By Sally Paxton, US Representative, Publish What You Fund, and Nancy Lee, Director, Sustainable Development Finance, Center for Global Development

This blog first appeared on the Center for Global Development website.

The Annual Meetings of the World Bank and IMF have come to an end. It was a jam-packed array of official meetings, private roundtables, bilateral engagements, civil society forums, and many side events covering a myriad of issues with a range of stakeholders. In the end, it can be difficult to sort what progress has been made on the big issues of multilateral development bank (MDB) reform. (This MDB reform tracker tool is designed to help.) The tension between unprecedented global needs and serious resource constraints hangs over these conversations, as MDBs seek more capital and donor funding, including for the International Development Association (IDA), the World Bank’s concessional window for the poorest countries.

We know that public money alone cannot address the scale of financing needed—the private sector needs to be an active partner. That means creating the right incentives and investment environments that will bring the private sector in at scale—something that is not happening now. MDBs have a critical role to play here. They can support policy and institutional reforms, help develop strong investment projects, and share risk with the private sector. All those require resources. But one critical MDB tool comes at a relatively low cost: their own data on their private investment track records in developing economies.

Across the discussions on how to crowd in the private sector, there was a common thread: more MDB transparency would help fill critical information gaps that stand in the way of private investment. The most important information gaps are in three areas where disaggregated data are needed: private capital mobilization (PCM) by MDBs, the development and climate impact of MDB private investments, and the credit performance of MDB private investments.

Private capital mobilization supported by MDBs

The G20 Independent Expert Group recommended that, by 2030, MDB-supported PCM should increase by US$240 billion annually. A recent MDB joint report found that PCM had reached US$71 billion in 2022, up from a period of stagnation at under US$64 billion. This is not the pace of progress that is required.

As in any effort to strengthen performance, the starting point has to be a deep dive into the data to understand the nature of the challenges: where mobilization is strong, where it is not, and why. Yet shareholders, investors, and researchers lack the disaggregated data that would enable analysis to answer these basic questions.

During the annual meetings, Publish What You Fund launched its final recommendations for better measurement and more disaggregated disclosure of PCM at an event at the Center for Global Development. The measurement approach was applauded by both the private sector and shareholders. But the MDBs have not shown an intention to systematically improve disclosure at a disaggregated level. As things stand now, we do not know whether sufficient information will be made available to the private sector so they can better understand opportunities to invest or to shareholders so they can properly exercise their oversight responsibilities. That includes choices about where to allocate additional resources, such as imminent decisions on allocating donor funds to the IDA Private Sector Window (PSW). (IDA is the World Bank’s concessional window for the poorest countries and is replenished by donors every three years.)

The PSW was established in 2017 during IDA’s 18th replenishment. A total of US$5.5 billion in IDA resources has been allocated so far to the PSW in the 18th, 19th, and 20th replenishments. The idea was that subsidies from this window would enable the International Finance Corporation (IFC), the World Bank’s private sector arm, and the Multilateral Investment Guarantee Agency (MIGA), the Bank’s insurance arm, to approve more projects in poor countries and fragile states by taking risk off IFC and MIGA balance sheets. But the targeted increase in finance shares to these countries has not been realized, and we lack evidence at the project level to determine whether use of these scarce subsidies is driving more mobilization of private finance in these countries and greater impact than unsubsidized projects. This lack of information is especially problematic given that the World Bank is seeking additional resources for the PSW in the current IDA21 negotiations, set to be concluded in December.

In this context, we welcome the World Bank’s commitment in the just released IDA21 draft replenishment report to provide “detailed project-level information on the project characteristics; project financing, including amounts of PSW, IFC/MIGA own-account commitments, and mobilization volumes disaggregated between DFIs and commercial third-party co-financing; and development impact, including the narrative, indicators, and ex post reporting on impact achieved.” To address the key data gaps, this disaggregation should include project-level private finance mobilization—with direct and indirect mobilization reported separately—and project-level ex ante and ex post impact scores (see next paragraph). And the same transparency that is possible for PSW-supported projects should be possible for all IFC and MIGA projects.

Project-level disclosure of impact

Two of the main findings from Publish What You Fund’s DFI Transparency Index were the lack of project-level data on impact as well as private capital mobilization. This is especially true for the private arms of MDBs. Most calculate ex ante (projected) impact scores at the project level, as an input into their decisions about what to finance. For some institutions, scores are recalculated ex post after the investment has been launched. Yet they do not publish these scores at the project level. That makes it impossible for stakeholders outside the institutions to find answers to basic questions: How important is impact in driving investment decisions? What kinds of projects have the highest expected impact? How does investment impact vary across countries, country income groups, and sectors? How accurate are ex ante impact scores when compared to ex post scores?

Credit performance: the Global Emerging Markets Risk Database (GEMS)

This database contains credit risk data (defaults and losses) dating back 30 years among a consortium of 26 MDBs and development finance institutions (DFIs). This information has been closely guarded for years, despite longstanding calls by a variety of stakeholders—including shareholders—for disclosure to help private investors better assess risk and risk adjusted returns in developing economies for public and private investments. After years of assertions that it would not be possible or desirable to release credit performance data at the country level, the latest GEMS report contains such data. The evidence suggests lower risk rates than many perceive and has whetted user appetite for more granular data. Releasing the actual database, with transactions appropriately anonymized, would allow users to assess risk by categories of interest, such as by detailed sector. In the a recent news article, three leading private sector voices welcomed the step forward in the recent report but provided a list of data that should also be released, noting that for information to be used, it must first be expanded and understood. Finally, a newly released market study underscores investors’ demands for more granular data, including at the country and sector level, collateral and guarantee data, and data on counterparty credit ratings and local currency lending.

Contracts

The key information roadblock is centered on the question of what is actually needed to protect business confidentiality in MDB contracts with private finance recipients. The barriers to disclosure of data on capital mobilization, credit performance, and impact find their roots in the very restrictive non-disclosure agreements that MDBs sign with their clients. Publish What You Fund’s extensive consultations with private investors and stakeholders showed that the source of these restrictive agreements comes mostly from inside the MDBs themselves. In fact, privately provided databases on infrastructure and other transactions in developing economies provide considerably more detail.

Publish What You Fund found that the problems could be largely resolved with contracts that start with a presumption of disclosure but allow for truly commercially sensitive information to be redacted to the level needed. We are now at a point that unless and until shareholders insist that development banks release disaggregated data this opportunity to leverage more private investment through better information will be lost.

The private sector has been clear that it needs more data, not less, to find and pursue investment opportunities that advance the Sustainable Development Goals (SDGs). They stress that most of the “confidential” data is already public but is expensive and inefficient to gather. As the Managing Director of Pollination, a climate change-focused investment and advisory firm, told our panel, “We’ve had a whole host of folks who are looking at the development finance space … but don’t know how to access and navigate it. And this is one of the most critical entry barriers that people come to us on.” From the shareholder perspective, faced with exercising its governance responsibilities, gross numbers don’t give enough information about how best to make decisions about the effective use of capital.

The common thread

The common thread here? Transparency. Across the board, we could advance the scaling of private sector investments through access to richly detailed MDB databases. No one is claiming that the granular data isn’t collected—it’s just not published. Meeting urgent global needs requires scaling of resources, especially from the private sector. MDBs should be using the power of their own data to help fill the information gaps that stand in the way.