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Aligning Capital Markets with Sustainable Development

The Financing for Development agenda has emphasized the importance of long-term “stable private financial flows to developing countries” since the Monterrey Consensus (para 25.) Indeed, the need for long-term investment to achieve the SDGs is estimated to be in the trillions of dollars. At the same time, there has been a growing focus on the importance incorporating environmental, social and governance (ESG) factors in investing. The Addis Ababa Action Agenda brings these two strands together, emphasizing that sustainability and stability of the financial system are mutually reinforcing. In this regard, governments in Addis Ababa committed to “endeavour to design policies, including capital market regulations where appropriate, that promote incentives along the investment chain that are aligned with long-term performance and sustainability indicators, and that reduce excess volatility.” (Para 38)