Devex Invested: Macron’s ‘ambitious’ global finance to-do list

French President Emmanuel Macron is never shy to call a summit to try to prod progress on the multilateral agenda. This June’s meeting on a “new global financial pact” is no different. We obtained a concept note by the French organizers on what they hope to achieve, and it is not lacking in optimism. "Ambitious decisions" are forecast in Paris on everything from greater access to climate finance and debt relief for low-income countries, to how they can leverage additional financing from the International Monetary Fund, not to mention “international tax arrangements.” Here are some of the known unknowns for now: • Which issues will emerge at the World Bank-IMF Spring Meetings in April as those most likely to generate political traction? Expect Macron to push on these. • With four months to go — and the steering committee and one of the four working groups still yet to meet — what can realistically be delivered by June? • To what extent will Beijing come to the table with real commitments on thorny issues like debt relief for low-income countries? Exclusive: Macron’s global finance to-do list for June summit (Pro) + Not a Devex Pro member yet? Start your 15-day free trial of Pro now to read the piece. Speaking of China’s role in debt relief efforts … “China also has an interest to cooperate with other creditors,” Ishac Diwan and Shang-Jin Wei from the Finance for Development Lab at the Paris School of Economics argue in this opinion piece for Devex. Among the top 50 low- and middle-income countries in China’s portfolio, it dominates all other creditors in six cases — Ethiopia, Guinea, Lao People’s Democratic Republic, Lesotho, the Democratic Republic of Congo, and Uganda. There are seven countries where China’s exposure is so small that its participation does not matter. And in the majority of LMICs, external debt is divided in a relatively balanced way between China, other bilaterals, and commercial creditors. “These are countries where incentives to coordinate are high,” the pair write, “as any lender can block an agreement by refusing to participate, but conversely, a debt restructuring deal requires the agreement of all.” Opinion: Will China help resolve lower-income countries’ debt crisis? Background reading: China is owed 37% of countries’ debt payments in 2022, World Bank says Will EIB reform itself, too? Following a Group of 20 major economies’ report in July, reforming the world’s multilateral development banks to be less risk averse and more willing to pursue global public goods is one of the main preoccupations in global development this year. As we’ve reported, much of the attention — and criticism — has fallen on the World Bank and its new road map for reform. But U.S. Treasury Secretary Janet Yellen, who is fueling much of the momentum for change, said last month that other MDBs need changes too. So, of course, we asked European Investment Bank President Werner Hoyer at the lender’s annual results event in Brussels last week how he sees the reform agenda and what it could mean for EIB, which signed €72.45 billion worth of financing in 2022, including €9.18 billion outside the European Union. Hoyer said he understood politicians’ interest in trying to get more from MDBs. He declined to offer “comments or judgments” on the World Bank road map, but he did add that it would be an “illusion” to think all the large MDBs need to take the same measures. And he could not resist one further shot across the bow. “We will not put the solidity of this bank into doubt,” he told journalists, citing EIB’s need to borrow on capital markets each year. “You need to have the confidence of your investors when you want them to give you their money. So this bank is solid like a rock and that will remain.” We think that means: Don’t hold your breath on sweeping changes to EIB as part of the independent review of MDBs’ capital adequacy frameworks, or CAFs. An EIB spokesperson clarified: “We welcome the CAF review report and its recommendations, bearing in mind that all MDBs are different and face specific constraints. We [are] currently engaging with our shareholders to determine the appropriate way forward.” EIB going further global The EIB annual results also provided a chance to ask Markus Berndt for an update on the work of EIB Global, the branch working on the bank’s lending outside the EU, of which he is the acting head. Since EIB Global’s launch in 2021, EIB has announced its first external hub (designed to enhance the bank’s on-the-ground presence) in Nairobi and soon, Abidjan. So where next? Berndt responded that the next hubs will be in Serbia, Egypt, Ukraine, and South Africa, as part of plans to strengthen the 29 EIB offices outside the EU. So, we asked, what exactly has changed in the EIB's approach to international development thanks to the creation of EIB Global? Berndt wrote back: - Far greater involvement in EIB governance with the foreign and development arms of EU member states, the European Commission, and the EU’s external action service. - More capital allocated to EIB operations outside the EU in the past 12 months than ever before, and thus a greater capacity for risk taking. - Developing new products, such as sector-based loans and local currency loans, joint financing vehicles, as well as joint partnerships to develop shared pipelines of projects (as with the African Development Bank). - Adopting dedicated targets that don’t only focus on volume but on development impact. This includes the introduction of an OECD-DAC-aligned EIB Gender Tag, collecting more baseline and impact indicators, and conducting more large-scale performance and impact evaluations. Background reading: EIB gets a new development branch Investments of Interest • Climate Investment Funds will invest $70 million to speed integration of clean energy into Colombia’s power grid. The “first-of-its-kind investment” in South America will use “highly concessional” capital to improve clean energy transmission, including advanced metering and upgrades to ensure that variable renewable energy can be incorporated. • ResponsAbility has raised $274 million for two funds targeting investments in sustainable food — $173 million for one focused on Asia and $101 million for one focused on Latin America. It will now start making investments targeted at helping smallholder farmers and implementing sustainable agriculture practices. We interviewed their chief client and investment solutions officer a few months ago. • The U.S. International Development Finance Corporation plans to mobilize $250 million for Ukrainian banks this year. The funding is intended to help banks continue lending to small businesses so they can maintain operations and keep people employed. What we’re reading The state of impact investing public policy — and opportunities for 2023. [Impact Alpha] Wall Street’s carbon dioxide agenda drives green bank to quit alliance. [Bloomberg] Adva Saldinger and Shabtai Gold contributed to this edition of Devex Invested.