Commission on Sustainable Development
CSD 2000

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DECISION ON FINANCIAL RESOURCES AND MECHANISMS

Introduction

1. The principal objectives of activities in the area of financial resources and mechanisms should be pursued in full accordance with Agenda 211 and paragraphs 76-87 of the Programme for the Further Implementation of Agenda 212. 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. 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 liberalisation provides countries with opportunities, as well as brings risks and challenges for the mobilization of adequate and more stable resources for sustainable development. Globalisation 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 globalisation, while others, in particular least developed countries, face further marginalisation. 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 globalisation 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 CSD 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 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 CSD will include the following:
(a) mobilisation of domestic financial resources for sustainable development;
(b) promotion of international co-operation and mobilisation 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.

Mobilisation 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 mobilisation of domestic financial resources and to establish the basis for an enabling environment through, inter alia , sound macroeconomic policies, a dynamic private sector; 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 le vels 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 which 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 co-operation and mobilisation of international finance for sustainable development

7. Sustainable development requires countries to 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 co-operation, as necessary, with donors and international organisations.

9. For many developing countries, in particular least developed countries, official development assistance 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 which have not yet fulfilled the commitments undertaken to reach the agreed United Nations target of 0.7 per cent of 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 t heir 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 which 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 recognised 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 foreign direct investment, 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 to promote 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 which 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 sub-regional co-operation in this regard. There is also a need to address the destabilisation 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 MEAs in a stable and predictable manner. The global mechanism of UNCCD 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, including 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 Environmental 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 organisations 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 organisations 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 area of competence where they have a clear comparative advantage. In this regard, better cooperation and dialogue is needed between international organizations, including the Bretton Woods institutions, the World Trade Organisation, the United Nations Conference on Trade and Development, the United Nations Environment Programme, the United Nations Development Programme and GEF.

20. Governments and international organizations should improve their coordination efforts, using the United Nations Development Assistance Framework, 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, 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 foreign direct investment 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 make recommendations to synchronise the progress on sectoral issues with cross-sectoral areas, but no agreement could be reached on the convening of such a panel.

Document made available in electronic format by the UN.