Introduction: Six themes and key recommendations for embedding gender equality, care, and climate in fiscal policy – Brookings

Report on Public and Climate Finance Innovations for Sustainable Development Goals

This report consolidates findings from thirteen analyses examining how innovations in public and climate adaptation finance can advance the Sustainable Development Goals (SDGs), with a significant emphasis on Gender Equality (SDG 5). The central argument is that fiscal policy, domestic resource mobilization, and climate finance must be fundamentally reframed to support progress toward equality and sustainable development. Key strategies identified include investment in social infrastructure, progressive tax reforms, and inclusive governance, which are presented as essential for building resilient and equitable societies in line with the 2030 Agenda.

A New Fiscal Paradigm for Achieving the SDGs

A paradigm shift in fiscal policy is required to prioritize long-term societal needs and achieve the SDGs. This involves rethinking conventional definitions of fiscal space to incorporate broader economic and social returns on investment, particularly in low and lower-middle-income countries.

Reclassifying Social Expenditure as Investment

Expenditures with high social returns, such as public spending on health (SDG 3), education (SDG 4), and care services (SDG 5), should be reclassified as long-term capital investments in social infrastructure rather than current expenditures. Macroeconometric modeling demonstrates that such investments yield large fiscal multipliers that expand fiscal space over time by increasing GDP and employment, directly contributing to Decent Work and Economic Growth (SDG 8). This reclassification justifies the use of patient capital and borrowing, necessitating revisions to fiscal rules that currently impose inflexible short-term constraints.

A Holistic Fiscal Framework for Gender Equality (SDG 5)

Achieving Gender Equality (SDG 5) requires a holistic approach that embeds gender objectives across all dimensions of fiscal policy, connecting revenue generation with expenditure allocation through both technical measures and political will.

Connecting Revenue and Expenditure

A comprehensive strategy for gender equality must move beyond isolated policy design to address the entire fiscal ecosystem. Key dimensions include:

• Policy Design: Ensuring tax and spending policies complement one another to create an equitable and efficient fiscal system that reduces gender gaps.
• Administration and Capacity: Addressing barriers to tax compliance that disproportionately affect women, such as mobility constraints or care responsibilities. Reforms like one-stop shops and digitization can improve administrative ease and support women’s economic empowerment.
• Fiscal Politics: Recognizing that political decisions mediate between revenue and expenditure, influencing resource allocation for critical areas like reproductive health, childcare, and domestic violence prevention.
• Gender Budgeting: Institutionalizing gender budgeting within ministries of finance to enhance transparency and accountability. An outcome-based monitoring approach, as opposed to merely tracking inputs, is crucial for effectiveness.

Enhancing Tax Progressivity for Reduced Inequalities (SDG 10)

Progressive tax systems are a critical tool for reducing both income inequality (SDG 10) and gender inequality (SDG 5). This involves implementing a standard toolkit of tax policies designed to ensure fairness and efficiency.

Key Tax Policy Recommendations

1. Strengthen Progressive Income Taxes: Implement comprehensive personal and corporate income tax systems that treat labor and capital income equally, which is more effective at reducing gender gaps.
2. Introduce Wealth and Property Taxes: Diversify revenue sources and ensure high-net-worth individuals contribute their fair share, providing funds for social and climate objectives.
3. Reform Indirect Taxes: Broaden the Value-Added Tax (VAT) base while replacing poorly targeted exemptions with targeted cash transfers to make these systems fairer for low-income women.

Reforming Taxation of the Informal Sector

Simplified tax regimes for the informal sector, where women entrepreneurs are predominant, often yield minimal revenue while imposing significant burdens. Reforms should focus on reducing regressivity and supporting progress towards Decent Work (SDG 8). Recommendations include:

• Establishing minimum exemption thresholds indexed to inflation to protect subsistence-level firms.
• Simplifying tax structures and harmonizing national and subnational taxes and fees.
• Investing in taxpayer education and digital services to improve compliance and reduce administrative costs for micro-enterprises.

Public Investment in Care Services for Inclusive Growth

Public investment in universal care services is a cornerstone for achieving multiple SDGs, including Gender Equality (SDG 5), Good Health and Well-being (SDG 3), Quality Education (SDG 4), and Decent Work and Economic Growth (SDG 8). A robust care economy reduces the burden of unpaid work on women, creates formal employment, and stimulates economic growth.

Financing a Universal Care System

Resources for care services can be mobilized through several channels:

• Progressive Taxation: Implementing progressive income, wealth, property, and carbon taxes to generate dedicated revenue streams.
• Expenditure Switching: Eliminating regressive subsidies, such as those for fossil fuels, and reallocating the savings toward social objectives, including care infrastructure and services.
• Transparent Budgeting: Creating systems to track spending and outcomes for care services to enable effective planning and oversight, thereby strengthening institutions (SDG 16).

Aligning Climate Finance (SDG 13) with Development Priorities

To maximize impact, public development finance and climate adaptation finance must be aligned to simultaneously build resilience, reduce poverty (SDG 1), and advance gender equality (SDG 5). This requires embedding climate finance within a holistic development framework.

Integrating Care as a Climate Adaptation Strategy

Comprehensive care services—including early childhood care, health care, and long-term care—are an unrecognized but vital climate adaptation strategy. They strengthen community preparedness and response to climate hazards. Climate finance can be leveraged to:

• Adapt Physical Infrastructure: Retrofit buildings where care services are provided (e.g., day care centers, nursing homes) and integrate nature-based solutions.
• Support Caregivers: Recognize caregivers as front-line responders in disaster risk plans and provide them with coordinated training and resources.
• Promote a Just Transition: Earmark revenues from carbon pricing, as seen in Ireland, to fund social welfare and renewable energy initiatives that protect low-income households and create green jobs, contributing to Climate Action (SDG 13) and SDG 8.

Strengthening Institutional Capacity for SDG Implementation

Effective implementation of a holistic fiscal policy requires strengthening administrative and institutional capacity at all levels of government, supported by international cooperation (SDG 17).

Priority Actions for Capacity Building

1. Collect Sex-Disaggregated Data: Systematically gather and analyze sex-disaggregated data from administrative and survey sources to inform equitable fiscal policies, monitor progress on SDG 5, and improve tax compliance.
2. Adopt Outcome-Oriented Gender Budgeting: Move beyond tracking financial inputs to focus on monitoring and evaluating the impact of public expenditure on gender equality outcomes, enhancing accountability and transparency (SDG 16).
3. Coordinate International Support: Multilateral banks, UN agencies, and bilateral donors should coordinate technical and financial assistance to ministries of finance and planning. This includes promoting tax cooperation, facilitating peer learning, and supporting innovative financing mechanisms like debt-for-care and debt-for-climate swaps.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 5: Gender Equality
   • The article explicitly states its focus is on promoting Sustainable Development Goals (SDGs) “with a particular focus on gender equality (SDG 5).” It extensively discusses how fiscal policy, taxation, and public spending on social infrastructure like care services can be designed to close gender gaps, support women’s economic empowerment, and reduce the burden of unpaid care work.
2. SDG 13: Climate Action
   • The article frequently links fiscal policy with climate adaptation. It discusses aligning “climate adaptation finance” with public finance, eliminating fossil fuel subsidies, and investing in climate-resilient infrastructure. It also frames care services as a “climate adaptation strategy.”
3. SDG 10: Reduced Inequalities
   • A core theme is using fiscal policy to create more equitable societies. The article advocates for “progressive tax reforms,” analyzing how tax and spending systems can “reduce both within-country inequality and inequality between women and men,” and minimizing the regressive nature of certain taxes on low-income individuals.
4. SDG 8: Decent Work and Economic Growth
   • The article connects public investment in social infrastructure, particularly care services, to economic growth and job creation. It cites evidence that such spending “raises GDP on average by about 11%, employment by 6%,” and supports women’s participation in paid employment and entrepreneurship.
5. SDG 1: No Poverty
   • The discussion on social protection, targeted cash transfers, and livelihood subsidies directly addresses poverty reduction. The article also highlights how poorly designed taxes on the informal sector can impose burdens on “subsistence-level firms,” hindering poverty alleviation efforts.
6. SDG 3: Good Health and Well-being & SDG 4: Quality Education
   • The article identifies “public spending on health, education, and care services for children” as investments in “social infrastructure.” It specifically mentions early childhood care and education (ECCE), maternal health, and health care as crucial areas for public investment.
7. SDG 16: Peace, Justice and Strong Institutions
   • The article calls for strengthening governance through “transparency, accountability, and participation in implementing reforms.” It emphasizes the need to improve the administrative capacity of tax authorities, institutionalize gender budgeting within legal frameworks, and make budget processes more transparent.
8. SDG 17: Partnerships for the Goals
   • The article discusses the role of domestic resource mobilization through tax reform. It also highlights the role of international partners, including “multilateral development banks, United Nations agencies, climate funds, and bilateral donors,” in providing financial and technical assistance to achieve development goals.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Under SDG 5 (Gender Equality):
   • Target 5.4: Recognize and value unpaid care and domestic work through the provision of public services, infrastructure and social protection policies. The article’s central argument for public investment in “universal care services” and treating it as “social infrastructure” directly aligns with this target.
   • Target 5.a: Undertake reforms to give women equal rights to economic resources. The focus on reforming tax regimes to be less burdensome on women-led informal businesses and improving women’s access to economic opportunities through care support addresses this target.
   • Target 5.c: Adopt and strengthen sound policies and enforceable legislation for the promotion of gender equality. The call to institutionalize “gender budgeting within ministries of finance and within legal frameworks” is a direct reflection of this target.
2. Under SDG 13 (Climate Action):
   • Target 13.2: Integrate climate change measures into national policies, strategies and planning. The article advocates for aligning “climate adaptation finance and public development finance” and embedding climate considerations into fiscal policy.
   • Target 13.a: Implement the commitment to mobilize climate finance. The text discusses how climate funds can be better coordinated with finance ministries to support social equity and just transitions, such as reallocating fossil fuel subsidy savings.
3. Under SDG 10 (Reduced Inequalities):
   • Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality. The article is centered on this target, detailing how “progressive tax reforms,” “targeted cash transfers,” and public spending on social services can reduce income and gender inequality.
4. Under SDG 8 (Decent Work and Economic Growth):
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship… and encourage the formalization and growth of micro-, small- and medium-sized enterprises. The analysis of simplified tax regimes for small enterprises and the argument that investment in care creates jobs directly support this target.
5. Under SDG 17 (Partnerships for the Goals):
   • Target 17.1: Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection. The entire discussion on tax reform, improving tax administration, and broadening the tax base is about achieving this target.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Collection of Sex-Disaggregated Data:
   • The article explicitly states a key action is “collecting and curating timely, sex-disaggregated data from surveys and administrative records to capture the full scope of gendered economic gaps.” This is a foundational indicator for measuring progress on gender equality (SDG 5) and inequality reduction (SDG 10).
2. Outcome-Based Monitoring of Budgets:
   • It is suggested that gender budgeting should move toward an “outcome-oriented approach, as opposed to simply tracking financial inputs.” This implies using indicators that “link resource allocations to outcomes” to measure the effectiveness of public spending on gender equality and social services (SDGs 3, 4, 5).
3. Economic Growth and Employment Metrics:
   • The article cites specific macroeconomic indicators to justify investment in care services, such as the impact on GDP and employment rates (“raises GDP on average by about 11%, employment by 6%”). These are direct indicators for SDG 8.
4. Fiscal and Revenue Metrics:
   • The article mentions “fiscal multipliers” as a measure of the effectiveness of public spending. It also refers to tax revenue as a percentage of GDP (e.g., Kenya’s turnover tax accounting for “0.002% of GDP”) as an indicator of a tax regime’s effectiveness, relevant for SDG 17.1.
5. Tracking of Public Expenditure:
   • The article highlights the need for systems that track “allocations and expenditures for care services,” noting their absence in places like Colombia. The existence and use of such tracking systems serve as an indicator of transparency and institutional capacity (SDG 16).

4. Table of SDGs, Targets, and Indicators

Source: brookings.edu