Publish What You Fund has published the Aid Transparency Index for 10 years. The Aid Transparency Index is the only independent measure of aid transparency among the world’s major bilateral and multilateral development agencies. In later editions, the Aid Transparency Index has included assessments of multilateral DFIs. For the first time in 2022, these DFIs had their sovereign and non-sovereign portfolios assessed separately. It is therefore important to explain the need for a new index of DFIs’ transparency and outline the principal differences between the two indexes. In turn, this will help to explain the different scores that institutions receive in the two assessments.

At its core, the Aid Transparency Index is primarily a measure of the extent and quality of data that aid agencies and other institutions (such as DFIs) publish in the IATI Standard. While being an IATI publisher is not a prerequisite of inclusion in the Aid Transparency Index, it remains the fact that in the most recent edition of the index all but one of the institutions included published IATI data. The predominance of IATI publishers in the Aid Transparency Index is partly a result of the Aid Transparency Index’s success in incentivising the publication of aid data to a globally recognised open data standard. Furthermore, publication in the IATI Standard is fundamental to scoring highly in the Aid Transparency Index; institutions that do not publish IATI data cannot score above 50 points. Across its history the Aid Transparency Index has been successful in improving the quantity and quality of aid data that is disclosed. It has also provided a basis for comparing data across a range of institutions; from bilateral aid agencies, to development banks, philanthropic organisations and United Nations agencies.

While there are clear benefits of comparability across this range of donors, DFIs have their own unique attributes that are not covered in the Aid Transparency Index. DFIs have different mandates to other aid agencies, including their role in mobilising private sector investment and financial additionality, which we believe warranted a separate index process. Also, there are characteristics of a subset of DFI activities that necessitate a form of transparency that is not adequately covered by the IATI Standard. DFIs have historically financed activities that contain significant environmental and social risks. These include the financing of major infrastructure projects and routing of capital through financial intermediaries. Our research into these subjects highlighted the need to measure transparency in new ways that are not included in the Aid Transparency Index. In some cases, prioritising formats other than IATI.

The strength of IATI is its standardisation of aid information, its timeliness, and the fact that it is fully open, machine-readable data, accessible from a central registry. This means it can be compared, aggregated and disaggregated for macro or micro-level analysis. There are, however, aspects of DFI business models that are fundamental to many of their mandates that are currently not accommodated by the IATI Standard. A number of these relate to the financial aims and structuring of DFI investments, including the use of co-financed financial instruments, the mobilisation of private finance, and the use of concessional funding in the form of technical assistance and blended finance. As these types of data cannot currently be published in the IATI Standard, they are not captured in the Aid Transparency Index, and it is necessary to assess the disclosure of them in other ways.

The Aid Transparency Index and the DFI Transparency Index both measure transparency, but the DFI Transparency Index allows for a more customised assessment that is tailored specifically to DFIs’ business models. These differing methodologies inevitably result in different scores for institutions that are included in both indexes. This is not inconsistent, but rather reflects that an institution may have different aspects of transparency being measured leading to different outcomes.

We recognise that for DFIs included in both the Aid Transparency Index and the DFI Transparency Index the current arrangement may not seem ideal. We have sought to reduce the burden of this arrangement by aligning the indexes to the greatest degree possible, while retaining their individual significance and the logics behind their use. We will continue to assess the relationship between the two indexes.

Both the DFI Transparency Tool and the DFI Transparency Index were developed as part of Publish What You Fund’s DFI Transparency Initiative. The initiative was a multi-stakeholder research and advocacy project that aimed to improve the transparency of DFIs. We researched the state of DFI transparency and opportunities for improvement between November 2019 and November 2021. The initiative identified the need for sustainable products that would facilitate and encourage enduring change over time.

The DFI Transparency Tool has two functions. First, it is intended to provide granular guidance to DFIs about the types of information that a range of stakeholders value and that should therefore be disclosed, based on their obligations as publicly owned entities that manage and disburse public money. Second, it forms the basis of assessments of the transparency of DFIs (the DFI Transparency Index).

The DFI Transparency Index measures, assesses, and ranks the transparency of leading DFIs against a set of indicators that are informed by the research behind the DFI Transparency Tool.

The First DFI Transparency Index was conducted between May 2022 and January 2023. Our intention is to continue running the index on a two-year cycle, recognising that it can take significant amounts of time for DFIs to change practice and policies. Work on the second edition of the Index is underway, in preparation for launch in the summer of 2025.

Our criteria for determining which DFIs feature in the index is based on the primary mandates of the institutions, their size, the geographic scope of their work, and their suitability for assessment according to current reporting practices. We have developed separate selection criteria for multilateral and bilateral DFIs due to their vastly different sizes and varying mandates. Our selection has been guided by data from the Finance in Common PDB Database.[1] The criteria are as follows:

Multilateral DFIs (Sovereign and Non-Sovereign)

1. Institutions must have a primary focus on investing in activities with a development objective. Trade finance institutions, including export import banks, are excluded from the assessment.
2. Institutions must have a total asset size over US $15 billion. For DFIs that operate separate institutions under a group, then total group assets may be considered.
3. Institutions must work internationally.
4. Institutions must demonstrate a fundamental commitment to transparency through the maintenance of a database or list of active investments.

Bilateral DFIs

1. Institutions must have a primary focus on investing in private sector activities with a development objective. Trade finance institutions, including export import banks, are excluded from the assessment.
2. Institutions must have a total asset size over US$500 million.
3. Institutions must work internationally.
4. Institutions must demonstrate a fundamental commitment to transparency through the maintenance of a database or list of active investments.

[1] Xu, Jiajun, Régis Marodon, Xinshun Ru, Xiaomeng Ren, and Xinyue Wu. 2021. “What are Public Development Banks and Development Financing Institutions? Qualification Criteria, Stylized Facts and Development Trends.” China Economic Quarterly International, volume 1, issue 4: 271-294.

The DFI Transparency Index assesses the transparency of DFI lending to financial intermediaries (including funds, banks, and non-bank financial institutions) as well as a subset of financial intermediary sub-investments. At the level of the financial intermediary, DFI investments are treated in the same way as DFI direct investments in other sectors and, as such, the same level of transparency is expected. Reflecting this, DFI investments in financial intermediaries may be included in the samples of projects that we analyse.

We limit our assessment of financial intermediary sub-investments to a sub-set of total on-lending activity. This is in recognition of the fact that a significant proportion of financial intermediary on-lending targets relatively low risk sectors, including MSME financing and housing finance. With this in mind, we limit our assessment to the disclosure of sub-investments of funds (such as private equity funds) and high risk and/or large on lending activities by banks. We define high risk and/or large as Category A (or equivalent) sub-investments and sub-investments that are larger than the thresholds established by the Equator Principles. The Equator Principles represent an internationally recognised standard for the identification of high-risk financing.

The DFI Transparency Index  assesses both sovereign and non-sovereign lending by DFIs. In the case of sovereign lending, our assessment is limited to leading multilateral DFIs, while assessment of non-sovereign lending includes both multilateral and bilateral DFIs. For multilateral DFIs that conduct both sovereign and non-sovereign activities we assess each separately.

While we assess both forms of lending, our analysis and ranking separate sovereign and non-sovereign lending. This is a result of our recognition that the two types of lending involve significantly different business models and, as such, necessitate the disclosure of different types of information. As the DFI Transparency Tool varies across the two types of lending, and the DFI Transparency Index includes different indicators in line with the tool, it is necessary to weigh the constituent indicators differently. With this in mind, we conduct two rankings.

The results of the DFI Transparency Index are presented in a report that was launched on January 25^th 2023 through an in-person and virtual event at the Brookings Institution, Washington DC. In addition to the report, the DFI Transparency Index webpage contains the Index results. We also publish individual DFI Profiles that provide DFI-specific analysis of the transparency of the institutions included in our assessment.