Devex Invested: What’s at stake as IDB Invest seeks a capital increase

Getting shareholders to cough up more money can be slow going for a multilateral development bank. IDB Invest, the private-sector arm of the Inter-American Development Bank, has been pushing for a capital increase for more than a year. What we can exclusively tell you now is how much money the institution is asking for: $3 billion to $4.5 billion. That’s according to IDB Invest CEO James Scriven, who says the funding will allow it to take on more risk, lend more, and design projects to combat climate change. “If I really want to have an impact on the region, this is what I need,” Scriven tells my colleague Shabtai Gold, adding that the funding is critical to carrying out IDB Invest 2.0, the lender’s new strategy. • IDB Invest does between $5 billion-$7 billion in business a year. Scriven wants to boost that to $15 billion - $20 billion so it can make new investments, including in green hydrogen and lithium. A capital increase could also help him quadruple equity investments from $50 million to $200 million a year. • The capital increase would also allow the financier to take more risk, including lending to countries with poor credit ratings, investing in nascent technology that traditional banks are wary of, and de-risking more investments for the private sector. • Thus far the board has agreed to explore a capital increase, though it hasn’t indicated how big it could be. Scriven and the IDB Invest team will deliver a more detailed proposal to the board by Sept. 30 and plan to have a formal capital increase request at IDB’s next annual meeting in March. • This request comes as IDB’s new president, Ilan Goldfajn, has taken the helm at a moment of crisis for the institution and is trying to right the ship. He has said he’ll focus on development effectiveness, digitalization, climate change, and addressing widening inequality in the region. Exclusive: IDB Invest chief seeks $3B-$4.5B capital increase ICYMI: New LatAm bank chief gets warm welcome for tough job ahead Spring (Meetings) in the air As the World Bank Spring Meetings kick off next week, here’s what we’re tracking: Movement on the reform efforts, just how much more money the bank can spend without jeopardizing its coveted AAA credit rating, and news about Ajay Banga, the nominee to be the next leader of the bank. Expect the World Bank’s approach to climate lending to be a central debate. As some shareholders push the bank to find more spending ability to tackle climate, some low-income countries fear the bank will stray from its anti-poverty focus. And when it comes to climate finance, there’s another divide: Higher-income nations largely prioritize efforts that reduce emissions, while lower-income nations want more focus on adaptation. Last week, we got an update on how much the anti-poverty lender can stretch its resources. World Bank chief David Malpass said that the institution can likely lend up to $50 billion more in the next decade — $10 billion more than his previous estimate. Often the bank turns to its shareholders for a capital increase when it needs more funds to address emerging challenges. But for now, that’s off the table, U.S. Treasury Secretary Janet Yellen said at a congressional hearing last week. Lawmakers also pressed her on climate finance, including whether the World Bank would support natural gas or nuclear energy. Banga, whose confirmation for World Bank president is all but assured, will take on the difficult job of navigating these various interests. In case Mr. Banga is reading and wants some advice, this op-ed offers some lessons from his predecessors. Among the recommendations: tackle at least one big unspoken challenge, continue to build the bank’s importance, and challenge orthodoxy to meet crisis moments. David Malpass: World Bank can lend ‘up to’ $50B more over next decade Also: Republicans grill Yellen on climate finance and World Bank reform Opinion: What Ajay Banga can learn from past World Bank presidents Will you be at the meetings? Get in touch with Shabtai and me with news tips or if you just want to meet your trusted Invested writers in person. Email us at adva.saldinger@devex.com or shabtai.gold@devex.com. Not another one There are about 81 climate funds active today, and that’s way too many, writes Philippe Le Houérou, chair of the board of the French Development Agency and former CEO of the International Finance Corporation, in this op-ed for Devex. It’s unclear how much they spend, to whom they lend, and with what impact, he writes. “Given the urgency of scaling up climate change mitigation and adaptation projects in emerging markets, rationalizing and redefining the current messy climate aid architecture is a crucial step for the development community to take,” he says. Opinion: Before setting up new climate funds, consolidate existing ones Disrupting tradition It turns out that the next generation of philanthropists doesn’t want to follow the lead of their parents and grandparents. My colleague Stephanie Beasley reports that they’re not so into getting buildings named after themselves or setting up charities. Rather, they are seeking new ways of giving that boost their impact. Think impact investing and using grants in blended finance transactions to attract private capital, rather than pure grantmaking. “They are going to be the most significant philanthropists in history,” says Michael Moody, co-author of the book “Generation Impact: How Next Gen Donors Are Revolutionizing Giving.” This new group of philanthropists stands to inherit about $70 trillion from baby boomers, and more of them are women than ever before, Stephanie writes. Want to dig deep into how one of these newer philanthropists is spending her money? My colleague Miguel Antonio Tamonan has an analysis of the $14 billion Mackenzie Scott has donated in the past three years. He breaks down how it was disbursed and where it’s going, with a detailed look at who she is supporting outside the U.S. Read: Will the next generation of givers revolutionize philanthropy? (Pro) Also: What does the data tell us about MacKenzie Scott’s philanthropy? (Pro) + Start your 15-day free trial of Devex Pro today to access all our exclusive reporting and analysis. What we’re reading More cuts are coming to the U.K. aid budget as it spends more at home. [Devex] Munich Re quits the climate finance alliance, citing “material” legal risks. It’s the latest blow to the Glasgow Financial Alliance for Net Zero. [Bloomberg] This podcast with Mark Zandi, chief economist of Moody’s Analytics, unpacks how U.S. interest rates, banking stress, and recession risks may impact emerging markets. [Moody’s] Germany has a new feminist development policy. Here’s how it will affect funding. [Devex Pro] Shabtai Gold contributed to this edition of Devex Invested.