Perspectives 2019 2020 Public Sector

Citi Perspectives 29 Resources allocation for SDG Historically, governments have directed their internal resources to more social-oriented sectors where direct financial returns are low and the time horizon for realizing social returns are long. These “social infrastructure” segments, such as education and health, were not sufficiently commercial to draw in private sector capital and, given the importance to the fundamental well-being of the country, dictated that the government provides the necessary funding for these segments. Conversely, private capital was allocated towards more commercially-viable projects with faster realization and higher absolute quantum of profits, e.g., the mobile telephony build-out in Africa. However given the major strategic shift in institutional investors’ attitudes towards ESG investment in recent years as highlighted previously, social impact is gaining greater currency with investors and influencing investment decisions. This shift should result in greater levels of capital being deployed by private sector investors into non-traditional sectors such as water and sanitation and health. If we take a deeper dive into specific SDGs and split the goals by focus and by cause/effect, it starts to become clearer which sectors of society are best placed to advance each of the goals. As per the diagram below, private capital appears better placed to invest in the causes, with the right accommodative policies, while public policy can have more impact on the ‘effects’. This framework then suggests a more efficient allocation of private sector capital and public sector resources in support of the specific SDGs. However beyond suggestion , there is a still a yawning gap in funding requirements and accommodative policies alone will not attract the capital needed. Governments must transform and harness their financial resources to incentivize and mobilize greater scale of private capital. Source: Citi’s GPS report — “ UN Sustainable Development Goals: Pathways to success — a systematic framework for aligning investment ” Private Capital Environmental/Physical Affordable and Clean Energy Clean Water and Sanitation Responsible Consumption and Production Sustainable Cities and Communities Economic Industry, Innovation and Infrastructure Social Quality Education Good Health and Well-Being Zero Hunger Cause Environmental/Physical Climate Action Life on Land Life Below Water Economic Decent Work and Economic Growth Social No Poverty Peaceful and Inclusive Societies Reduced Inequalities Gender Equality Effect Public Policy Accommodative Policy Accommodative Policy