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Please be aware that the content herein has not been peer reviewed. It consists of personal reflections, insights, and learnings of the contributor(s). It may not be exhaustive, nor does it aim to be authoritative knowledge.
Title
Please provide a name for your action learning plan.
Innovative Financial instruments for development
Challenge statement
Challenge type: If you are working on multiple challenges, please indicate if this is your "big bet" or "exploratory" challenge.
Please note: we ask you to only submit a maximum of 3 challenges - 1x Big Bet, 2x Exploratory. Each challenge must be submitted individually.
BIG BET
Challenge statement: What is your challenge? (Please answer in specific terms: "Our challenge is that...”.)
Our challenge is the need to promote and participate in the financial system in the 2030 agenda. Given the gap that exists between the resources needed to finance the SDGs in the world, in a context of significant fiscal deficits, the participation of the private sector and the development of new, innovative financial instruments for development is central, in addition to creativity and efficiency in the management of available public resources.
Background: What is the history of your challenge? What is causing or driving it? Who is involved? How does the current situation look like? What undesired effects does it produce?
The main sources of financing for sustainable development in Uruguay come from the public sector and there are few instruments from the private sphere that aim at the SDGs. Despite the potential of innovative financing instruments for development (impact investment, social impact bonds, green bonds, among others), their application is still in its early stages, and they have not permeated most of the investments in Uruguay. This could be for several reasons:
1. Lack of governance schemes for the implementation of innovative financing instruments for development.
2. Lack of knowledge of the private sector of key concepts such as impact investment.
3. Scarcity of successful experiences disseminated.
On the other hand, in Uruguay there are favorable market conditions for private capital investments: political-institutional and economic stability, involvement of the government, the multilateral sector, and civil society
in the development of a sustainable finance ecosystem.
With the objective of advancing within the framework of the 2030 Agenda, Uruguay applied for the joint program entitled: "Development of the impact investment ecosystem: Reforming market conditions and defining the strategy to finance the transition to sustainable development in Uruguay". Within this framework, it contributed to reconfiguring the conditions of the impact investment market and to the definition of the
financing strategy for the transition to sustainable development in Uruguay.
Furthermore, in December 2021, UNDP and the Ministry of Social Development signed a Memorandum of Understanding with the objective of carry out a pre-feasibility study for a result-based payment bonus in the field of dual education.
Quantitative evidence: What (official) data sources do you have on this challenge that better exemplifies the importance and urgency of this frontier challenge? You can add text, a link, or a picture.
Qualitative evidence: What weak signals have you recently spotted that characterizes its urgency? Please provide qualitative information that better exemplifies the importance and urgency of this frontier challenge. You can add text, a link, or a picture.
Value proposition: What added value or unique value proposition is your Accelerator Lab bringing to solving this challenge? Why is it your Lab that needs to work on this challenge and not other actors within UNDP, other stakeholders in the country respectively? Why is it worth investing resources to this challenge?
The added value that our Accelerator lab is bringing is:
- The systemic view within UNDP.
The three clusters in the country office are working on sustainable finance but separately. Within the lab we aim to put the actors together and connect the projects form all the portfolios.
- From the Acclab, we have a background working on this issue. For instance, in 2021 we developed the first crowdfunding campaign to restore the native forest in Uruguay, where we were able to try a new mechanism of finance for development.
- From the Acclab we generated partnerships with the private sector that contributed with funding for restoration.
- We are working in the construction of the Renewable Energy Innovation Fund that seeks to support Uruguay's second energy transition by transitioning to low-carbon technologies in industry, transportation, the commercial and residential sectors, ensuring universal access to renewable energy and stimulating innovation and competitiveness in the country. It is a financing window that combines private capital and United Nations funds to promote energy transition projects, along with a technical assistance mechanism to help companies validate technologies, business models, and impact measurement.
Short “tweet” summary: We would like to tweet what you are working on, can you summarize your challenge in a maximum of 280 characters?
We are working on the development of new financial instruments for development,mapping the sustainable finance system in the country and contributing to the development of the ecosystem.
Partners
Who are your top 5 partners for this challenge? Please submit from MOST to LEAST important and state Name, Sector and a brief description of the (intended) collaboration.
Please state the name of the Parter:
Planning and budget office (OPP)
What sector does our partner belong to?
Government (&related)
Please provide a brief description of the collaboration.
OPP has a great proximity to relevant actors and its role in planning, budget structuring and design of
transversal policies. Therefore, it is an important actor to building relationships
in sustainable finance in the country.
Is this a new and unusual partner for UNDP?
No
Who are your top 5 partners for this challenge? Please submit from MOST to LEAST important and state Name, Sector and a brief description of the (intended) collaboration.
Please state the name of the Parter:
Ministry of Social Development
What sector does our partner belong to?
Government (&related)
Please provide a brief description of the collaboration.
The Ministry of Social Development is interested in implementing the first social impact bond in the country to work on education and job placement for young people in vulnerable contexts.
Is this a new and unusual partner for UNDP?
No
Who are your top 5 partners for this challenge? Please submit from MOST to LEAST important and state Name, Sector and a brief description of the (intended) collaboration.
Please state the name of the Parter:
Ministry of environment
What sector does our partner belong to?
Government (&related)
Please provide a brief description of the collaboration.
The Ministry of Environment is interested in implementing new sustainable financial instruments for restoration.
Is this a new and unusual partner for UNDP?
No
Who are your top 5 partners for this challenge? Please submit from MOST to LEAST important and state Name, Sector and a brief description of the (intended) collaboration.
Please state the name of the Parter:
Private investors, particularly Banks
What sector does our partner belong to?
Private Sector
Please provide a brief description of the collaboration.
We are working with the private sector to bring impact investors to the social impact bonds. Particularly, banks.
Furthermore, for the Renewable Energy Innovation Fund the financing combines private capital and United Nations funds to promote energy transition projects, along with a technical assistance mechanism to help
private companies validate technologies, business models, and impact measurement.
Is this a new and unusual partner for UNDP?
Yes
Who are your top 5 partners for this challenge? Please submit from MOST to LEAST important and state Name, Sector and a brief description of the (intended) collaboration.
Please state the name of the Parter:
NGOs: ANIMA
What sector does our partner belong to?
Civil Society
Please provide a brief description of the collaboration.
Social providers, NGOs to be part of the social impact bond. For this pilot, we are working with the NGO ANIMA that has an innovative, free and professional technical educational proposal in a dual format where young people from vulnerable socioeconomic contexts can attend the cycle of Technological Baccalaureate in Administration and Information Technology and Communication. In the last 2 years of high school, the training practices are developed in the training companies, three times a week in the afternoon. In this sense, the educational process is oriented to the development of the necessary skills for the labor and social inclusion of young people.
Is this a new and unusual partner for UNDP?
Yes
Learning questions
Learning question: What is your learning question for this challenge? What do you need to know or understand to work on your challenge statement?
Is sustainable finance a mechanism to reduce the gap and contribute towards the SDGs?
How can we develop the sustainable finance ecosystem in Uruguay?
To what stage(s) in the learning cycle does your learning question relate?
Explore, Test
Usage of methods: Relating to your choice above, how will you use your methods & tools for this learning question? What value do these add in answering your learning question?
· System Thinking: It will help us to understand all the actors that exist in the sustainable finance ecosystem, what value each one adds, how they interrelate and what spaces are needed.
· Solution Mapping: It will allow us to discover innovative financial instruments, solutions that are being developed both locally and globally.
· Pilots: We will develop pilots to obtain learnings
in order to be able to scale
· Crowdfunding: Through the crowdfunding campaign already developed, we will try to scale it or share learnings and try another type of campaign, wither crowdfunding or crowdlending.
Existing data gaps: Relating to your choice above, what existing gaps in data or information do these new sources of data addressing? What value do these add in answering your learning question?
· Interviews. Interviews will be conducted with potential impact investors, companies, and civil society organizations, to understand their perspective and what opportunities exist from different roles.
· Academic literature. There is a lot of literature on innovative financial instruments, regarding different types of instruments, guides, impact measurement techniques, successes and failures, experiences. A review will be done to understand and obtain data.
· Consultative workshop. Consultative workshops useful to obtain transparent and honest information to define possible paths.
· Socioeconomic data. This data will be essential to identify social and economic opportunities.
· Publications - magazines, academic articles. This data can be important to understand trends, obtain insights from the sustainable finance ecosystem and identify signs of change.
Closing
Early leads to grow: Think about the possible grow phase for this challenge - who might benefit from your work on this challenge or who might be the champions in your country that you should inform or collaborate with early on to help you grow this challenge?
- Government
- NGOs
- Banks
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1No poverty
10Reduced innequalities
17Partnerships for the goals
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