According to the UN, we are "nowhere near" achieving the UN Sustainable Development Goals (SDGs) by 2030. As of July 2023, progress on half of the SDGs is weak and insufficient, with almost a third of the goals either stalled or reversed. Achieving this ambitious set of 17 goals requires an unprecedented level of global cooperation.
The 2024 Financing for Sustainable Development Report highlights that urgent steps are needed to mobilize financing at scale to close the development financing gap, now estimated at USD 4.2 trillion annually, up from USD 2.5 trillion before the COVID-19 pandemic. The findings suggest that only a massive surge of financing and a reform of the international financial architecture can rescue the SDGs.
To close this financing gap, strong partnerships and innovative financial mechanisms are essential. Both must be aligned with the action areas of the UN’s Addis Ababa Action Agenda, created in 2015, convened by the UN’s Conference on Financing for Development. This framework is the high-level blueprint for action by governments, international organizations, businesses and civil society to increase the financial resources available to align financing flows and policies for achieving sustainable development, inclusive economic growth, environmental protection and social inclusion.
Ten years on from the 3rd conference in Addis Ababa, the 4th International Conference on Financing for Development taking place in Spain in June 2025 will seek to assess gaps to implementation of the Addis Ababa Action Agenda, and consider the fresh needs in the context of a rapidly changing global macroeconomy – marked by rapid digitalization and automation, global conflict and the urgent need to address climate change impacts.
In this context, there has been an emergence of a new class of impact investors in recent years: sovereign wealth funds (SWFs) with mandates for domestic economic development alongside financial returns. These publicly backed funds finance critical development needs like infrastructure and SMEs. With clearly defined impact investing strategies, technical capacities, financial vehicles to quickly mobilize capital and a pipeline of investments co-financed with the private sector, these actors working together are well positioned to supercharge financing to close the SDGs funding gap.
The Sovereign Impact Initiative is a response to the need for systemic change and international finance at scale. It aims to transform the investment culture of SWFs and other global investors to accelerate the channeling of financial resources to impactful projects aligned with the SDGs.
The Sovereign Impact Initiative aims to solve a classical market failure introduced by asymmetric information. On one side, commercial investors (such as private investors and development finance institutions) are seeking attractive and consistent projects in developing markets, but they may lack the local knowledge, capacity and investor protections to do so. On the other side, SWFs with local knowledge and expertise in developing countries must crowd-in commercial capital to build markets and finance critical development investments that investors may avoid without de-risking mechanisms. This long-term project aims to bring these parties together to scale up financing for development, and consequently reduce the perceived and real investment risks of SDG-aligned projects in developing countries.
This is a unique opportunity for the global SWF community, whose assets reached EUR 11.6 trillion as of 2023. The Initiative’s initial focus is to link international SWFs and other international investors with African SWFs, but plans to expand to Latin America and South-East Asia in the future. Egypt, Morocco, Senegal and Nigeria will be members of the Initiative’s first cohort of African SWFs.
Objectives:
Co-design an investment vehicle with SWFs to unlock capital from strategic and international SWFs and channel to national SWFs in developing countries.
Research and analyze financing trends, practical solutions, tools, challenges and gaps to uncover best impact investing practices that enable SWFs to be aligned with the UN SDGs.
Establish a community of knowledge and practice as a platform for SWFs to build capacity through sharing of case studies, challenges and learnings to highlight impact investing best practices among SWFs.
Design a technology platform to increase transparency and improve measurement and reporting through metrics and targets, tracking the impact of SWF financial flows into the SDGs.
The Initiative was created by the Center for the Governance of Change at IE University in partnership with the Joint SDG Fund, UNDP and the International Forum of Sovereign Wealth Funds, with support from the Directorate General for Development Policies at the Spanish Ministry of Foreign Affairs.
