Devex Invested: A ‘north star’ for DFI transparency efforts

For years, I’ve heard complaints about the lack of transparency at development finance institutions — not just from advocates, but from investment managers who want more data to convince investors to enter emerging markets. That’s why I was particularly interested when Publish What You Fund launched its DFI Transparency Initiative about two years ago.

Research conducted as part of that effort is now complete. In addition to a report with findings that should eliminate some of the excuses DFIs have deployed for not releasing data, Publish What You Fund developed a new tool to help them improve. I’ll be curious to see if they do.

• “The state of DFI transparency is not sufficient to allow us, or anybody, to know what we’re actually buying with public resources, what the investments are, what the rationale is, how we measure impact,” Gary Forster, CEO at Publish What You Fund, told me back in 2019. “How do we learn from different investments if no data or information is available? How do DFIs exhibit their own value?”

• The initiative found that DFIs fall short in reporting about investments, especially those made through financial intermediaries — which, for some DFIs, account for a significant chunk of their portfolios — and that DFI clients are willing to share more information. In fact, data that DFIs say they can’t share due to commercial confidentiality is often publicly available.

• The new tool is supposed to help DFIs address shortcomings, and two have committed to using it: the United States International Development Finance Corporation and the European Bank for Reconstruction and Development. It will also form the basis of a new Publish What You Fund DFI Transparency Index, with the first edition likely to launch next year.

• Elizabeth Boggs Davidsen, vice president of the office of development policy at DFC, calls the tool a “helpful north star.” “The more transparent we are, the more trust we engender with our authorizers and other stakeholders,” she says.

Devex Pro: A new tool aims to help DFIs improve transparency

Show us the money

The outcome of COP 26 was a mixed bag. The once-lofty target of $100 billion in annual climate finance — an unfulfilled promise from rich countries dating back to 2009 — has now come to be seen as the floor of what’s needed, rather than the ceiling. Amid the conference, many advanced economies made significant climate finance pledges, which the BBC tracked.

Also of note: The event paved the way for a global carbon market by finalizing new rules that had remained unresolved from the 2015 Paris Agreement. This will allow for a “robust, transparent and accountable carbon market to promote more and faster climate ambition and create a further avenue for finance flows from developed to developing countries,” according to the Environmental Defense Fund.

+ Devex Pro subscribers can deepen their understanding of what the Paris alignment means for development donors, and how a new green energy alliance will work. Not yet a Pro subscriber? Sign up now and start your 15-day free trial.

Blended finance to the rescue

Climate change is dramatically damaging coral reefs. As my colleague Catherine Cheney writes, these picture-perfect, colorful corals face the greatest extinction risk of any ecosystem on the planet. The Global Fund for Coral Reefs intends to use a blended finance model to save as many of the reefs as possible. It aims to raise and invest $625 million over the next 10 years.

Read: Can this new fund save coral reefs before it’s too late?

Devex Pro: The top ocean donors

Investing in both climate and gender

CDC Group, the European Investment Bank, and EBRD have launched a new “Gender-Smart Climate Finance Guide.” It provides tools, analysis, and case studies to help investors find opportunities and mitigate risk in gender and climate financing.

“A growing body of evidence shows important synergies between gender equality and climate action, making a strong case for investments which are both climate-smart and gender-smart,” says Jessica Espinoza, a co-chair of the new 2X Collaborative, which describes itself as a “global industry body for gender lens investing.”

One big number

That’s the percentage of CEOs who say COVID-19 highlighted the need to transition to more sustainable business models, according to a survey by the United Nations Global Compact and Accenture. Most report that governments are not providing the guidance needed to recover from the pandemic in a way that helps keep global warming under 1.5 degrees Celsius.

Investments of interest

• The International Finance Corporation is providing a loan of up to $50 million in Congolese francs to Equity Banque Commerciale du Congo — a subsidiary of Equity Group — for local currency loans to micro, small, and medium-sized enterprises in the Democratic Republic of Congo.

• The Canadian government and Convergence have launched a “Gender-Responsive Climate Finance Design Funding Window” to provide about $4 million in early stage grant funding for blended finance solutions tackling climate change and gender equality in emerging markets.

What we’re reading

Tariq Fancy, the former chief investment officer for sustainable investing at BlackRock, argues that governments must change economic incentives to meet climate demands instead of relying on the market alone. [The Economist]

Choosing between industry and government action on sustainability is a false dichotomy, according to the head of the U.N. Environment Programme Finance Initiative. [UNEP FI]

An explanation of why environmental, social, and governance efforts are failing sustainable development. [Green Finance Platform]

Shabtai Gold contributed to this edition of Devex Invested.