Financing sustainable development is one of the greatest challenges of our times. Meeting this challenge will require the mobilization and redeployment of tens of trillions of dollars, largely from private sources, channeled through the global financial system. Yet despite its overhaul following the financial crisis, today’s global financial system is not fit for this purpose. Today, too little capital flows to meet the financing needs of the sustainable development goals, and too much capital continues to finance unsustainable development.

 

 

Digital finance, which includes a broad range of technologies such as big data, artificial intelligence, blockchain and the Internet of Things (IoT), offers innovative solutions to scale up sustainable finance, and the prospect of a more efficient, accessible and less vulnerable financial system. Digital finance can increase the capabilities of actors throughout the financing value chain, at reduced costs, to factor in environmental risks, opportunities, incentives and choices, as well as enhance the effective use of policies, regulations, standards and fiscal measures. Such positive outcomes are not, however, an automatic consequence of digital finance and fintech-powered innovations, and there are also potential risks and unintended consequences. The opportunity and need is to ensure that the transformative potential for digital finance is harnessed to align the financial system with sustainable development.

 

Harnessing this potential of digital finance with the financing needs of sustainable development will require the collective ambition, innovation, and persistence of the world’s financial institutions, policymakers and citizens.