NEW YORK – Financial markets serve two crucial purposes: to channel savings toward productive investments, and to enable individuals and businesses to manage risks through diversification and insurance. As a result, the sector is essential to sustainable development, which represents unprecedented global-scale investment opportunities and risk-management challenges.
That is why, when world leaders meet this July in Addis Ababa, Ethiopia, at the Conference on Financing for Development, the financial industry should be ready to offer practical, global solutions to the challenges associated with financing economic growth, poverty reduction, and environmental sustainability.
We have now entered the Year of Sustainable Development. At three back-to-back global summits – the conference in Addis Ababa, September's meeting at the United Nations to adopt Sustainable Development Goals (SDGs), and the UN Climate Change Conference in Paris in December – 193 governments will attempt to ensure that global growth and poverty reduction continue within a safe natural environment.
It will be a close call. The global economy, despite all of the huge bumps in the road, is delivering aggregate annual growth of 3-4%, leading to a doubling of output every generation. Yet the global economy is not delivering sustainable growth in two basic senses. In many parts of the world, growth has been deeply skewed in favor of the rich; and it has been environmentally destructive – indeed, life-threatening when viewed on a century-long time scale, rather than according to quarterly reports or two-year election cycles.