In January 2020, JPMorgan Chase became the first private company to launch a development finance institution. J.P. Morgan Development Finance Institution sits within the Corporate & Investment Bank and mobilizes financing to emerging markets. The unusual move sparked questions from the development community about why a private institution would launch a DFI, whether it would mobilize more capital, and what its impact would be. I caught up with Faheen Allibhoy, managing director at JPM DFI, to talk about its first year.
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• In 2020, JPM DFI “qualified” a total of 437 transactions worth a total of $146 billion. While a mix of geographies is represented in the portfolio, only about 6.4% of those transactions were considered to have a high or very high “development intensity” — a score of their expected development impact.
• The DFI has two main focuses: qualifying transactions using a framework to measure impact and working as a development finance structuring agent. In the first of these business lines, it’s unclear whether the existence of the DFI has meant JPMorgan Chase is making more transactions than it would have otherwise. But the latter is where it is bringing some innovation, Allibhoy tells Devex.
• “What we really hope is that the development impact standards that we have developed as a private institution, that other financial institutions would come into this space, would align, because that is what creates an industry and an asset class,” she says. While we haven’t seen other financial institutions launch DFIs, there has been growth in impact investing; environmental, social, and governance investing; and commitments to boost sustainable investing.
Transparency — to a limit
For more than a decade, multilateral development banks and DFIs have shared data on the performance of their investments through the Global Emerging Markets Risk Database consortium. The database has always been private — until now. GEMs released a report about default statistics last month. But the limited published data may in fact hurt efforts to bring in more institutional investors, Nadia Nikolova, lead portfolio manager for development finance at Allianz Global Investors, tells me.
By only releasing the default data and not recovery rates, GEMs is not painting a complete picture. Many of these investments are long term and end up recovering after default. The data will make it harder to argue that perceived risk is higher than actual risk, says Nikolova, who had long called for the data to be released.
By the numbers
A new report from BlueMark, a year-old impact investment verification business, sheds light on how investors are integrating impact into the management of their businesses. Of the dozens of investors it has certified:
An investment gone wrong?
A European Investment Bank energy infrastructure project in Nepal is the subject of a recent report from the bank’s Complaints Mechanism, Vince Chadwick reports. The findings show a number of problems: environmental assessment shortcomings, no stakeholder engagement plan, and poor outreach to local Indigenous people. EIB has said it is addressing the report’s recommendations.
This comes as EIB tries to convince shareholders to back a restructuring and push back against two studies finding that the bank lacks development expertise. “For the time being, the EIB is ill-equipped to operate as a genuine development bank,” Xavier Sol, director at Counter Balance — an NGO that follows EIB — tells Devex.
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The U.S. International Development Finance Corp. announced two new hires Monday: Jake Levine as its first chief climate officer and Aparna Shrivastava as deputy chief climate officer. Levine will lead on executing the agency’s new climate plan, and Shrivastava will lead interagency coordination and integration of climate across DFC.
Investments of interest
• CDC Group announced a $100 million debt commitment to ETG, an agricultural conglomerate connecting smallholder farmers to global markets. The investment aims to strengthen food value chains by enlarging its logistics networks, boosting agricultural yields and the production of staple foods. It is one of CDC Group’s largest corporate debt investments.
• The group of G-7 DFIs launched a plan to accelerate investments in climate adaptation and resilience. While the move is not itself an investment, the announcement should lead to new ones.