Development finance institutions have ramped up their investments through financial intermediaries in recent years. They argue it’s a critical way to get more financing to targeted groups, such as small- and medium-sized or women-owned enterprises in specific countries.
But some experts are worried about the impact of those investments and a lack of transparency about where the funds go. A group of concerned organizations — Oxfam International, economic research agency Profundo, the International Accountability Project, and the Early Warning System — has released a new database of $38.2 billion worth of projects funded by financial intermediary clients of two DFIs: Dutch development bank FMO and the International Finance Corporation.
Here’s what was revealed:
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• In fiscal year 2020, more than 50% — or $6.5 billion — of IFC’s total commitments went to financial markets and funds. At FMO about 40% — or €3.7 billion ($4.2 billion) — of its portfolio went through financial intermediaries in 2020.
• The database includes high-risk subproject investments from FMO and IFC-funded clients across 76 countries between 2017 and 2020, tracked through “318 financial intermediaries to 12,800 private actors.” The DFIs invest through a range of intermediaries, from Citigroup, Credit Suisse, and Rabobank to smaller national banks, Christian Donaldson, a senior policy adviser at Oxfam, tells me.
• The problem? Some of these financial intermediaries have invested in projects with the potential to harm people and the environment, including a dam in Cambodia that flooded villages and a mine in Liberia that displaced people and polluted local water resources. These communities were not consulted or given access to information related to redress mechanisms, according to a press release.
• “It is appalling that development finance institutions still don’t disclose such basic information,” Donaldson says in the press release. “There is no reason for them to make it so hard to allow access to such basic information when they should have it as part of their due diligence and make it accessible.”
• “Last year, the IFC became the first institution to commit to disclose this information on its website” — though it hasn’t yet followed through — Donaldson says. He also encourages other DFIs to follow suit.
ICYMI: Devex Pro subscribers can get to know the new tool that aims to help DFIs improve transparency.
DAI acquired microfinance specialist company MicroVest in a move aimed at strengthening DAI Capital, the global development organization’s growing finance arm.
MicroVest is a B Corporation with $250 million under management. It raises capital from private institutions and allocates it to financial institutions working with “underbanked” enterprises in emerging markets.
My colleague David Ainsworth has the details about the acquisition.
Devex Pro: DAI acquires asset management company MicroVest
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David Marchick, who has been serving as the chief operating officer at DFC in the U.S., is set to step down later this month. Marchick, a political appointee, has helped lead the agency since President Joe Biden’s administration took office.
DFC came one step closer to having a confirmed CEO last week. Here’s what Scott Nathan said at his nomination hearing.
Read: CEO nominee for US DFC sails through nomination hearing
“At the direction of the President, we are undertaking a whole-of-government effort to assess how to better use the U.S. Government’s development infrastructure toolkit.”
— Jake Sullivan, U.S. national security adviserAccording to a White House statement Friday, a new assessment of the country’s development infrastructure tools includes the U.S. International Development Finance Corporation, Millennium Challenge Corporation, and U.S. Agency for International Development. What the review will mean is not exactly clear, nor is how U.S. administration objectives under the Build Back Better World initiative might direct agency actions. But I’ll bring you what I know as I know it.
A group of 53 institutional investors — managing about $12.4 trillion in assets and members of the Access to Nutrition Initiative Investor Group — made a pledge Tuesday to take action on nutrition.
It includes commitments around supporting healthy food, transparency in the sector, and adhering to the framework of the Investor Expectations on Nutrition, Diets and Health, to spur more investment in companies that address global nutrition challenges and seek to deliver the Sustainable Development Goals.
This is the first time institutional investors have participated in a multilateral nutrition summit, according to those involved. I’ll watch to see how these investors might support nutrition and whether this pledge changes policy or investment behavior.
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As promised in last week’s Invested, here’s an interview with CDC Group chief Nick O’Donohoe. [Devex Pro]
Zambia and IMF have reached a debt deal, though the institution’s board has not yet approved it. [Devex]
The explosion of “green bonds” continues to raise questions. [Financial Times]