Financing the UN Development System: Pathways to Reposition for Agenda 2030

This is the third annual report on financing the UN development system produced by the Foundation and the UN Multi-Partner Trust Fund Office.

Financing the UN Development System
Pathways to Reposition for Agenda 2030


Financing the UN Development System

Pathways to Reposition for Agenda 2030


This is a kicker.

**The UN development system currently faces an extraordinary opportunity to reaffirm its role and relevance in a rapidly changing world.** The ambition and broad scope of the 2030 Agenda for Sustainable Development both demands and emboldens this reform of the UN development system.

With the function of the system increasingly dictated by the nature of the funding it receives, the issue of financing is at the centre of any credible repositioning. That being said, it is far from clear what the appetite is for **financing reform** and which reforms should be prioritised.

This third annual report on financing the UN development system **seeks to contribute to the debate by providing a thorough overview of the revenue,** **income sources, and expenditure of the UN development** **system.** It gauges the major trends, opportunities and challenges around financing, while also **presenting five possible pathways along which the UN development system can reposition for Agenda 2030.**

The following is an overview of the findings of the larger report, _[Financing the the UN Development System: Pathways to Reposition for Agenda 2030](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf)._

UN Resource Flows

There is a wealth of statistical information available about the UN development system \(UNDS\), yet it needs to be provided and presented in a manner that lends itself to making informed decisions that align finance to policy direction and positioning.

Here we strive to accessibly present the revenue, income sources and expenditure of the UNDS, which in principle represents the entities of the UN system that undertake development activities.

To preface, the table below provides an overview of the six types of financial instruments currently in use in the UN system, which are essential to understanding UN financing and the subsequent sections.


In 2015, the **total revenue for the UN system as a whole was US$ 48 billion**. Of this, US$ 9 billion was for peacekeeping and close to **US$ 27 billion was for operational activities for development \(OAD\),** with almost US$ 21 billion going to five entities \(UNICEF, UNDP, WHO, WFP and UNHCR\) \(see Table 1\).

Out of the total US$ 48 billion **more than half was earmarked contributions \(53%\)**, meaning the funding was tied to a theme or a country. Assessed contributions, those that can broadly be defined as the price of membership, made up 30%, while core fundingvoluntary untied contributionsmade up 10%.

The ratio of core to earmarked funding thus remains very uneven. In addition, assessed and core resources, both non\-earmarked funding flows for the work of specific UN organisations, have stagnated in real terms.

Meanwhile, an analysis of individual agencies assessed contributions over the past 40 years points to a **correlation between agencies with a high ratio of assessed funding and the specificity of their agencies responsibilities** \(see Table 2\). This indicates that where functions are clearly demarcated and the benefits of club membership are immediate, assessed contributions are easier to come by.

Another characteristic of the revenue landscape is that there has been a significant increase in the volume of humanitarian assistance. Analysis of the comparative growth rates of funding for operational activities over the past 15 years, clearly shows the **significant rate of growth of humanitarian compared to development funding.**

Then a look at the funding of the UN system by major functionsbased on the definitions of functions used by the UN for its data collectionshows that **operational activities for development represent some 60%** compared to peacekeeping at 20%, and norms, standards,policy and advocacy at 20%.

Income Sources

With regard to income sources, **32% of multilateral aid is channelled through the UNDS** \(see Figure 4\). While this represents the largest allocation of any of the major multilateral players, it is also **the only one channel in which earmarked contributions far outstrip core/assessed contributions.** The UNDS is unique in this dependence on earmarked funding, as seen in the graphic below.

The data also highlights the highly\-concentrated character of contributions to UN agencies: **47% of contributions to UN operational activities in 2015 came from only three donors** \(US, UK and Japan\), while the top ten donors accounted for 73% of the total contributions. It is also notable that nine of the ten major contributors provided more earmarked than core contributions.

A small portion of the earmarked funding to the UNDS meanwhile consists of contributions to **UN pooled funds**, financing that supports jointly\-agreed UN priority programmes. **In 2015 pooled funds accounted for 6% of total contributions to operational activities for development.** The top 12 contributors accounted for 92% of the US$ 1.5 billion total contributions to UN pooled funds of which the largest four donors alone account for 64%.

The data also shows **pooled fund contributions for humanitarian purposes have been about two thirds of the total deposits in recent years**. Pooled funding for transition and crisis\-affected situations shows an upward trend, while other development\-related interventions received less funding.

The collection of data relating to income from non\-state contributors to the UNDS is difficult to assemble across the UN system; however, data has been analysed for five major organisations: UNICEF, UNDP, UNHCR, WFP and WHO. This shows a broad range of experience, with **some agencies having great success in attracting non state income from individual contributions while others rely more on foundations,** for example.

In a limited number of cases, **the volume of non\-state income represents a significant amount for the agency concerned. UNICEF is a prime example** with close to US$ 1.5 billion in non\-state income, with 79% coming from individual donors \(national committees\).


With regard to the profile of expenditures, the report reviews expenditure by agency, by year, by country income status and by region.

Of note is an overview of the OAD expenditures broken down by country income category. This shows that **average UN expenses per country are highest for low income countries** and decrease as countries move into low and upper middle income status and on to high income status. However,one element of the expenditure pattern is similar for all countries irrespective of income categories: **by far the largest portion of UN expenditures is funding from earmarked resources**.

The figure also shows that expenditures in **crisis\-affected countries,** a group of countries that spans the four income categories, **have the highest level of UNDS spending per country,** with the expenditures for humanitarian and development related interventions reaching on average US$ 329 million per country.

An overview of the geographical distribution of the UNs operational spending by region shows that **with 37% the Africa region is the largest beneficiary of UN operational activities,** followed by the Western Asia region with 19% of total expenses and Asia and Pacific region accounting for 15% of the total.

The Western Asia region continued the trend already noted in last years report of receiving an increasing portion of the UNs overall operational expenditures. This continued growth is directly related to the number and severity of the crises that have affected this region in recent years.

Pathways to Reposition for
Agenda 2030

With the basic data around UNDS financing in mind, what then are the major opportunities and challenges around financing the UN system? What financing reform is needed to help the UNDS meet the challenges of Agenda 2030?

These questions are debated and explored in the papers by senior contributors from inside and outside the UN system outlined below. Grouped along five key clusters, they provide fresh perspectives and ideas on pathways to financing reform, which can help the UNDS reposition for Agenda 2030.


[From Funding to Financing beginning the journey](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=48)
By Richard Bailey

[Reforming the World Health Organizations financing model](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=52)
By Dr Gaudenz Silberschmidt and Dr Guitelle Baghdadi\-Sabeti

[Rising powers in United Nations development funding Growing responsibilities, growing engagement?](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=55)
By Sven Grimm and Zhang Chun

[Scaling up financing for the poorest countries through innovation](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=59)
By Lisa Finneran and Annely Koudstaal
[Strengthening bilateral finance for multilateralism: Considerations for the United Nations system](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=62)
By Romilly Greenhill and Nilima Gulrajani

[A new contract for financing the UN development system: What does it mean and how can it be achieved?](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=66)
By Max\-Otto Baumann and Pratyush Sharma


[Mobilising private finance in the era of the Sustainable Development Goals](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=72)
By Gavin Power and Moramay Navarro Perez

[Business and the Sustainable Development Goals: Why it matters](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=76)
By Sahba Sobhani and Robert de Jongh

[From fund\-raising to market transformation](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=80)
By Eric Usher and Careen Abb

[The promise of blended finance](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=83)
By Homi Kharas

[Blended finance in fragile contexts: Opportunities and challenges](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=88)
By Cordelia Lonsdale and Sarah Dalrymple.

[Reaching the last mile: The role of innovative finance in meeting the Sustainable Development Goals](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=92)
By Judith Karl

[Financial protection: Planning today for the disasters of tomorrow](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=96)
By Bianca Adam

[UN pooled funds: A game\-changer in financing Agenda 2030](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=100)
By UN Multi\-Partner Trust Fund Office


[Financing for peace](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=106)
By Stephan Massing

[Financing sustainable peace: The right way](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=109)
By Rachel Scott

[Is peacebuilding cost\-effective?](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=112)
By the Institute for Economics and Peace

[The potential of innovative financing to sustain peace](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=115)
By Kevin Starace, Commissioned by the Dag Hammarskjld Foundation and UN MPTFO

[Financing the prevention of violent extremism](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=119)
By Khalid Koser

[Assuring that nothing happens \- Reflections on financing conflict prevention](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=121)
By Jordan Ryan


[A global platform for support of norms, standards and monitoring in development cooperation](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=126)
By Stephan Klingebiel and Li Xiaoyun

[Global norms: Building an inclusive multilateralism](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=129)
By the Dag Hammarskjld Foundation

[Multilateral development banking for 21st century challenges: Addressing global public goods](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=132)
By Scott Morris and Priscilla Atansah

[The Green Climate Fund The new kid on the block](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=135)
By Manfred Konukiewitz

[Why the United Nations should embrace the concept of global public goods](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=138)
By the Dag Hammarskjld Foundation

[Who will pay for safe, orderly and regular migration?](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=141)
By Sarah Rosengaertner


[Illicit financial flows and domestic resource mobilisation: Drivers of change in financing Agenda 2030](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=147)
By Tom Cardamone

[Open budgeting and monitoring for the Sustainable Development Goals: A country\-level perspective](\-content/uploads/2017/09/UNDS\-Financing\-Report\-2017.pdf#page=150)
By Claire Schouten and John Hendra


*Please note in the printed version of the report there is a mistake in Figure 20 (UNHCR) and Figure 24; they have been corrected in this online version.