Global health centre
13 September 2017

Financing the United Nations Development System

The halls of the United Nations (UN) were abuzz this summer with discussions of how to better finance the United Nations Development System (UNDS). UNCTAD’s 2014 World Investment Report had estimated that the 2030 Agenda for Sustainable Development will require USD 2.5 trillion per year more than the current system affords. A concerted strategy to meet this demand was laid out in the 2015 Addis Ababa Action Agenda, which called for financing and investment innovations for technology, infrastructure, social protection, health, micro-, small- and medium-sized enterprises, foreign aid, taxation, climate change, and financing through existing and new development banks.

In his June 2017 report, Repositioning the UN Development System to Deliver on the 2030 Agenda, UN Secretary-General Antonio Guterres emphasised the need to shift mentalities and modus operandi from “funding” to “financing.” He also proposed working towards a Funding Compact to bolster UNDS core-funding (currently at 15%, and with over 90% of non-core funds fuelling “single donor-single entity projects”). This would, he argued, assist Member States and UNDS entities deliver collaboratively on one agenda, and would enhance the predictability, flexibility, sustainability and quality of UNDS funding.

The need to shift from funding to financing echoed throughout the 2017 High Level Political Forum on Sustainable Development. The topic was also explored in depth by the Dag Hammarskjöld Foundation and the UN Multi-Partner Trust Fund Office’s third joint report on Financing the UN Development System: Pathways to Reposition for Agenda 2030. In one chapter titled “From Funding to Financing – beginning the journey,” Richard Bailey explains that where traditional UNDS funding relied on the mobilisation of grant resources for delivering projects (i.e. the transfer of resources from a financial contributor to a recipient), a financing approach to reach sustainable development would combine diverse financial flows, including foreign direct investment, remittances, private debt and portfolio equity, and overseas development assistance.

The report’s value lies in the smorgasbord of case studies showcasing innovative financing models evident in different global governance frameworks today. It contains chapters on the World Health Organisation’s financing reforms, the United Nations Environment Programme’s Finance Initiative, The Global Community Engagement and Resilience Fund’s financing model for the prevention of violent extremism, among many others. These chapters capture not only the positive effects produced from various innovative financing models, but also the lessons learned from the challenges faced – a valuable resource for the UNDS country teams as they embark on the shift from funding to financing.

Two aspects of the financing discussions warrant further debate: Should conflict prevention fall within the purview of the UNDS? And will the UNDS structural reforms proposed by Guterres have budgetary implications?


Should conflict prevention be financed by the UNDS?

Investing in conflict prevention to secure sustainable development is now square on the UNDS agenda. It is nestled in SDG 16, under target 16.A, which aims to prevent violence and combat terrorism and crime through the strengthening of national institutions. It also features prominently in the Secretary-General’s June 2017 report, which emphasises the need to tackle root causes of crises to consolidate peace and prosperity, and calls on UN Resident Coordinators to champion national efforts “to promote a prevention approach focused on building resilience of national institutions to anticipate disruptions and shocks that could make the SDGs unattainable or undermine progress achieved.”

Yet the Russian Federation has questioned whether conflict prevention fits within the purview of development. While primarily concerned about undue interference in state sovereignty, their contestation warrants further discussion particularly regarding questions relating to financing conflict prevention. Should the already budget strapped UN development system now be expected to invest in conflict prevention? Will this drain funds away from other key areas of development work and lead to the further securitisation of development? The Dag Hammarskjold Foundation and UN Multi-partner Trust Fund office report presents several innovative chapters on financing conflict prevention that can feed into these discussions.


Structural reforms with budgetary implications?

Many of the UNDS reforms proposed by the Secretary-General in his June 2017 report are structural. Decentralisation, he emphasised, is key, whereby an accountability mechanism would be introduced at headquarters with a focus on delivery on the ground. He proposed greater autonomy, integration and coherence at regional and country offices, strengthening the role of Resident Coordinators so that they can more effectively lead and integrate the work of the UN’s multiple agencies present at country levels. And he called for a new generation of Country Teams to transform overlaps in the UN’s work into synergies, and to help governments identify partners to bridge gaps in capacity and financing.

While it is easy to dismiss proposals for UN reform as rhetoric, the structural reforms Guterres presented are not too unlike those introduced at the UN Refugee Agency under his leadership, between 2005 and 2015. According to the Agency’s own evaluation, the structural reforms introduced had important budgetary ramifications. By shifting focus from headquarters to regional, country and field operations, the UN Refugee Agency increased its productivity by more than 50% while maintaining the same budget. More funds were freed up for service and programmatic delivery – the actual processing of asylum seekers and refugees. While the UNDS is quite a different beast, lessons and indeed optimism can be drawn from the re-structuring that occurred at the UN Refugee Agency.

The heads of UNDS entities will present their proposals for UNDS funding by the end of 2017. One thing is sure – there is mounting momentum and an enormous appetite for change.

The Dag Hammarskjold and UN Multi-Trust Partnership Funds Office presented the findings of their joint report as part of the Graduate Institute’s Programme for the Study of International Governance seminar series in September 2017.

Written by Cecilia Cannon, Head of Research, Programme for the Study of International Governance, The Graduate Institute