Financing Sustainable Development: Innovative Tools for a Green and Social Transition

December 17, 2024

By SDSN France

The workshop organized by KEDGE Business School, SDSN France, and the SDSN highlighted economic and financial innovations that promote ecological and social transitions.

The year 2025 will be a pivotal milestone for advancing the 2030 Agenda as it will host the Fourth International Conference on Financing for Development (FfD4), coinciding with the tenth anniversary of the Addis Ababa Action Agenda. This conference represents a crucial opportunity to address growing financing gaps, particularly in developing countries, where an estimated $4 trillion annual deficit threatens Sustainable Development Goals (SDG) progress. Strengthened international cooperation, innovative financial mechanisms, and reforms in global financial architecture are imperative to align resources with sustainable development priorities.

Ahead of the FfD4, on December 10, 2024, SDSN and KEDGE Business School hosted a workshop on Financing for Sustainable Development. This event served as a platform to explore innovative financial instruments, mechanisms, and approaches aimed at reimagining the financial system and its ethical foundations to better align with the SDGs and the Paris Climate Agreement.

The event brought together experts from academic, institutional and financial circles, all dedicated to developing actionable financial policies and tools to support the green and social transition. Participants shared expertise on ecosystem regulation, sustainable monetary policies, innovations in corporate governance, and strategies to bridge the financing gaps needed to achieve the SDGs.

Showcasing Research and Prototypes

Convening at the Paris Campus of KEDGE BS, the workshop presented the work of SDSN France's Economics & Finance Commission, led by Thomas Lagoarde-Ségot. Launched in 2019, the Commission has developed prototypes of financial policies and instruments tested within the Philia analytical model. Philia is a platform designed to simulate the macroeconomic effects of financial policies in an artificial economy, respecting planetary limits. The model highlights the impact of environmental shocks on major economic and social equilibria, and enables researchers to assess the effectiveness of prototypes and innovative financial tools.

Welcomed by the Director of KEDGE BS, Alexandre de Navailles, members of the Commission presented their work and launched discussions on interdisciplinary approaches and analytical tools.

Policy-Mix of Financial Instruments

Gaetan Le Quang and Laurence Scialom (EconomiX, Université Paris Nanterre) presented an economic model for ecosystem-based regulation that limits funding for harmful environmental projects, encourages a low-carbon economy, and reduces climate risks.
Jézabel Couppey-Soubeyran (Université Paris 1 Panthéon-Sorbonne) and her collaborators Augustin Sersiron (Institut Catholique de Paris) and Pierre Delandre (Etopia) proposed voluntary currencies to finance investments essential to the ecological and social transition. Using the Philia model — developed by Thomas Lagoarde-Ségot, winner of the 2024 FT Responsible Business Education Award — the three economists tested the effects of a voluntary currency on climate imbalances and associated inflationary pressures, and simulated the substitution of brown capital with green capital.
Alban Mathieu (KEDGE BS), Raphaël Didier (Université de Lorraine) and Thomas Lagoarde-Ségot presented research on complementary local currencies (CLCs) as tools to help finance ecological transition by strengthening ties to local production. Adaptable to different contexts, CLCs promote economic resilience and participatory democracy. Loans issued in CLCs can be guaranteed by the ecological and social impact of financed projects, while complying with the European monetary policies.
Nicolas Dufrêne (Institut Rousseau) discussed proposals to cancel or convert portions of public debt held by central banks. This proposal aims to alleviate financial pressure from states, enabling investments in the green transition. By transforming debt into a lever for investment, this approach seeks to align economic policy with sustainable development. Dufrêne also highlighted the historical and philosophical importance of debt cancellations, often viewed as a morally justified mechanism for overcoming systemic challenges.
Xavier Hollandts (KEDGE BS), in collaboration with Thomas Lagoarde-Ségot and Nicolas Aubert, presented research on employee ownership models in SMEs. Their work explores the economic, ecological, and social implications of employee ownership by analyzing theoretical models and employee preferences for sustainable investments. The project assesses whether this model fosters sustainable investments and long-term strategic decision-making.

Addressing Global Financing Gaps: Rethinking Strategies for Achieving the SDGs

Isabella Massa and Samory Touré of the SDSN SDG Transformation Center provided a sobering assessment of the current state of the 2030 Agenda: only 16% of SDG targets are on track, while the remaining 84% are lagging or regressing. Achieving the SDGs requires substantial investment in infrastructure, renewable energy, and human capital (health, education, and social protection). Yet, the current global financial architecture isn’t providing resources at the pace and scale needed to meet the 2030 Agenda, preventing developing economies and vulnerable countries from investing adequately in sustainable development. Expanded public and private funding, particularly in the poorest regions, is essential if we are to achieve our goals.

The SDG Transformation Center team presented various methodologies: top-down approaches (macroeconomic estimates), bottom-up approaches (specific costs required), and hybrid models (input-output elasticity). The team developed a robust bottom-up method to estimate the financing needs and shortfalls of the SDGs at national, regional, local levels. Drawing on frameworks like SDSN’s Six Transformations, this method is designed to equip decision-makers, businesses, and civil society with tools to prioritize policies, optimize resources, and advocate for increased mobilization of funding.

Abdoulaye Fabregas (OECD, Development Co-operation Directorate) highlighted growing tensions caused by climate and geo-economic crises, slow global economic convergence, trade fragmentation, and insufficient SDG financing. Fabregas also stressed the urgent need to break the cycle of underdevelopment, indebtedness, and lack of investment. He encouraged the adoption of new financial tools, such as debt swaps, taxonomies, and complementary local currencies, while advocating for reforms to the international financial architecture.

At the conclusion of the workshop, Christophe Leroy presented a documentary film that highlights the Commission's work and underlying research. Featuring interviews with leading experts conducted by Thomas Lagoarde-Ségot, the film offers a forward-looking narrative on financing sustainable development.

The workshop contributions converged towards a shared goal: creating and testing a new policy mix that combines monetary, banking, and institutional innovations to accelerate ecological and social transformation. These ideas, supported by rigorous analyses and simulations, will inform debates at the Fourth International Conference on Financing for Development, scheduled to take place in Seville, Spain, from June 30 to July 3, 2025.