Welcome to Devex Invested. I'm Adva Saldinger and in this new newsletter, I'll be bringing you news, analysis and insights on what's happening in financial markets, development finance institutions and corporations — and why it matters in financing global challenges.
Development finance institutions don’t have the best record of investing countercyclically — but are they learning from past mistakes in their response to COVID-19? The jury is still out, but a few trends have emerged.
• A year ago, DFIs were worried about the pandemic’s impact on their balance sheets. But the DFIs I spoke to — CDC Group, FMO, FinDev Canada, and the U.S. International Development Finance Corp. — say their clients have been more resilient than expected, reporting a minimal number of defaults or deferments thus far.
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• Some DFIs expected clients to have massive liquidity needs, but that wasn’t necessarily the case. DFC has invested only $644 million through the $4 billion rapid response liquidity facility it launched last year.
• With balance sheets stronger than expected, we’ll be looking to see how much risk DFIs are willing to take.
A ‘lost decade’
United Nations and political leaders warned of a potential “lost decade” for development at the U.N. Financing for Development Forum last week. U.N. Secretary-General António Guterres called for a “paradigm shift” to better align the private sector with the Sustainable Development Goals and for more political leadership on the issue.
The U.N. Development Programme launched two initiatives:
• The SDG Investor Platform, a partnership between UNDP and the Global Investors for Sustainable Development Alliance, is a database of investment opportunities. “Increasing transparency and matching of demand and supply is key to the success of SDG-oriented investments,” said Oliver Bäte, CEO at Allianz, and Leila Fourie, CEO at the Johannesburg Stock Exchange.
• UNDP launched the Integrated National Financing Framework Knowledge Platform, where countries can share plans for how to fund their national development strategies.
Among the proposals floated was one from Costa Rican President Carlos Alvarado Quesada for an “extraordinary support fund” to catalyze 0.7% of global gross domestic product through multilateral development banks in the form of concessional financing and investment.
Green bonds going strong
Business of climate
Corporate momentum — or at least announcements — around climate and sustainable finance is building.
• Last week, Apple called for the U.S. Securities and Exchange Commission to mandate corporate reporting on carbon emissions. Sources tell me that the U.S. government could announce new rules for corporate reporting on climate later this year.
• JPMorgan Chase announced that it aims to facilitate more than $2.5 trillion in investments over the next 10 years to “address climate change and contribute to sustainable development,” in part through the DFI it launched last year.
+ A recent report found that JPMorgan Chase was one of the largest financiers of fossil fuels in the past five years. Big banks in the private sector collectively invested about $3.8 trillion since the adoption of the Paris climate agreement.
• Citigroup announced it is “committing $1 trillion to sustainable finance by 2030” — including $500 billion for environmental finance.
Inclusive capitalism: Yes, some may consider this an oxymoron — it is a form of capitalism focused on creating long-term value for businesses, investors, employees, customers, governments, and communities. In other words, it is capitalism that can create a fairer and more sustainable world.
Watch: The Skoll World Forum hosted a debate last week about whether capitalism can actually be inclusive.
1 meeting to watch
Multilateral development bank heads meet virtually Wednesday to consider greenlighting a joint $250 million grant facility to improve their clients’ climate strategies — news we broke last week. We hear not everyone is sold on the idea. We’ll be watching.
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Sustainable Investing Associate
World Resources Institute
Washington, D.C., United States
Vanessa Holcomb Mann and Jessamy Nichols discuss how to know when catalytic financing makes sense. They offer four principles: support approaches that have long-term market impact; ensure additionality; appeal to investors; and prioritize sustainable approaches.
Investments of interest
• Apple announced the Restore Fund, a carbon removal initiative that will make investments in forestry projects. The company said the fund — the first of its kind — aims to remove carbon from the atmosphere and demonstrate a viable financial model for scaling investment in forest restoration.
• Amazon announced the $250 million Amazon Smbhav Venture Fund that will invest in Indian startups — particularly in agritech and health tech — to help small and medium businesses digitalize. The fund was announced as Amazon “faces heat from government bodies, and the small and medium-sized businesses that it purports to serve,” according to TechCrunch.