to untie aid to the maximum extent. We will further make development more effective and predictable by providing developing countries with regular and timely indicative information on planned support in the medium term. We recognize the importance of efforts by developing countries to strengthen leadership of their own development, national institutions, systems and capacity to ensure the best results for effective development by engaging with parliaments and citizens in shaping those policies and deepening engagement with civil society organizations. We should also bear in mind that there is no one-size-fits-all formula that will guarantee development effectiveness. The specific situation of each country needs to be fully considered.

260. We note that the aid architecture has significantly changed in the current decade. New aid providers and novel partnership approaches, which utilize new modalities of cooperation, have contributed to increasing the flow of resources. Further, the interplay of development assistance with private investment, trade and new development actors provides new opportunities for aid to leverage private resource flows. We reiterate our support for South-South cooperation, as well as triangular cooperation, which provide much needed additional resources to the implementation of development programmes. We recognize the importance and different history and particularities of South-South cooperation and stress that South-South cooperation should be seen as an expression of solidarity and cooperation between countries, based on their shared experiences and objectives. Both forms of cooperation support a development agenda that addresses the particular needs and expectations of developing countries. We also recognize that South-South cooperation complements rather than substitutes for North-South cooperation. We acknowledge the role played by middle-income developing countries as providers and recipients of development cooperation.

261. We invite the international financial institutions, within their respective mandates, to continue providing financial resources, including through specific mechanisms for the promotion of sustainable development and poverty eradication in developing countries.

262. We recognize that greater coherence and coordination among the various funding mechanisms and initiatives related to sustainable development are crucial. We reiterate the importance of ensuring that developing countries have steady and predictable access to adequate financing from all sources to promote sustainable development.

263. We recognize that ongoing serious global financial and economic challenges carry the possibility of undoing years of hard work and gains made in relation to the debt of developing countries. We further recognize the need to assist developing countries in ensuring long-term debt sustainability through coordinated policies aimed at fostering debt financing, debt relief and debt restructuring, as appropriate.

264. We stress the need for adequate funding for the operational activities of the United Nations development system, as well as the need to make funding more predictable, effective and efficient as part of wider efforts to mobilize new, additional and predictable resources to achieve the objectives that we have set forth in the present outcome document.

265. We recognize the important achievements of the Global Environment Facility (GEF) over the past 20 years in funding environmental projects and welcome important reform processes that GEF has carried out during recent years, and we call for its further improvement and encourage GEF to take additional steps, within its mandate, to make resources more accessible to meet country needs for the national implementation of their international environmental commitments. We support further simplification of procedures and assistance to developing countries, in particular in assisting the least developed countries, Africa and small island developing States in accessing resources from GEF, and enhanced coordination with other instruments and programmes focusing on environmentally sustainable development.

266. We stress that fighting corruption and illicit financial flows at both the national and international levels is a priority and that corruption is a serious barrier to effective resource mobilization and allocation and diverts resources away from activities that are vital for poverty eradication, the fight against hunger and sustainable development. We are determined to take urgent and decisive steps to continue to combat corruption in all its manifestations, which requires strong institutions at all levels, and urge all States that have not yet done so to consider ratifying or acceding to the United Nations Convention against Corruption and begin its implementation.

267. We consider that innovative financing mechanisms can make a positive contribution in assisting developing countries to mobilize additional resources for financing for development on a voluntary basis. Such financing should supplement and not be a substitute for traditional sources of financing. While recognizing the considerable progress in innovative sources of financing for development, we call for a scaling-up of present initiatives, where appropriate.

268. We recognize that a dynamic, inclusive, well-functioning, socially and environmentally responsible private sector is a valuable instrument that can offer a crucial contribution to economic growth and reducing poverty and promoting sustainable development. In order to foster private sector development, we shall continue to pursue appropriate national policy and regulatory frameworks in a manner consistent with national laws to encourage public and private initiatives, including at the local level, to foster a dynamic and well-functioning business sector, and to facilitate entrepreneurship and innovation, including among women, the poor and the vulnerable. We will work to improve income growth and distribution, inter alia through raising productivity, empowering women, protecting labour rights, and taxation. We recognize that the appropriate role of government in relation to the promotion and regulation of the private sector will vary from country to country depending on national circumstances.

Decision 8/5
Financial resources


Introduction

1. The principal objectives of activities in the area of financial resources and mechanisms should be pursued in full accordance with Agenda 21 and paragraphs 76-87 of the Programme for the Further Implementation of Agenda 21. It is important that all countries take a holistic approach to sustainable development, taking fully into account the interconnectedness of the trade, financial, economic, environmental and social aspects of sustainable development; in view of the different contributions to global environmental degradation, States have common but differentiated responsibilities as stated in principle 7 of the Rio Declaration on Environment and Development. One of the main challenges is to promote social equity and ensure that economic growth does not result in environmental degradation.
2. The rapid process of globalization and liberalization provides countries with opportunities, as well as brings risks and challenges for the mobilization of adequate and more stable resources for sustainable development. Globalization may have contributed to the increased supply of private capital flows, including foreign direct investment (FDI), to developing countries; however, this investment has been concentrated in a small number of developing countries. It has also been accompanied by a decline in official development assistance (ODA) during the 1990s. In some cases, developing countries have benefited from globalization, while others, in particular least developed countries, face further marginalization. There is a need to strengthen international cooperation efforts and to further reform and improve the existing international financial system, with a view to preventing recurrence of financial crises and providing better mechanisms for financial crisis management in order to support and reinforce sustainable development.
3. As a result of the process of globalization and its economic, social and environmental consequences, an increasing number of issues cannot be effectively addressed by countries individually. The financing for the implementation of Agenda 21 is expected to be met, in general, from domestic resources; additional international financial support will also be very important for developing countries. So far, the provision of financial resources required for the implementation of Agenda 21, particularly in developing countries, has fallen far short of needs. Therefore, all financial commitments entered into under Agenda 21, particularly those contained in chapter 33, and the provision with regard to new and additional resources that are both adequate and predictable need to be urgently fulfilled. As recognized in Agenda 21, the cost of inaction could outweigh the financial costs of implementing Agenda 21.

Priorities for future work

4. The Commission will continue to address financial resources and mechanisms within the context of the themes to be discussed in 2001. The next comprehensive discussion of financial resources and mechanisms for sustainable development will take place at the comprehensive review, in 2002, of progress since the United Nations Conference on Environment and Development. The review will benefit from the outcome of the high-level international intergovernmental event on financing for development which will take place in 2001. In support of the preparatory process leading up to the comprehensive review, a further meeting of the Expert Group on Finance for Sustainable Development is planned to be held in 2001 in Budapest, Hungary.
5. Priority areas for future work of the Commission will include the following:
(a) Mobilization of domestic financial resources for sustainable development;
(b) Promotion of international cooperation and mobilization of international finance for sustainable development;
(c) Strengthening of existing financial mechanisms and exploration of innovative ones;
(d) Improvement of institutional capacity and promotion of public/private partnerships.

Mobilization of domestic financial resources for sustainable development

6. Considering the importance of mutually supportive international and national enabling economic environments in the pursuit of sustainable development, Governments are urged:
(a) To promote the mobilization of domestic financial resources and to establish the basis for an enabling environment through, inter alia, sound macroeconomic policies; a dynamic private sector; and transparent, effective, participatory and accountable governance, conducive to sustainable development and responsive to the needs of the people;
(b) To increase cooperation for addressing capital flight and for considering issues related to capital repatriation in order to broaden the domestic resource base for financing sustainable development;
(c) Taking into account their levels of development and institutional capacity, to consider ways and means to integrate environmental considerations into the management of public policies and programmes, including public finance;
(d) Where they have not already done so, to continue to design and implement national sustainable development strategies, which are due by 2002, in accordance with the Programme for the Further Implementation of Agenda 21;
(e) To conduct studies and research on ways and means of implementing a range of economic instruments, including, inter alia, the application of the polluter pays principle, and fiscal instruments, including wider use of environmental taxes and charges; such policies should be decided by each country, taking into account its own characteristics and capabilities, especially as reflected in national sustainable development strategies, and should avoid adverse effects on competitiveness and on the provision of basic social services for all;
(f) To provide the necessary incentives for sustained private investment, including macroeconomic, legal, environmental policy and regulatory frameworks that would reduce risks and uncertainty for investors; assistance for capacity-building should be provided to developing countries and countries with economies in transition to enable them to design effective environmental regulation and market-based instruments and to use them widely, taking into account their different levels of development.

Promotion of international cooperation and mobilization of international finance for sustainable development

7. Sustainable development requires that countries pursue consistently pro-sustainable development policies in all areas. Developed countries should work in partnership with developing countries to help develop, adopt and implement effective strategies to achieve sustainable development. Developed countries should integrate into their strategies effective and concrete measures to support developing countries in achieving sustainable development, in accordance with commitments made at Rio, taking into account the sustainable development policies of recipient countries to the maximum extent possible.
8. Governments are encouraged to develop policies to enhance the efficiency and effectiveness of aid; policy dialogue; transparent, effective, participatory and accountable governance, conducive to sustainable development and responsive to the needs of the people; sound management of public affairs; and the participation of civil society, in cooperation, as necessary, with donors and international organizations.
9. For many developing countries, in particular least developed countries, ODA is the main source of external funding. Donors are urged to improve the allocation of ODA to more effectively reduce poverty. Governments of developed countries are urged to increase the quality and quantity of ODA. Governments of developed countries that have not yet fulfilled the commitments undertaken to reach the agreed United Nations target of 0.7 per cent of gross national product (GNP) for ODA are urged to do so as soon as possible, and where agreed, within that target, to earmark 0.15 to 0.20 per cent of their GNP for the least developed countries. In this regard, new ODA should preferably be provided in the form of grants, taking into account, inter alia, the needs and financial situation of recipient countries. All aid should be carefully targeted to achieve maximum effectiveness, taking into account the specific circumstances of the recipient countries. The eradication of poverty, the enhancement of productive employment and the reduction of unemployment, and the fostering of social integration through sustainable development in the framework of international development are important elements in achieving the targets derived from the United Nations conferences and summits of the 1990s.
10. Creditor countries and international financial institutions are urged to implement speedily the enhanced Heavily Indebted Poor Countries (HIPC) Initiative to provide ?deeper, broader and faster? debt relief to the eligible countries in order to allow as many countries as possible to benefit from assistance under the initiative as soon as possible. In this regard, donors are urged to implement their financing pledges for the enhanced HIPC Initiative, and without further delay agree on an overall financing plan for the HIPC Trust Fund, and to provide cancellation of bilateral official debt to countries qualifying for the enhanced HIPC Initiative. In this context, it is noted that multilateral debt-relief funds can have a positive impact in respect of assisting Governments in safeguarding or increasing expenditures on priority social sectors, and donors are encouraged to continue efforts in this regard.
11. HIPC countries are urged to develop their national poverty strategies in a participatory way so that debt relief is linked with poverty eradication and allows debtor countries to utilize budgetary savings for social expenditures in order to have maximum impact on poverty eradication. Eligible countries that have not yet entered the HIPC process are urged to implement the necessary policy measures to enable them to participate as soon as possible. The debt-relief programme should form part of a comprehensive macroeconomic framework to facilitate the release of substantial resources for financing for development and to enable debtor countries not to fall back into arrears. Efforts should be undertaken to eliminate the structural causes of indebtedness. Debt relief alone is not enough and should be complemented, inter alia, by increased market access for developing countries, taking into account existing agreements and arrangements for special and differential treatment for developing countries, provision of ODA and promotion of private investment, as well as by necessary domestic reforms.
12. It is recognized that the highly indebted middle-income developing countries and other highly indebted middle-income countries have difficulties in meeting their external debt and debt-servicing obligations, and it is noted that the worsening situation in some of them in the context, inter alia, of higher liquidity constraints, may require debt treatment, including, as appropriate, debt reduction measures. Concerted national and international action is called for to address effectively debt problems of middle-income developing countries with a view to resolving their potential long-term debt sustainability problems through various debt-treatment measures, including, as appropriate, orderly mechanisms for debt reduction. All creditor and debtor countries are encouraged to utilize to the fullest extent possible, where appropriate, all existing mechanisms for debt reduction, including debt swaps.
13. In order to attract foreign investment, including FDI, Governments are urged to put in place the policies, institutions and capacities needed for their economies to function in a predictable, transparent, non-discriminatory and stable fashion to facilitate market-driven investment within the appropriate regulatory framework. The international community should support the efforts of developing countries, in particular the least developed countries, and countries with economies in transition, to develop their capacity to deepen this process to attract FDI and to devise appropriate measures by providing assistance in capacity-building, in developing and implementing sound economic policies, and in promoting the transfer of environmentally sound technology, including publicly owned technologies, to developing countries as stipulated in Agenda 21 and the Programme for the Further Implementation of Agenda 21. Ways and means of utilizing ODA for the leveraging of private investment in sustainable development should be further explored.
14. Given the potentially important role that private capital flows play in supporting sustainable development, Governments, in cooperation with international organizations, are urged to consider and implement appropriate measures to increase and enhance their productivity through prudent macroeconomic management and financial sector supervision, and to promote regional and subregional cooperation in this regard. There is also a need to address the destabilization of countries arising, in part, from volatile, speculative and rapid movements of private capital. In this regard, measures are also needed in order to promote stable and transparent financial systems at the national and international levels.

Strengthening of existing financial mechanisms and exploration of
innovative ones

15. Innovative approaches should be pursued in order to further strengthen the existing financial mechanisms of multilateral environmental agreements (MEAs) in a stable and predictable manner. The global mechanism of the Convention on Biological Diversity also requires strengthening.
16. Governments are encouraged to promote the use of innovative financial mechanisms. In this regard, Governments in cooperation with international organizations and major groups should continue to engage in study and research on ways to make such mechanisms more practical and effective, inter alia, by learning from the experience of others, and to adapt those mechanisms to the particular circumstances of individual countries. These mechanisms are not a substitute for other sources of finance for sustainable development, namely, ODA, FDI, funding from international financial institutions, foreign portfolio investment and domestic resources.
17. The Global Environment Facility (GEF), which is an important mechanism for providing funding to developing countries and those with economies in transition for projects and activities targeting global environmental benefits in sustainable development, should be strengthened and broadened within its mandate.







Improvement of institutional capacity and promotion of public/private partnerships

18. The private sector can play a major role in promoting and contributing to sustainable development. International organizations and Governments should initiate further innovative pilot projects and partnership arrangements that encourage the private sector and other major groups to finance sustainable development.
19. International organizations are urged to better coordinate their work in the area of finance for sustainable development in order to avoid duplication and to raise their effectiveness, focusing on their respective areas of competence where they have a clear comparative advantage. In this regard, better cooperation and dialogue are needed between international organizations, including the Bretton Woods institutions, the World Trade Organization, the United Nations Conference on Trade and Development (UNCTAD), the United Nations Environment Programme (UNEP), the United Nations Development Programme (UNDP) and GEF.
20. Governments and international organizations should improve their coordination efforts, using the United Nations Development Assistance Framework (UNDAF), the Comprehensive Development Framework proposed by the World Bank and the poverty reduction strategy process initiated by the World Bank and the International Monetary Fund (IMF), taking into account all aspects of sustainable development.
21. International organizations, Governments and major groups are encouraged to undertake further research and other activities in the following areas:
(a) The relationship between FDI and sustainable development, with a view to identifying how FDI can best promote sustainable development;
(b) Capacity-building for the mobilization of foreign and domestic financial resources for sustainable development;
(c) ?Green? budget reforms as well as the various aspects of an effective implementation of environmental taxes and charges;
(d) Innovative international financial mechanisms.
22. The Commission discussed the proposal of convening an ad hoc intergovernmental panel to undertake an analytical study of the lack of progress in the fulfilment of the commitments made in the areas of finance, with a view to making recommendations to synchronize the progress on sectoral issues with cross-sectoral areas, but no agreement could be reached on the convening of such a panel.

15. 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.

16. 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.

17. 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.

18. 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.

19. The Commission on Sustainable Development:
(a) 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;
(b) 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;
(c) 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;
(d) 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;
(e) 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;
(f) 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:
(i) Promoting more effective donor coordination and more effective and creative use
of existing resources;
(ii) Generation of new and additional financial resources from all sources;
(iii) Identification of appropriate sources of direct grants and loans on concessional
terms;
(iv) Quantification of the resources required to meet the needs of developing countries;
(v) Resources contributions by industrialized countries and international financial
institutions, including regional institutions;
(vi) Formulation of financial strategies that include possible partnerships with nongovernmental
organizations and the private sector and the promotion of conditions for
increased private financial flows;
(vii) 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

20. The Commission on Sustainable Development:
(a) 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;
(b) 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;
(c) 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:
(i) 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;
(ii) Increase efficiency in programme delivery and possibilities for joint programming;
(iii) Explore the potential of cooperation arrangements and, where appropriate, take
into account the experience gained in existing programmes in the United Nations
system;
(d) 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;
(e) 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;
(f) 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;
(g) 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;
(h) 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;
(i) 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.

76. 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.

77. 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.

78. 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.

79. 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.

80. 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.

81. 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.

82. 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.

83. 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.

84. 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.

85. 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.

86. 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.

87. 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.

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:
(a) 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;
(b) 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;
(c) 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;
(d) 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;
(e) 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;
(f) 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;
(g) 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;
(h) 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:
(a) 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/
(b) 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;
(c) 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:
(a) 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;
(b) 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;
(c) 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
15/ Report of the World Summit for Social Development, Copenhagen,
6-12 March 1995 (A/CONF.166/9), chap. I, resolution 1, annex I.

111. 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.
112. 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.
113. 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.
114. The Commission, in its work on monitoring the implementation of
recommendations and commitments of Agenda 21 related to ODA, will promote:
(a) 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;
(b) 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;
(c) 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 casestudies
of national experiences in this area;
(d) 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.
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115. 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.
116. 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.
117. 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.
118. 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-forsocial
development swaps. The Commission takes note of successful examples of
debt-for-sustainable development swaps and recommends their further promotion,
as appropriate.
119. 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.
120. 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
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effective participation of all relevant parties in particular developing
countries.
121. 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.
122. 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.
123. 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.
124. 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.
125. 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
18/ See UNEP, Convention on Biological Diversity (Environmental Law and
Institutions Programme Activity Centre), June 1992.
19/ Official Records of the Economic and Social Council, 1994, Supplement
No. 13 (E/1994/33/Rev.1), chap. I, para. 60.
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international organizations, in particular UNDP, UNEP, UNCTAD, the International
Monetary Fund (IMF), the World Bank and the regional commissions.
126. 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.
127. The Commission will provide leadership in developing further proposals for
promoting the exchange of experiences in the implementation of policy reforms
for sustainable development.
128. 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.
129. 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.
130. 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.
131. 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
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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.
132. 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.
133. 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.
134. 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.
135. 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.
136. 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.
137. 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.
20/ Environmentally sound technology rights banks are ownership
arrangements that act as a broker for acquiring patent rights to sounder
technologies and make them available to countries in need of technical
assistance, in particular the developing countries, on favourable terms.
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138. 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.
139. 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.
140. 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).
141. 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.