FfD4: How the Fourth Financing for Development Conference Can Strengthen Finance for Development, Climate and Nature

Last week, member states met at the United Nations (UN) in New York for the Second Preparatory Committee (Prep Com) Session ahead of the Fourth International Conference on Financing for Development (FfD4). During the Prep Com, countries discussed the Elements paper, a document outlining proposals for FfD4, and shaped by contributions from over 300 organizations, including from the International Institute for Sustainable Development (IISD). These discussions will feed into the Outcome Document of the FfD4, which will set the course for how countries and institutions finance sustainable development going forward.  

Alongside the Prep Com was the Financing for Development Dialogues: From Evidence to Action, also held at the UN. The Dialogues were a series of events on themes designed to support member states and other stakeholders in their deliberations. IISD was one of several organizations selected to convene a panel discussion. Our focus was leveraging FfD4 to better align financing frameworks for development, climate, and nature.  

What Will Be Discussed at FfD4? 

At the upcoming FfD4, UN member states will assess progress on three important frameworks: the Monterrey Consensus, the Doha Declaration, and the Addis Ababa Agenda. These agreements, forged through broad international consensus, have guided global development policies and financing strategies for over 2 decades.  

The Addis Ababa Action Agenda, which concluded the last Financing for Development Conference, took a comprehensive approach to financing the Sustainable Development Goals (SDGs). This global accord, negotiated by all 193 UN member states, stressed the need to mobilize financial resources from domestic funds, international finance, public-private partnerships, and innovative financing mechanisms—while reinforcing global cooperation. 

However, a lot has changed since Addis. Traditional overseas development assistance is under even more pressure. There are also several new financing commitments to address climate change and preserve global biodiversity, accompanied by their own strategies: the Climate Finance Framework and the Global Biodiversity Framework. The proliferation of frameworks raises concerns about the transparency of finance commitments, risks of double counting, and resources being delivered in silos. 

The sustainable development finance landscape is undoubtedly more complex this time around. But it also creates an opportunity for FfD4 to pioneer an integrated and coherent financing approach that aligns climate, nature, and development goals, ensuring a more effective response to these overlapping challenges–an approach IISD is advocating for. 

What’s Already Happening?  

Last week, the Second Preparatory Committee for the FfD4 Conference took place at the UN in New York, where countries reviewed the Elements Paper. 

Countries contributed actively to the Prep Com, with many offering detailed comments on the text of the proposals. While there was consensus on what FfD4 should tackle, including debt and domestic resource mobilization (DRM), the main debate revolved around how FfD4 could address these issues effectively. One of the main points of contention was striking a balance between institutional reforms and capacity building. Developing nations stressed the need for institutional reforms. The African Group, for example, called for the reform of tax systems through the UN Framework Convention on Tax Cooperation, arguing that the current system hinders developing countries' ability to mobilize resources as it “disproportionately favors wealthier nations.” 

Sovereign debt was highly discussed. Debt levels have risen significantly since the last FfD conference in 2015, as have debt servicing costs. Emerging and developing economies underscored the urgent need for a more effective response to sovereign debt vulnerabilities, calling for reforms of the international financial architecture. The delegate from Sierra Leone said, “progress on the SDGS is hampered by overwhelming debt burdens. Many African Nations are forced to make difficult trade-offs on allocating with some countries spending more on external debt servicing than on essential services like health care.” Member states also discussed if the UN could play a role in debt alongside institutions like the World Bank, the International Monetary Fund, and the G20. 

Illicit financial flows (IFFs) were another major focus. While there was widespread support for stronger actions against money laundering and tax evasion, questions arose about whether the current proposals in the Elements Paper went far enough. Some pushed for more ambitious measures, stressing the need for a coordinated, multilateral approach to tackling IFFs. Pakistan proposed that United Nations Economic and Social Council (ECOSOC) be given a mandate to coordinate efforts to strengthen financial integrity. Other countries, like the US, opposed creating new mechanisms to address IFFs, maintaining that existing ones such as the Financial Action Task Force (FATF) were sufficient. 

Discussions also covered various other topics tackled by the Elements Paper, such as climate finance, official development assistance, trade, and the role that digital technology could play in supporting financing for development, among others. 

Considering these discussions and feedback given by countries, the Elements Paper will now be refined and transformed into a zero draft by the Permanent Missions of Norway, Zambia, Mexico, and Nepal, as co-facilitators of the FfD4 Outcome Document. This new document will serve as the starting point for negotiations. 

What Should FfD4 Aim to Achieve? 

IISD is the UN Development Programme’s (UNDP’s) official partner in the knowledge track for FfD4. We are directly supporting the negotiations by working with the UNDP to convene several high-level symposia for negotiators to share ideas to advance FfD4. Apart from this convening role, IISD is proposing several ways to strengthen FfD4 and the Elements Paper. The first is at the level of the ambition of FfD4:  

• FfD4 should produce a cross-disciplinary review of the financing strategies required to meet all climate, nature and development goals. The Elements Paper rightly calls for “the linkages and overlaps between development and climate change financing….[to] be better understood and defined for better measurement of additionality and results.” We would go a step further to say there needs to be better alignment of the practical pathways to achieving the financing required for climate, nature, and development to ensure maximum impact. FfD4 could do this by convening the relevant expert communities to collectively review the strategies underpinning the different financing frameworks and join forces to achieve their common objectives. It could also foster greater coordination through multi-stakeholder spaces such as Country Platforms to enhance the transparency of revenue estimates and financing needs. 

• FfD4 needs to define practical guidance to policymakers on the ‘how’ of DRM. DRM continues to be the main source of finance for sustainable development, making it critical that this aspect of FfD4 provides practical pathways to deliver the finance required. The IMF finds that developing countries could increase their tax-to-GDP ratio by 9% by rationalizing tax expenditures, more effective taxation of capital income, and property taxes, among other reforms. These and other practical policy tools should feature prominently in FfD4. Countries should be encouraged to rationalize tax expenditures, going beyond the call for greater “transparency and oversight of tax expenditures”. While taxes on high-net-worths feature in the Paper, capital gains taxes could be added as another form of wealth tax–a major source of revenue loss. Low-hanging fruit such as improving personal and property taxation in developing countries - proposals made by the International Centre for Tax and Development (ICTD), African Tax Administration Forum (ATAF) and Overseas Development Institute (ODI)– are precisely what FfD4 should target. Finally, FfD4 should make a much stronger push for effective taxation of natural resources – a major opportunity to enhance DRM for resource-rich developing countries. The Elements Paper focuses on adding value to critical minerals. While it is an important goal, downstream processing depends on a range of factors and may not be feasible for all countries. It may also come at a cost to resource revenues. FfD4 should not limit its focus to value addition. It should also promote simpler, more reliable, and potentially progressive forms of taxing the extraction of minerals.   

• FfD4 should strike a grander bargain on sovereign debt relief as an essential complement to DRM targets. It is a pre-condition for development finance to be effective, and crucial to ensuring a more just and equitable framework. Expanding fiscal space for investment in the SDGs is the Elements Paper most urgent and important ask. However, the section devoted to it only mentions official creditors. There has been huge growth in private, bonded debt, making it critical that FfD4 proposals on creating fiscal space include the private sector and aligns it with some of the current proposals such as the Bridge proposal and Debt Relief for Green and Inclusive Recovery. The Elements Paper rightly emphasizes building capacity across the debt cycle, not just for debt managers but also for key actors like parliamentarians, fiscal councils, and audit institutions. This recommendation must translate into concrete funding commitments in the Outcome Document. The Elements Paper also calls for sustainable and responsible borrowing and lending principles. However, experience shows the lack of enforceability of such voluntary principles; instead, FfD4 focuses on strengthening enforcement rather than creating new principles. 

What’s Next?  

Building on the zero draft to be developed by co-facilitators following last week’s discussions, countries will continue refining their proposals ahead of the third Preparatory Committee to be held in February 2025.  

IISD will continue to participate in shaping the process with evidence-based research at the crossroads of tax, debt, subsidies and private finance, making sure we build on this momentum to drive ambitious and actionable reforms for financing development, climate and nature goals.