Innovative Financing for Development

http://www.un.org/esa/ffd/topics/innovative-finance.html

 

Innovative Financing for Development

Achieving the Millennium Development Goals and addressing global challenges such as climate change require considerable financing. Finding the necessary resources is challenging, especially for least developed countries. Official development assistance (ODA) is falling short of what countries need, and ODA commitments remain unfulfilled.

The need for additional and more predictable development financing has led to a search for alternative, innovative sources. The Monterrey Consensus recognized “the value of exploring innovative sources of finance provided that those sources do not unduly burden developing countries”, and encouraged “exploring innovative mechanisms to comprehensively address debt problems of developing countries, including middle-income countries and countries with economies in transition.”

Various initiatives to develop and implement innovative development financing mechanisms have emerged. Aiming to complement ODA and address existing imbalances, these initiatives and proposals range from international solidarity levy on air tickets, to international financial and currency transaction taxes, debt for development swaps, and other ideas. In the absence of an internationally agreed definition of innovative financing, the amounts raised by innovative finance mechanisms differ according to what is classified as “innovative finance”.

The General Assembly, in its resolution 65/146, highlighted the considerable progress in innovative sources of financing for development achieved to date, and stressed the importance of scaling up present initiatives and developing new mechanisms, as appropriate. The Assembly reiterated that such voluntary mechanisms should be effective, should aim to mobilize resources that are stable and predictable, should supplement and not be a substitute for traditional sources of financing, should be disbursed in accordance with the priorities of developing countries and should not unduly burden such countries.

The Financing for Development Office provides substantive support to the work of Mr. Philippe Douste-Blazy, Special Adviser to the United Nations Secretary-General on Innovative Financing for Development.

For more information:

          Documents

                     Events

                     Links

 

          Report of the Secretary-General on “Innovative mechanisms of financing for development” (A/66/334)

                     World Economic and Social Survey 2012, In Search of New Development Finance

 

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United Nations A/RES/65/146

General Assembly Distr.: General

4 February 2011

Sixty-fifth session

Agenda item 19

10-52130

*1052130* Please rec cle

 

Resolution adopted by the General Assembly on 20 December 2010

[on the report of the Second Committee (A/65/435)]

65/146. Innovative mechanisms of financing for development

The General Assembly,

Recalling the United Nations Millennium Declaration,0F

1 the 2005 World

Summit Outcome1F

2

 and the High-level Plenary Meeting of the General Assembly on

the Millennium Development Goals and its outcome document,2F

3

 

Recalling also the Monterrey Consensus of the International Conference on

Financing for Development3F

4 and the Doha Declaration on Financing for

Development: outcome document of the Follow-up International Conference on

Financing for Development to Review the Implementation of the Monterrey

Consensus,4F

5

Recalling further the Outcome of the Conference on the World Financial and

Economic Crisis and Its Impact on Development,5F

6

Noting the informal event on innovative sources of development finance

organized by the Secretary-General on 3 June 2010,

Recognizing the potential of innovative mechanisms of financing to contribute

to the achievement of the internationally agreed development goals, including the

Millennium Development Goals,

Noting the ongoing work on innovative sources of financing for development,

including in various forums such as the Leading Group on Innovative Financing for

Development,

 1. Reaffirms the Monterrey Consensus of the International Conference on

Financing for Development0H

4

 and the Doha Declaration on Financing for

Development: outcome document of the Follow-up International Conference on

_______________

1

 See resolution 55/2.

2

 See resolution 60/1.

3

 See resolution 65/1.

4 Report of the International Conference on Financing for Development, Monterrey, Mexico, 18–22 March

2002 (United Nations publication, Sales No. E.02.II.A.7), chap. I, resolution 1, annex. 5

 Resolution 63/239, annex.

6

 Resolution 63/303, annex. A/RES/65/146

2

Financing for Development to Review the Implementation of the Monterrey

Consensus1H

 

5

 in their entirety, their integrity and their holistic approach, and

recognizes that the mobilization of financial resources for development and the

effective use of those resources are central to the global partnership for

development, including in support of the achievement of the internationally agreed

development goals, including the Millennium Development Goals;

 2. Also reaffirms that each country must take primary responsibility for its

own development and that the role of national policies and development strategies

cannot be overemphasized for the achievement of sustainable development, and

recognizes that national efforts should be complemented by supportive global

programmes, measures and policies aimed at expanding the development

opportunities of developing countries, while taking into account national conditions

and ensuring respect for national ownership, strategies and sovereignty;

 3. Stresses the essential role that official development assistance plays in

complementing, leveraging and sustaining financing for development in developing

countries and in facilitating the achievement of development objectives, including the

internationally agreed development goals, in particular the Millennium Development

Goals, reiterates that official development assistance can play a catalytic role in

assisting developing countries in removing constraints on sustained, inclusive and

equitable growth by, inter alia, enhancing social, institutional and physical

infrastructure, promoting foreign direct investment, trade and technological innovations,

improving health and education, fostering gender equality, preserving the environment

and eradicating poverty, and welcomes steps to improve the effectiveness and

quality of aid based on the fundamental principles of national ownership, alignment,

harmonization, managing for results and mutual accountability;

 4. Also stresses that innovative mechanisms of financing can make a

positive contribution in assisting developing countries in mobilizing additional

resources for development on a stable, predictable and voluntary basis;

 5. Reiterates that such voluntary mechanisms should be effective, should

aim to mobilize resources that are stable and predictable, should supplement and not

be a substitute for traditional sources of financing, should be disbursed in

accordance with the priorities of developing countries and should not unduly burden

such countries;

 6. Highlights the considerable progress in innovative sources of financing

for development achieved to date, and stresses the importance of scaling up present

initiatives and developing new mechanisms, as appropriate;

 7. Decides to convene at its sixty-sixth session a separate meeting of the

Second Committee under the item entitled “Follow-up to and implementation of the

outcome of the 2002 International Conference on Financing for Development and

the 2008 Review Conference” to consider the question of innovative mechanisms of

financing for development;

 8. Requests the Secretary-General to submit to the General Assembly at its

sixty-sixth session a report examining the contribution and the potential of

innovative mechanisms of financing for development in respect of achieving the

internationally agreed development goals, including the Millennium Development

Goals, as well as their effectiveness and their implications, taking into account that

such mechanisms should be voluntary in nature and should not unduly burden

developing countries.

69th plenary meeting

20 December 2010

 

===============================================

         

United Nations A/66/334

General Assembly Distr.: General

1 September 2011

Original: English

11-48589 (E) 200911

*1148589*

Sixty-sixth session

Item 18 of the provisional agenda*

Follow-up to and implementation of the outcome of

the 2002 International Conference on Financing for

Development and the 2008 Review Conference

 

 Innovative mechanisms of financing for development

 

 Report of the Secretary-General

 

 Summary

 

 The present report, submitted in response to General Assembly resolution

65/146, complements the report of the Secretary-General on the follow-up to and

implementation of the Monterrey Consensus and the Doha Declaration on Financing

for Development. It reviews the scope and scale of innovative financing mechanisms

and examines their contribution and potential in respect of achieving the Millennium

Development Goals, in particular in the areas of health and environment. The report

also highlights the implications of innovative financing mechanisms for aid

architecture and aid effectiveness, including alignment with national priorities,

predictability and sustainability, monitoring and evaluation and governance

structures, and derives policy conclusions.

 * A/66/150. A/66/334

2 11-48589

 I. Introduction

1. The General Assembly, in its resolution 65/146, highlighted the considerable

progress in innovative sources of financing for development achieved to date, and

stressed the importance of scaling up present initiatives and developing new

mechanisms, as appropriate. The Assembly reiterated that such voluntary

mechanisms should be effective, should aim to mobilize resources that are stable

and predictable, should supplement and not be a substitute for traditional sources of

financing, should be disbursed in accordance with the priorities of developing

countries and should not unduly burden such countries.

2. In the same resolution, the General Assembly requested the Secretary-General

to submit to it at its sixty-sixth session a report examining the contribution and

potential of innovative mechanisms of financing for development in respect of

achieving the internationally agreed development goals, including the Millennium

Development Goals, as well as their effectiveness and their implications, taking into

account that such mechanisms should be voluntary in nature and should not unduly

burden developing countries. The present report is in response to that request.

 II. Scope and scale of innovative financing in

existing mechanisms

3. Given the absence of an internationally agreed definition of innovative

financing, the amounts raised by innovative finance mechanisms differ according to

what is classified as “innovative finance”. Classification schemes by the

Organization for Economic Cooperation and Development (OECD) and the World

Bank differ in their coverage; hence their estimates are not strictly comparable.

4. OECD defines innovative finance as mechanisms of raising funds or

stimulating actions in support of international development that go beyond

traditional spending approaches by either the official or private sectors and

distinguishes them from innovative uses of traditional development finance

(e.g. counter-cyclical lending, debt swaps and issuing guarantees) and “incentives

designed to enhance aid effectiveness” (e.g. results-based aid and cash-ondelivery).1

5. Within the OECD framework, it is estimated that the selected mechanisms

have generated $37 billion for development assistance, of which $31 billion

corresponded to climate change and environment (see annex, table 1).2 In the

Development Assistance Committee statistics, the revenues raised by innovative

financing mechanisms are (or will be) recorded as official development assistance

(ODA) and included in meeting such commitments when such revenues are raised or

spent by the official sector for international development. By definition, the

non-ODA component of innovative financing will come from funds contributed

directly by the private sector.

__________________

1 Elisabeth Sandor, Simon Scott and Julia Benn, “Innovative Financing to Fund Development:

Progress and Prospects”, DCD Issues Brief, November (Paris, OECD, 2009). 2 The estimations presented in this report are based on the aggregation of updated financial

information on each mechanism that is available in the public domain, by distinguishing

between reported commitments and actual deliveries to the extent possible. A/66/334

11-48589 3

6. In this sense, in the health sector,3 of the $5.5 billion raised, only $0.2 billion

of non-government contributions is “additional” to ODA.4 Even these “additional”

resources may be reported as official receipts when they are eventually disbursed by

Development Assistance Committee multilateral donors. Hence, additional funds

raised from the private sector may transit official channels and thus become either

ODA from a bilateral donor or official receipts from a multilateral donor.

7. For climate change and environment, most of the $31 billion raised represents

private financial and investment flows and can be classified as “additional” to ODA.

Nevertheless, both revenues raised for the Adaptation Fund ($154 million) and from

the World Bank Eco 3Plus Note and Green Bond ($2.3 billion) will be reported as

official when they are disbursed to developing countries. As a result, a bulk of

$28 billion raised from carbon emissions trading is effectively additional.5

8. In contrast, the World Bank considers innovative finance to be any financing

approach that helps to generate funds by tapping new funding sources or by

engaging new partners, including those that enhance the “efficiency” of financial

flows by reducing delivery time and/or costs, and make financial flows more

“results-oriented”.6 Within this framework, “non-traditional applications” of

solidarity or catalytic mechanisms and public-private partnerships raised $57 billion

in 2000-2008 (see annex, table 2).7 This figure does not include some mechanisms

short-listed by OECD, but includes a large share of official sources

(e.g. $10.7 billion of development cooperation from non-Development Assistance

Committee donors and $40.1 billion of local currency bonds issued by multilateral

development banks).

9. Norway’s carbon dioxide tax on aviation fuel ($91 million) and the European

Union Millennium Development Goal Contract ($2.4 billion) are not included in the

__________________

3 Health sector contributions made up of the Affordable Medicines Facility for Malaria, the

International Bank for Reconstruction and Development (IBRD) or International Development

Association buy-downs, and the advance market commitment are all counted as official

development assistance; revenues raised from solidarity levy on airline tickets are recorded as

official development assistance when they are spent for development or delivered to UNITAID;

debt cancellation and conversion under the Debt2Health are transactions within official

development assistance flows; and revenues raised by the International Finance Facility for

Immunization in the bond market are not considered as official development assistance.

Nonetheless, official contributions by donor countries to this mechanism are reported as official

development assistance when their commitments are delivered. See OECD Working Party on

Statistics, “Mapping of some important innovative finance for development mechanisms”,

DCD/DAC/STAT/RD(2011)1/RD1, 7 February 2011.

4 Contributions to advance market commitments: Gates Foundation $50 million and Affordable

Medicines Facility for Malaria $20 million; and the Global Fund Investment Products,

MASSIVEGOOD and PRODUCT(RED) $173 million. The International Development

Association buy-downs of $146 million include non-official contributions, but they are excluded

due to the lack of information to identify the contributions made by non-government donors.

5 There is no data available to indicate the extent of the public-sector involvement in these

transactions. In the Development Assistance Committee statistics, donors can report their

official concessional support for clean development mechanism projects as ODA.

6 The World Bank Group, Innovative Finance for Development Solutions: Initiative of the World

Bank Group, available at: http://siteresources.worldbank.org/CFPEXT/Resources/IF-forDevelopment-Solutions.pdf

.

7 Navin Girishankar, “Innovating Development Finance: From Financing Sources to Financial

Solutions”. Concessional Finance and Global Partnerships Working Paper Series, No. 1

(Washington, D.C., The World Bank, 2009). A/66/334

4 11-48589

OECD or World Bank reports. If these are included in the overall total, innovative

finance lies roughly between $37 billion and $60 billion (see annex, table 3); the

figure varies according to which mechanisms are deemed to be innovative financing

mechanisms.

10. As 2015 approaches, the extent of “additionality” created by innovative

financing mechanisms, in relation to traditional sources of development finance, is

of increasing interest to many Member States. New resources are needed to

complement traditional ODA. In a narrow sense, “additionality” of innovative

financing would only apply to resources that are not classified as ODA, whereas in a

broader sense all resources raised by innovative financing mechanisms, regardless

of their classification as ODA, might be regarded as “additional”, provided that they

do not substitute traditional ODA. Quantification of the extent of the latter concept

of “additionality”, is, however, not straightforward in the current reporting system.

 III. Contribution of innovative financing mechanisms

in operation

 A. Health

11. In the past decade, total revenues raised by the operational mechanisms in the

health sector as classified by OECD (see annex, table 1), amount to $5.5 billion,

80 per cent of which were raised by two mechanisms: International Finance Facility

for Immunization and the solidarity levy on airline tickets. On a cash basis,

however, $3.5 billion8 (or $3.6 billion, including $91 million of Norway’s carbon

dioxide tax contributions to the International Drug Purchase Facility (UNITAID))

has been made available for disbursement.

12. All mechanisms, except for World Bank buy-downs in the health sector, pool

resources into three public-private partnerships: two vertical funds or result-based

funds — the GAVI Alliance and the Global Fund to Fight AIDS, Tuberculosis and

Malaria (GFATM) — and one international drug-purchasing facility, UNITAID.

Through these public-private partnerships, capital is channelled into a large number

of developing countries for specific health programmes.9

13. Tangible results reported by the three public-private partnerships (which

combine resources provided by innovative financing mechanisms and other

contributions) spread across the globe by saving the lives of millions of people and

__________________

8 The difference is attributed to the difference between resources raised and those actually

delivered: (a) cash transferred from the International Finance Facility for Immunization was

$1.9 billion, out of the $3.4 million raised; (b) air-ticket levy contributions that reached

UNITAID as at the end of 2010 were $0.9 billion, against the $1 billon raised in 2006-2010;

(c) cash delivery of Debt2Health was $39 million against the $117 million commitments; and

(d) cash transferred from advance market commitments was $70 million, out of $396 million

delivered by donors.

9 Both GAVI and GFATM have been registered as Development Assistance Committee

multilateral donors since 2008 and 2004, respectively, and their disbursements are recorded as

Development Assistance Committee multilateral official development assistance. UNITAID, on

the other hand, is not a Development Assistance Committee multilateral donor; thus, its

disbursements are not covered by the Committee’s statistics. A/66/334

11-48589 5

by reducing prices of some treatments.10 Since 2000, GAVI-funded vaccines have

immunized almost 300 million children and prevented more than 5 million future

deaths, through routine immunization and related investments.11 GFATM-funded

programmes have provided life-saving antiretroviral therapy to 3 million people,

detected and treated 7.7 million cases of tuberculosis, and saved an estimated

6.5 million lives since 2002.12 UNITAID has funded HIV/AIDS and related drugs

for nearly 1 million adults and children and delivered 19 million malaria treatments

and 1.5 million tuberculosis treatments.13 By creating demand, UNITAID has

contributed to a price reduction of a new HIV/AIDS medicine by more than 70 per

cent, allowing more than 1 million people access to it, as well as a cumulative

average of a 64 per cent price reduction in five new child-friendly medicines since

2007. In 2009, GFATM reported that 21 per cent of international public HIV

funding, 65 per cent of international tuberculosis funding for the 22 high-burden

countries and 65 per cent of international malaria funding came from GFATM.14

Those results constitute a significant incentive to further scale up innovative

financing for the health sector.

 Innovative financing contributions to the GAVI Alliance, the Global Fund to

Fight AIDS, Tuberculosis and Malaria and UNITAID

14. The figure below summarizes the contribution of each innovative financing

mechanism to the three public-private partnerships and gives an overview with

regard to other sources of finance.

Figure

Contribution of innovative financing to public-private partnerships in the

health sector

(a) GAVI Alliance total cash receipts of $5.4 billion (as at 15 April 2011)

__________________

10 The Special Adviser to the Secretary-General on Innovative Financing for Development,

Philippe Douste-Blazy, highlighted these achievements at the United Nations informal event on

innovative sources of development finance, held in New York on 3 June 2010.

11 GAVI, “Investing in vaccines: An opportunity to save four million children’s lives by 2015”

(www.gavialliance.org/resources/GAVI_Investing_in_vaccines_May_2011.pdf).

12 GFATM, Making a Difference — Global Fund Results Report 2011 (Geneva, GFATM, 2011). 13 “UNITAID Facts: Boosting Global Access to Testing and Treatment and Pushing Prices Down”,

August 2010; “UNITAID: making the money go further”, June 2010; www.unitaid.eu.

14 GFATM, 2011. A/66/334

6 11-48589

(b) GFATM total cash receipts of $19.3 billion (as at 31 May 2011)

 

(c) UNITAID total cash receipts of $1.3 billion (as at 31 December 2010)

Sources: Compiled by the Department for Economic and Social Affairs based on GAVI, “Cash

received 2000-2011 as of 15 April 2011” (www.gavialliance.org/resources/

 Cash_Received_2000_2010.pdf); GFATM, “Pledges and Contributions”, as of 31 May 2011

(www.theglobalfund.org/en/) and UNITAID, Annual Reports, 2009-2009; “2010 Voluntary

Contributions as of 31 December 2010” (www.unitaid.eu).

 1. GAVI Alliance

15. The proceeds from the advance market commitment and the International

Finance Facility for Immunization mechanisms, both under World Bank financial

management, account for 37 per cent of GAVI cumulative cash receipts (see figure).

The weight of innovative financing contributions becomes 54 per cent when

excluding cash receipts prior to 2006, when GAVI started receiving International

Finance Facility for Immunizations contributions.

16. Of the total pledged amount of $1.5 billion to advance market commitments,

however, only $0.4 billion has been delivered by the six donors and $70 million has

been transferred from the advance market commitment funds to GAVI for

disbursement to recipient countries (see figure). As at the end of March 2011, GAVI A/66/334

11-48589 7

had disbursed $94 million to UNICEF for the purchase of 13 million doses of

vaccines, of which $45 million came from advance market commitment funds.15

17. The International Finance Facility for Immunization has been the major GAVI

source, allowing its disbursements to triple in the period from 2006 to 2010. In

effect, despite the adverse impact of the global financial and economic crisis, the

Facility has raised $3.4 billion since late 200616 and $1.8 billion have been

disbursed from GAVI to finance vaccine procurement, immunization and health

systems to strengthen programmes in 70 countries.17 The predictability and

flexibility offered by this mechanism have proved to be highly beneficial.18

 2. Global Fund to Fight AIDS, Tuberculosis and Malaria

18. Because of the scale of the contributions coming directly from governments

(including from developing countries), total contributions from the Affordable

Medicines Facility for Malaria, Debt2Health, the Dow Jones Global Fund 50 Index,

PRODUCT (RED) and UNITAID represent a mere 2 per cent of GFATM cash

receipts since its inception (see figure). In turn, since its inception, the Global Fund

has disbursed $13.8 billion to 144 countries.19

19. Almost all contributions are pooled, together with contributions from other

sources. Total contributions to the Global Fund from innovative financing

mechanisms account for only 2 per cent of the Global Fund’s cumulative resources.

20. The Affordable Medicines Facility20 consists of: (a) a co-payment fund of

$212 million, contributed by the Bill & Melinda Gates Foundation, UNITAID and

the United Kingdom of Great Britain and Northern Ireland in 2009-2010, which acts

as subsidy provider for eligible first-line buyers from the public and private sectors;

and (b) $127 million commitments by GFATM to finance supporting interventions.

As at the end of April 2011, artemisinin-based combination therapies worth

$30 million had been delivered to five countries, out of the committed co-payments

of $115 million.21

__________________

15 GAVI Alliance secretariat, Advance Market Commitment for Pneumococcal Vaccines

Annual Report, 1 April 2010-31 March 2011 (http://www.vaccineamc.org/files/

AMCannualReport11.pdf).

16 Using donors’ commitments of $6.2 billion as security, bonds are issued in the international

capital markets for institutional and individual investors.

17 International Finance Facility for Immunization, “Results”, as of 31 March 2011

(www.iffim.org).

18 Mark Pearson, Jeremy Clarke, Laird Ward, Cheri Grace, Daniel Harris and Mathew Cooper,

“Evaluation of the International Finance Facility for Immunization (IFFIm)”, June 2011,

London, HLSP.

19 GFATM, “Global Fund Grants — Progress Summary” (www.theglobalfund.org/en/

 commitmentsdisbursements/).

20 The Affordable Medicines Facility for Malaria aims to enable countries to increase the provision

of affordable artemisinin-based combination therapies (ACTs). To achieve this aim, the Global

Fund has negotiated lower ACT prices with manufacturers and pays a large proportion of this

(a “Co-Payment”) directly to manufacturers on behalf of buyers across the public-private forprofit

and not-for-profit sectors.

21 Based on the GFATM Affordable Medicines Facility for Malaria summary report on co-paid

ACTs (www.theglobalfund.org/programs/amfm/report.aspx). A/66/334

8 11-48589

21. Debt2Health was expected to generate “additional” development financing of

$450 million by 201022 by reducing the debt burden of developing countries not

eligible for the heavily indebted poor countries initiative. Against a total pledge of

$314 million made by Australia and Germany, four agreements have been

concluded, in which three beneficiary countries have committed $117 million for

2008-2018. As at 31 May 2011, only $39 million had been delivered to GFATM (see

figure).

22. No contribution from this mechanism has been reported since the Dow Jones

Global Fund 50 Index was launched at the Frankfurt Stock Exchange in December

2010.23 PRODUCT (RED),24 the second largest source of private-sector

contributions in GFATM revenues, has delivered $173 million since 2006, to

support GFATM-funded HIV/AIDS programmes in six sub-Saharan countries.

Finally, UNITAID made direct contributions of $39 million, in addition to its

$130 million contribution to the Affordable Medicines Facility for Malaria. The

pooling of resources makes it difficult to trace the disbursements attributed to these

innovative financing contributions.

 3. UNITAID

23. In the 2006-2010 period, contributions from the solidarity levy on airline

tickets and Norway’s carbon dioxide tax represented 75 per cent of UNITAID cash

receipts (see figure). By the end of 2010, UNITAID had disbursed $1.1 billion25 to

finance treatments of HIV/AIDS, malaria and tuberculosis in 94 countries.

24. While solidarity levies on air tickets were expected to generate €220 million

(about $300 million) annually,26 what has been delivered to UNITAID since 2006

has been an annual average of $225 million, of which 95 per cent came from

France.27 Despite the fact that the number of countries implementing air-ticket

levies almost tripled between 2006 and 2010, from 5 to 14 (including five least

developed countries),28 the annual contributions from this mechanism fell from

74 to 65 per cent of overall UNITAID revenues.

25. In turn, through a tax on carbon dioxide emissions from aviation fuel, Norway

has made steady annual contributions from 2006/07 to 2010, which represent 7 per

cent of the UNITAID cumulative cash receipts.

26. MASSIVEGOOD, an initiative launched in March 2010 to collect a

microdonation ($2 or €2) from airline tickets, was projected to generate close to

$1 billion per year. As at May 2011, the expected proceeds had not yet been

delivered.

__________________

22 A/64/189, para. 32.

23 The Index measures the performance of the largest companies supporting the missions of

GFATM, and a portion of the licensing will finance GFATM programmes.

24 Licensing fees are paid directly by 12 participating companies, and specified percentages of

profits from the sales of (RED) products are transferred to GFATM.

25 Based on information in the UNITAID Annual Report 2009, and project budget for 2010. 26 A/64/189, para. 19.

27 The total revenues raised in France through this mechanism amount to €707 million (almost

$1 billion), of which 90 per cent of revenues from air-ticket levies to UNITAID and the

remaining 10 per cent has been used to meet the country’s International Finance Facility for

Immunization pledge.

28 Based on the information provided by the UNITAID secretariat, 18 October 2010. A/66/334

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 4. World Bank buy-downs

27. The World Bank International Development Association buy-down mechanism

for disease eradication projects converts the terms of a normal International

Development Association development credit through the provision of additional

external donor resources under clearly defined performance criteria. It increases the

concessionality of International Development Association credits and IBRD loans

by allowing a donor to pay part or all of the principal and interest in the future after

achievement of predefined results. Since 2003, International Development

Association buy-downs in Pakistan and Nigeria to support polio-eradication

campaigns have received $146 million from the Gates Foundation, the United

Nations Foundation, Rotary International, and the United States Center for Disease

Control, to buy-down $316 million in International Development Association

credits.29 Two International Bank for Reconstruction and Development (IBRD) buydowns

occurred in China (for tuberculosis control in 2002, with a $37 million grant

from the United Kingdom) and Botswana (for HIV/AIDS in 2008, with a

$20 million buy-down funded by the European Commission).30 Although proceeds

from this mechanism are earmarked for specific purposes, when they are disbursed,

they are often considered part of overall finance made available to beneficiary

countries.

 B. Climate change and environment

28. Since 2004, half a dozen mechanisms have raised $31 billion; 90 per cent was

raised through carbon emission trading (annex, table 1), which can also be

considered “additional” to previously budgeted ODA. The additional resources

committed to address the needs of developing countries in the Copenhagen Accord

are $100 billion a year. Estimates of funding requirements vary,31 but, despite

differences in numbers, it is clear that there are shortfalls in the total resources

needed for climate change and environment.

29. Carbon markets offer opportunities for directly financing new technologies in

developing countries and for leveraging private investments.32 The clean

development mechanism allows emission-reduction projects in developing countries

to earn certified emission reduction credits, which can be traded, sold and used by

developed countries to meet a part of their emission reduction targets under the

Kyoto Protocol. Joint implementation allows investments in projects mainly in

economies in transition to lower cost of complying with Kyoto Protocol targets. In

2005-2010, primary clean development mechanism transactions amounted to

$26.5 billion,33 and joint implementation agreements totalled $1.5 billion in 2004-

__________________

29 The World Bank Group (undated), op. cit.

30 OECD, 2011, annex table.

31 See World Bank, The World Development Report 2010: Development and Climate Change,

chap. 6 (Washington, D.C., IBRD/World Bank, 2010), UNDP, 2007, Human Development

Report 2007/2008: Fighting Climate Change: Human Solidarity in a Divided World; and

Department for Economic and Social Affairs, World Economic and Social Survey 2009. 32 United Nations, “Report of the Secretary-General’s High-level Advisory Group on Climate

Change Financing”, 5 November 2010 (www.un.org/wcm/webdav/site/climatechange/shared/

Documents/AGF_reports/AGF_Final_Report.pdf).

33 Carbon Finance at the World Bank, State and Trends of the Carbon Market 2011 (Washington,

D.C., The World Bank, June 2011), table 1. A/66/334

10 11-48589

2009.34 The scalability and additionality to ODA (see sect. II), generated from this

mechanism is certainly attractive. Nevertheless, despite the scale of revenues

already generated by it and its potential to generate $3 to $10 billion annually,35 its

contributions remain modest compared to the annual financing requirement for

mitigation. Moreover, the financial benefits to developing countries are expected to

be much lower than the overall size of the clean development mechanism credits.36

A highly skewed distribution of clean development mechanism projects among

developing countries also implies, as in the case of other external financial flows,

the concentration of the vast majority of benefits going into a handful of countries.

Least developed countries, with relatively low levels of emissions, have been bypassed

by this mechanism.37 Uncertainty about the continuation of the carbon

market beyond 2012, driven by concerns as to whether the climate change

negotiations will give rise to a second commitment period of the Kyoto Protocol, is

also affecting investors’ preferences for certain projects.

30. The Adaptation Fund38 receives a 2 per cent levy on clean development

mechanism transactions. Cumulative cash receipts from the sales of certified

emission reductions amount to $154 million (annex, table 1), accounting for 64 per

cent of the Adaptation Fund’s cumulative cash receipts.39 However, thus far, the

proceeds in this Fund have hardly been utilized. As at 30 April 2011, no more than

$10 million of the approved $43 million had been disbursed. A total of $48 million,

or the value of eight projects, are at the endorsed stage.40

31. The European Union Emission Trading Scheme has strong carbon efficiency

attributes in addition to its potential to generate sizeable additional revenues.41 This

is the largest emission trading scheme in the world, allowing entities to cover a

share of their emission reduction obligations by using credits earned in clean

development mechanism/joint implementation projects. Revenues are transferred to

the national budgets of European Union members. Yet, at present, Germany is the

only country that allocates 40 per cent of the revenues raised from allowance

auctions to international development for climate change mitigation and adaptation,

as part of its ODA in 2008-2010. The amount allocated for international

development assistance totalled €580 million ($0.8 billion) (annex, table 1).

32. The World Bank’s Eco 3Plus Note and Green Bond raise funds from public

and private investors for making contributions to IBRD lending. In 2008, three

Eco 3Plus Notes, whose coupons were linked to an equity index, focusing on

alternative energy, water and waste management and reduction of pollution, raised a

__________________

34 OECD, 2011, annex table.

35 OECD, “Development Finance Challenges 2010-2015”, Issues Paper, DCD/DAC(2010)6/REV2,

annex table 3.

36 World Bank, 2010, chap. 6, endnote 6.

37 Carbon Finance at the World Bank, 10 years of Experience in Carbon Finance: Insights from

working with the Kyoto mechanisms (Washington, D.C., The World Bank, May 2010a). 38 The Adaptation Fund has been established by the Parties to the Kyoto Protocol of the United

Nations Framework Convention on Climate Change to finance concrete adaptation projects and

programmes in developing countries that are parties to the Kyoto Protocol.

39 Based on the figures presented in table 1, the World Bank as Trustee for the Adaptation Fund,

“Financial Status of the Adaptation Fund Trust Fund (as at 30 April 2011)”, AFB/EFC.5/8,

20 May 2011.

40 Ibid., table 2a.

41 European Commission, “Innovative financing at a global level”, Commission Staff Working

Document, SEC(2010)409, 1 April 2010. A/66/334

11-48589 11

total of $333 million. The Green Bond finances IBRD climate change mitigation and

adaptation projects. In 2008-2011, the revenues raised by the Green Bonds exceeded

$2 billion.42 It is difficult to identify how much of these proceeds have been

channelled from IBRD to developing countries.

 C. Other sectors

33. Two IBRD buy-downs implemented in China were used for financing

education and rural development with grants from the United Kingdom. The

amounts involved are two $100 million IBRD loans, supported by a $34 million

grant for education and a $32.45 million grant for rural development.

34. The European Union’s “Millennium Development Goals Contract” may be

considered an innovative way of managing and implementing development

programmes. This Contract is a longer-term (6 years), more predictable form of

general budget support, with outcome indicators linked to education, health and

other relevant sectors of the Millennium Development Goals.43 Contracts worth

€1.8 billion ($2.4 billion) have been signed to accelerate the progress in achieving

the Millennium Development Goals in several African countries.

 IV. Implications for aid architecture and aid effectiveness

35. Evaluation of the implications and effectiveness of innovative financing is a

difficult task, owing to the fact that they are usually disbursed with other

contributions from traditional and non-traditional development finance. This makes

the assessment of contributions specific to innovative finance difficult. Some

lessons can, however, be drawn from the operations of the existing mechanism used

for health and climate change, where the role played by non-traditional donors has

become increasingly important.

 A. Delivery mechanisms for innovative financing resources

 Health

36. The three public-private partnerships in the health sector do not have field

presence in developing countries. They rely on delivery mechanisms of other

stakeholders for the implementation of their programmes.

37. GAVI-funded programmes are implemented by recipient country governments

in cooperation with the United Nations Children’s Fund (UNICEF), the World

Health Organization (WHO) and the World Bank. UNICEF procures vaccines and

provides technical assistance. WHO provides normative guidance, quality assurance

and quality control of vaccines and gives technical health support, and the World

Bank helps implementing Governments to develop sustainable financing for health

systems and immunization services. In operational terms, cash grants are mostly

sent to the ministry of finance of recipient countries and the ministry of health is

__________________

42 The World Bank Treasury, “Green Bond Fact Sheet”, 23 June 2011.

43 European Commission, “MDG Contract”, 20 April 2011 (http://ec.europa.eu/europeaid/what/

 millenium-development-goals/contract_mdg_en.htm). A/66/334

12 11-48589

responsible for the implementation of approved programmes, while the designated

multilateral agencies coordinate various country-level activities, in cooperation with

the ministry of health, subnational authorities or civil society organizations.44 With

regard to the pilot advance market commitment, delivery of vaccines to developing

countries does not start until manufacturers have entered into a supply agreement

with UNICEF and their vaccines have been deemed by WHO to be eligible for the

advance market commitment. Procurement of vaccines will be managed by

UNICEF.

38. GFATM grants are disbursed to public entities, multilateral agencies, the

private sector or civil society organizations, which are responsible for implementing

the programmes. On the operational procedures of the Affordable Medicines Facility

for Malaria, funding for supporting interventions will be managed through an

existing GFATM malaria grant. GFATM negotiates the price of artemisinin

combination therapies and subsidizes them to lower the cost to first-line buyers. The

co-payments are directly made by GFATM to manufacturers, upon receipt of

invoices and other required documentation. Interventions on the ground in support

of the Affordable Medicines Facility for Malaria are provided by the Roll Back

Malaria Partnership.

39. UNITAID funds are transferred to the following 10 partner agencies for the

implementation and delivery of projects: the Clinton Health Access Initiative,

Ensemble pour une Solidarité Thérapeutique Hospitalière En Reseau, the

Foundation for Innovative New Diagnostics, the Global Drug Facility, GFATM,

i+solutions, Roll Back Malaria Partnership, Stop TB Partnership, UNICEF and

WHO. Thus, none of the innovative financing contributions are disbursed directly to

recipient countries, raising issues of fragmentation, despite the fact that UNITAID

earmarks at least 85 per cent of its funds for least developed countries.

40. In the overall assessment, delivery mechanisms for innovative financing

resources involve a multitude of different stakeholders and processes. There is scope

for streamlining delivery procedures based on best practices in multilateral

processes.

 Climate change and environment

41. Fragmentation of climate finance is as acute as in the health sector due to the

emergence of a large number of special-purpose climate funds.45

42. The Clean Development Mechanism Executive Board is responsible for

approval of projects, baseline and monitoring methodologies. Although the

Executive Board interacts with private project participants and acts as market

regulator,46 the market is the delivery instrument. Most clean development

mechanism transactions on the primary market consist of forward contracts, with

payment on delivery of emission reductions. They are then bought and sold several

__________________

44 For vaccines or safe injection supplies, funds are transferred directly to UNICEF Supply

Division for procurement.

45 World Bank, 2010, chap. 6.

46 Charlotte Streck, “The governance of the Clean Development Mechanism: the case for strength

and stability”, Environmental Liability, 2, pp. 91-100, 2007. A/66/334

11-48589 13

times on a secondary market until they reach the end user. Unlike transactions in the

primary market, such trading does not directly impact on emission reductions.47

43. As regards the Adaptation Fund, approved proposals are implemented by the

following accredited national and multilateral agencies: the Agencia Nacional de

Investigación e Innovación of Uruguay, the Asian Development Bank, the Centre de

Suivi Ecologique of Senegal, the International Fund for Agricultural Development,

the Planning Institute of Jamaica, the United Nations Development Programme

(UNDP), the United Nations Environment Programme (UNEP), the World Food

Programme (WFP) and the World Bank.48 Direct access to funding by national

implementation entities is considered to be a great advantage for smaller developing

countries.49 Among the approved projects in seven countries, however, only one

national implementation entity has been designated as implementing entity, while

UNDP has been responsible for the implementation of five projects and one has

been assigned to WFP.50

44. Efforts are required to remove those barriers specific to the clean development

mechanism, which prevent the mechanism from reaching more least developed

countries. The governance structure of the clean development mechanism must

respond to the increasing technical complexity of this mechanism and streamline the

rigorous registration and issuance processes, while maintaining the mechanism’s

environmental integrity. The forthcoming seventeenth session of the Conference of

the Parties to the United Nations Framework Convention on Climate Change,

especially the negotiations with respect to a second commitment period under the

Kyoto Protocol, will have important implications for the future of the clean

development mechanism.

 B. National ownership in the allocation process

45. GAVI and GFATM request the creation of a national coordination mechanism,

consisting of all the major stakeholders in each recipient country, as a forum to

design and implement its country-driven programmes. Critics argue that this

undermines recipient countries’ capacities and puts additional pressures on their

governments. Instead of nurturing underdeveloped national health systems and

working towards a wider coverage of diseases, the vertical funds have created

parallel systems with their own management and reporting structures, which

narrowly focus on three long-run disease-specific gains.

46. The application process is complex and puts an additional burden on recipient

countries. In order for them to receive financial support from the revenues raised by

the innovative mechanisms, GAVI and GFATM require that recipient countries first

have to be one of the “eligible” countries, following criteria set by the respective

public-private partnerships. They then have to go through a rigorous application

procedure. With the exception of the Affordable Medicines Facility for Malaria,

there is no separate application form for requesting funding from innovative

financing proceeds, and it is unclear as to what extent these global funds take into

consideration the earmarking of innovative financing proceeds for specific countries

__________________

47 World Bank, 2010, chap. 6, endnote 6.

48 World Bank, 2010a.

49 Ghosh, 2010.

50 The World Bank as Trustee for the Adaptation Fund, 2011, table 2. A/66/334

14 11-48589

during the regular application processes. GFATM creates competition around a fixed

amount of funding with an average approval rate little over 50 per cent.51

47. GAVI requires that eligible countries meet a long list of general criteria for

funding, including a well-functioning inter-agency coordination committee.52

Furthermore, for new vaccines support, an additional condition is applied: the

eligible countries’ immunization coverage for DTP3 (diphtheria, tetanus and

pertussis) should exceed 70 per cent.53 Unlike GFATM, the GAVI application

process is not a competition, but developing countries may have to undergo multiple

rounds of revisions before their proposals are eventually approved, which many

countries find time-consuming and resource-intensive.54

48. The application process is believed to be the starting point for developing

“country-driven” programmes, in aligning with long-term national development

goals and priorities. Yet, this is one of the areas for which the global funds have

been criticized. The intention of submitting country-driven proposals is to give

recipient countries an increased sense of ownership and make them more

accountable for the implementation and outcomes of their programmes. In practice,

however, many countries, facing a shortage of qualified staff and insufficient

information systems, depend heavily on external expertise in completing a required

country-driven application package. Consequently, there is a risk that countries with

weaker institutional capacities and fewer resources, compared to their competitors,

may not be able to benefit as much as they would wish from the innovative

financing proceeds collected by GAVI and GFATM.

49. Similar observations can be made for climate change and environment finance.

Submission of project proposals at the national level is also the first step in

accessing funding from the clean development mechanism and the Adaptation Fund,

and the rigorous approval processes are subject to criticism.

50. A proposed clean development mechanism project activity can only be

registered once approval letters are obtained from the designated national authority,

including confirmation by the host party that the project activity assists it in

achieving sustainable development. Without host country approval, certified

emission reductions cannot be created.55 Project-design documents are validated by

the accredited designated operational entity — a private third-party certifier — and

submitted to the Executive Board of the clean development mechanism with a

request for registration. While necessary for safeguarding the environmental

integrity of the mechanism, among other things, through standardization, rigorous

project approval processes and the issuance of credible emission credits should not

result in excessive delays or create bottlenecks, as many observers consider to be

the case.56

51. With regard to the Adaptation Fund, all project proposals submitted by eligible

Kyoto Protocol Parties, either directly through an accredited national implementing

__________________

51 Paul Isenman, Cecilie Wathne and Geraldine Baudienville, “Global Funds: Allocation Strategies

and Aid Effectiveness”, Final Report, 2010, London: Overseas Development Institute.

52 This committee is usually chaired by the ministry of health and composed of development

partners.

53 The threshold increased from 50 to 70 per cent in January 2011.

54 Sridhar and Tamashiro, 2009.

55 Streck, 2007.

56 World Bank, 2010a. A/66/334

11-48589 15

entity or by using the services of multilateral implementing entities, must be

endorsed by the national authority designated by the relevant Government to make

such endorsements.

 C. Predictability and sustainability

52. Predictability of innovative financing poses some challenges, as delivery is

contingent upon results. Despite the promise of funding that will last for multiple

years, results-based funding means that the performance of recipient countries

influences subsequent releases from vertical funds, and reduces predictability.57

OECD reports that, for a large number of countries and regardless of sector,

proposals for results-based funding do not ensure the predictability and

sustainability of access to development finance.58 This was reaffirmed in the recent

evaluation commissioned by the GAVI secretariat.59

53. With respect to sustainability, all three public-private partnerships in the health

sector face challenges in securing sufficient funding, not only from innovative

financing mechanisms, but also from traditional sources of contributions to expand

their operations and make greater contributions to the achievement of the

Millennium Development Goals.

54. For the International Finance Facility for Immunization, which thus far

demonstrates the greatest potential, future funding from this mechanism is in

decline, while GAVI is embarking on ambitious programmes amid concerns that

their grants will become inflexible and thus distort national priorities. The potential

of the International Finance Facility for Immunization in terms of frontloading and

predictability have also not been fully realized.60

55. The GAVI co-financing policy is key for its financial sustainability. The level

of co-financing contributions under GAVI-funded programmes depends on

recipients’ ability to pay, but their share should be increased gradually.

56. The contribution of the clean development mechanism to the predictability and

sustainability of development finance in developing countries is unclear, not least

amid the uncertainty about the second commitment period of the Protocol. Like the

health sector, payments are based on project performance and project approval is the

first hurdle that developing countries have to clear. Furthermore, the level of

revenues generated by the clean development mechanism and certified emissions

reductions depends on the valuation of the market, which is subject to uncertainty

and beyond the control of both channelling mechanisms (e.g. the Adaptation Fund)

and developing countries hosting clean development mechanism or Adaptation Fund

projects.

__________________

57 Isenman and others, 2010.

58 OECD, 2010 DAC Report on Multilateral Aid, DCD/DAC(2010)32/REV1. 59 Pearson and others, 2011.

60 Ibid. A/66/334

16 11-48589

 D. Monitoring and evaluation

57. Monitoring and evaluation are key for vertical funds, as delivery is resultsbased.

This frequently imposes additional requirements on recipient countries. In the

health sector, both GAVI and GFATM have created their own mechanisms and

procedures for monitoring the implementation of their approved programmes at the

country level and for evaluating their performance against the agreed performance

indicators and expected outcomes. Recipient countries must follow specific

procedures, formats and timetables imposed by the global funds and provide

additional information, leading to increasing transaction costs and fragmentation of

national systems.61

58. Except for the advance market commitment and the Affordable Medicines

Facility for Malaria, there is no monitoring or evaluation mechanism unique to

innovative financing mechanisms. The advance market commitment secretariat has

prepared the monitoring and evaluation plan for 2009-2021 for the commitment,

with a total estimated cost of close to $4 million, by setting up an evaluation

steering committee in cooperation with the GAVI evaluation unit.62 To ensure that

recipient countries have adequate monitoring and evaluation systems, GFATM

recommends that they invest 5 to 10 per cent of their grant budget in monitoring and

evaluation.63 GFATM has set up procedures to enhance financial safeguards and

strengthen fraud prevention.64

59. As a collective effort to address fragmentation in the health sector, the

establishment of the Health System Funding Platform was announced in 2009. The

creation of this platform was agreed by GAVI, GFATM, the World Bank and WHO,

to streamline health system strengthening support (including the existing planning,

financing, procurement and monitoring procedures). The platform is expected to

reduce transaction costs for countries and the number of duplicative initiatives.

Improvements may include a common reporting system and a common set of

performance indicators, as well as common processes for financial management,

such as joint audits and simplified procurement systems.65 A joint proposal form for

GAVI and GFATM support to health system strengthening is scheduled to start in

2011.

60. Monitoring and reporting of climate change finance flows and verification of

results are also a central topic of the climate negotiations.66 In the clean

development mechanism, each individual project uses different approaches and

investment appraisal criteria, making the task of assessing impacts, of both specific

__________________

61 Sridhar and Tamashiro, 2009.

62 Advance market commitments for vaccines, “Advance Market Commitment for

Pneumococcal Vaccines Report of the Monitoring and Evaluability Study”, 13 November 2008

(www.vaccineamc.org/files/amc_mont_eval_stdy.pdf).

63 GFATM, “Affordable Medicines Facility — malaria: innovating in financing, access and publicprivate

partnership”, December 2010.

64 GFATM, press release 4 February 2011.

65 GAVI Alliance, GFATM, the World Bank and WHO, “The Health Systems Funding Platform”

not dated (http://siteresources.worldbank.org/INTHSD/Resources/topics/415176-

1251914777461/HealthSystemFundingPlatform_BackgroundUNSGGlobalStrategy_

10Sept2010.pdf).

66 World Bank, 2010, chap. 6. A/66/334

11-48589 17

and overall projects from a global perspective, challenging.67 The World Bank

recommends simplifying the existing approaches for the clean development

mechanism and the joint initiative to achieve more efficient and effective

assessments of baseline methodologies, and additionality on emission reductions.

61. It is also suggested that financial flows into climate change projects from

different sources, together with the delivery of committed funds, be monitored by

the identification of a common methodology.68

 E. Governance

62. A salient feature of the governance structure of the three public-private

partnerships that channel innovative financing in the health sector is the inclusion of

a wide range of stakeholders. All three executive boards include representatives

from multilateral organizations, developing countries, the private sector and civil

society organizations. Implementation of programmes funded by GAVI or GFATM

requires effective and strong leadership at the country level for the successful

design, implementation and monitoring of projects, in coordination with designated

multilateral organizations and other stakeholders.

63. Although the composition of the Adaptation Fund Board signifies an advance

in developing country representation, there remain difficulties in establishing

operational and objective criteria for the allocation of funds, as the methodology for

identifying “the level of vulnerability” and “the level of urgency and risks arising

from delay”, as well as criteria for “adaptive capacity to the adverse effects of

climate change” are still to be determined.69

64. In response to criticisms, the Executive Board of the clean development

mechanism has adopted revised procedures for registration of projects and issuance

of certified emissions reduction credits, along with revised procedures for the

Board’s review of requests for improved efficiency in registration and certified

emissions reduction issuance in the clean development mechanism processes.

Moreover, during 2010, a performance monitoring framework for designated

operational entities was introduced to support a system-wide quality assessment

process.

 V. Other initiatives and mechanisms under consideration and

their potential

65. Apart from the innovative financing mechanisms in operation, other proposals

are under consideration for their potential and effectiveness. The Leading Group on

Innovative Financing for Development has played a very important role in

spearheading the debate on new proposals and initiatives.

66. The Task Force on International Financial Transactions and Development of

the Leading Group presented its study on such a tax in July 2010, to fill the funding

__________________

67 World Bank, 2010a.

68 Ghosh, 2010.

69 Richard J. T. Klein and Annette Moehner, “The Political Dimension of Vulnerability:

Implications for the Green Climate Fund”, IDS Bulletin, Vol. 42, No. 3, May 2011. A/66/334

18 11-48589

gap for international development and environmental challenges, complementing

ODA.70 The Task Force concluded that a nationally applied, but internationally

coordinated, currency transaction tax, with a potential of raising $25 to $34 billion

annually (at the rate of 0.005 per cent), would be a very effective mechanism to

fund global public goods and to share the wealth generated by globalized

economies. As a channelling mechanism, the Task Force recommended the

establishment of a dedicated financial facility, called the “Global Solidarity Fund”,

governed by the levy-raising authorities and responsible for the distributions and

administration of the funds.

67. Subsequently, in November 2010, the Secretary-General’s High-level Advisory

Group on Climate Change Financing included financial transaction taxes as one of

many options to finance a part of the Copenhagen Accord commitments. According

to the Advisory Group, auctions of emissions allowances and new carbon taxes in

developed countries have the greatest revenue contribution potential among the new

public instruments examined by generating $30 billion annually. Another $10 billion

could be raised annually from taxing carbon emissions from international (maritime

and aviation) transportation, and up to $10 billion could be mobilized from some

form of financial transaction tax implemented among interested countries at the

national or regional level.71 These numbers indicate that innovative financing

mechanisms could finance about one half of the annual commitment of $100 billion

under the Copenhagen Accord.

68. The European Union supports the financial transaction tax at a global level and

is expected to propose a Europe-wide financial activities tax to curb speculative

trading as well as to use the revenues for its 2014-2020 budgets.72

69. With regard to education, in March 2010, the Leading Group created the Task

Force on Innovative Financing for Education, which explored two avenues to fill an

estimated annual resource gap of $16 billion for achieving basic education goals in

low-income countries. Nine mechanisms were short-listed and classified into two

categories: (a) tax on international financial transactions, local currency education

bonds, education venture bonds, diaspora bonds, voluntary contributions from

migrants and debt-for-education swaps; and (b) sports levy, public-private

partnerships and microdonations from individual bank transactions.73 For the

delivery mechanism, it identified the Education for All-Fast Track Initiative, a

vertical fund in the education sector, as the most suitable candidate to channel

resources generated by innovative financing mechanisms, by stressing its advantage

of having inclusive partnership and avoiding proliferation and fragmentation,

pronounced in the health sector.

__________________

70 Leading Group, Globalizing Solidarity: the Case for Financial Levies, Report of the Committee

of Experts to the Taskforce on International Financial Transactions for Development, 2010.

71 United Nations, “Report of the Secretary-General’s High-level Advisory Group on Climate

Change Financing”, 5 November 2010 (http://www.un.org/wcm/webdav/site/climatechange/

shared/Documents/AGF_reports/AGF%20Report.pdf).

72 “Update: EU expects financial transaction tax to raise EUR31.5B annually — report”, 4 July

2011, www.wsj.com; “EU looks to financial-sector tax”, 28 June 2011, wsj.com.

73 Leading Group, 2+3=8: Innovating in Financing Education, Report of the Writing Committee

to the Task Force on Innovative Financing for Education (Paris, French Ministry of Foreign and

European Affairs, Permanent Secretariat of the Leading Group, 2010). A/66/334

11-48589 19

70. The Leading Group stressed the role of remittances, including South-South

remittances, especially in Africa, and suggested that future efforts focus on

improving the regulatory framework and developing electronic payment and remote

banking services.74 The Food and Agriculture Organization of the United Nations

(FAO) has proposed fostering migrants’ remittances to the agricultural sector with a

matching grants system for food security, along with the use of an advance market

commitment (for stimulating public-private research and development in

agriculture) and lotteries or voluntary contributions.75 On food security and

agriculture, the Leading Group announced the creation of a new task force after its

plenary meeting held in Mali in June 2011.76

71. To curb money-laundering and compact corruption, the Leading Group’s Task

Force on Illicit Flows and Tax Evasion stresses that transparency and information

sharing are the key and calls for strengthening international cooperation in tax

matters and more efforts on developing countries’ capacity-building.

72. In the health sector, UNITAID has established a voluntary patent pool

mechanism, called “the Medicines Patent Pool Foundation”. A successful Patent

Pool will accelerate the availability of generic versions of new antiretroviral

treatments and the development of adapted formulations for children. In September

2010, the United States National Institutes of Health became the first patent-holder

to share its intellectual property.77 The Leading Group created another task force on

health in December 2010 to examine tobacco tax, which could raise over $7 billion

annually with a 1 to 5 per cent tax on a package of cigarettes,78 and new forms of

public-private partnerships.

 VI. Conclusions

73. Considerable progress has been made since the Monterrey Consensus in

raising resources through innovative financing. While the potential to raise

additional resources for development remains significant, appropriate measures

need to be taken to make innovative financing mechanisms more durable,

predictable and effective. Moreover, possibilities for initiating new innovative

financing schemes for development should be systematically explored.

74. To correctly record the scale of revenues raised, an international

agreement is needed on the precise definition and scope of the term. Such an

agreed definition would then provide the appropriate reference point for

standardized reporting and accounting frameworks, which can be set up for

recording reliable and coherent data over time.

__________________

74 Permanent Secretariat of the Leading Group on Innovative Financing for Development

“Executive summary of workshops [held in Tokyo, Japan, on 16-17 December 2010]”,

13 January 2011.

75 Ibid.

76 Leading Group, “Bamako Declaration: following the Ninth Plenary Session”, 25 June 2011. 77 UNITAID, “US National Institutes of Health (NIH) First to Share Patents with Medicines Patent

Pool”, 30 September 2010 (http://www.unitaid.eu/en/20100930290/News/US-NationalInstitutes-of-Health-NIH-First-to-Share-Patents-with-Medicines-Patent-Pool.html).

 

78 Simon Wreford-Howard, “WHO support to Innovative Financing for Health”, presentation slides

for the Leading Group 8th Plenary Meeting, Tokyo, 16 December 2010. A/66/334

20 11-48589

75. Several issues warrant further discussion and analysis, particularly

questions related to “additionality”, the relationship of innovative finance to

ODA and its effectiveness.

76. The delivery and monitoring mechanisms in the health sector need to be

reviewed and streamlined. The setting up of parallel systems and complicated

structures for innovative financing should be minimized while maintaining

effective controls and consideration given to allocation through globally

inclusive institutions, such as the United Nations. To fully align interventions

with national systems, the case for general budget support remains strong.

77. Harmonization of fragmented monitoring and evaluation mechanisms is

needed to reduce transaction costs. There is also a need for independent

monitoring and evaluation at the international level to assess delivery,

allocation and impact of innovative financing on development outcomes.

78. Vertical funds should be encouraged to incorporate more flexibility into

their strategies and financing modalities to ensure country ownership. With

regard to climate change finance, innovative funding models should provide

flexible resources to support interventions anchored in recipient countries’

national development goals.

79. The General Assembly may wish to consider setting up a working group

on innovative mechanisms of financing for development, with the participation

of all relevant stakeholders, to examine the potential of existing and proposed

mechanisms and make recommendations for increasing their scale and

predictability; improving delivery and monitoring; and enhancing their

effectiveness in contributing to development goals, including the Millennium

Development Goals, as well as climate change mitigation and adaptation.A/66/334

11-48589 21

Annex

 Table 1

Revenues raised by innovative finance, based on the Organization for Economic

Cooperation and Development framework, by sector, 2002-2011a

(in millions of United States dollars)

Mechanisms and initiatives Estimated revenues

Health

Affordable Medicines Facility for Malaria 212

Debt2Health 119

Global Fund Investment Products N/A

IBRD loan buy-downs 57

IDA credit buy-downs 146

International Finance Facility for Immunization 3 400

MASSIVEGOOD 0.2

Pilot advance market commitment for pneumococcal vaccines 396

PRODUCT(RED) 173

Solidarity levy on airline tickets 1 009

 Subtotal 5 512

Climate change/environment

Carbon Emissions Trading under the Kyoto Protocol 28 000

Caribbean Catastrophe Risk Insurance Facility 68

Germany’s auctioning/sales of emission permits under the

European Union Emissions Trading Scheme 810

Sovereign Index Insurance 2

Two per cent share of proceeds from sales of certified emissions

reductions for the Adaptation Fund 154

World Bank Eco 3Plus Notes 333

World Bank Green Bond 2 000

 Subtotal 31 367

Education

IBRD loan buy-downs 34

 Subtotal 34 A/66/334

22 11-48589

Mechanisms and initiatives Estimated revenues

Rural development

IBRD loan buy-downs 32

 Subtotal 32

 Total 36 946

Source: Compiled by the Department for Economic and Social Development based on the OECD

Working Party on Statistics, “Mapping of some important innovative finance for

development mechanisms”, 7 February 2011, DCD/DAC/STAT/RD(2011)1/RD1, annex

tables; GFATM, “Pledges and Contributions”, as at 31 May 2011 (www.theglobalfund.org);

World Bank as Trustee for the Adaptation Fund, “Financial Status of the Adaptation Fund

Trust Fund (as at 30 April 2011)”, AFB/EFC.5/8, 20 May 2011; The World Bank Group,

Innovative Finance for Development Solutions: Initiative of the World Bank Group, not

dated (http://siteresources.worldbank.org/CFPEXT/Resources/IF-for-DevelopmentSolutions.pdf)

(21 June 2011); World Bank, State and Trends of the Carbon Market 2011;

information provided by the World Bank Treasury (23 May 2011) and the World Food

Programme (23 May 2011).

a

 This table refers to amounts raised. The charts in the main report show the amounts received

by GAVI, GFATM and UNITAID from the resources raised.

 Table 2

Revenues raised by innovative finance, based on the World Bank framework, by

sector, 2000-2008

(in millions of United States dollars)

Mechanisms and instruments by source Revenues

Health

Airline ticket tax 580a

Frontloading of official development assistance

(e.g. International Finance Facility for Immunization) 1 223b

 Subtotal 1,803

Climate change/environment

Adaptation Fund 68

Carbon finance 1 615b

World Bank sustainable investments (climate) 769

 Subtotal 2 452

Other or unspecified

Emerging donors 10 744c

Local currency bonds 40 116

National lottery 187

Stolen Asset Recovery Global Programme 134

World Bank sustainable investments (general) 527

World Bank World Supporter Fund 850 A/66/334

11-48589 23

Mechanisms and instruments by source Revenues

World Bank pooling with private donors 268

 Subtotal 52 826

 Total 57 082

Source: Navin Girishankar, “Innovating Development Finance: From Financing Sources to

Financial Solutions”. CFP Working Paper Series, No. 1, June 2009 (Washington, D.C.: The

World Bank), annex tables 2.1a and 2.2a.

Notes: a

 No data for 2008.

b

 Linked to global programme.

c

 Data for 2007-2008 are not comprehensive.

 Table 3

Scale of innovative finance, 2000-2011

(in millions of United States dollars)

OECD World Bank

 Total estimates from annex, tables 1 and 2 36 946 57 082

Mechanisms not included by OECD or the World Bank

Norway’s carbon dioxide tax on aviation fuel 91a

European Union Millennium Development Goals Contract 2 386b

 Range of estimation 36 946 ~ 59 559

Source: Compiled by the Department for Economic and Social Affairs based on UNITAID,

Annual Reports, 2007-2009; UNITAID, “2010 Voluntary Contributions as at 31 December

2010” (www.unitaid.eu); and European Commission, “MDG Contract”, 20 April 2011

(http://ec.europa.eu/europeaid/what/millenium-development-goals/contract_mdg_en.htm).

Notes: a

 Only counting contributions to UNITAID in 2006-2010. b

 €1.8 billion converted at the 2010 annual average exchange rate of 1.3257.

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