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The Boards of Governors of the Inter-American Development Bank (IDB) and IDB Invest approved three transformative changes to increase the impact and scale of the IDB Group’s development work in…
The post IDB Group Unveils $3.5 Billion Capital Inrease to Drive Social Progress, Climate Action in Latin America and the Caribbean appeared first on ESG News.
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IDB Group Unveils $3.5 Billion Capital Inrease to Drive Social Progress, Climate Action in Latin America and the Caribbean – ESG News
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IDB Group Unveils $3.5 Billion Capital Inrease to Drive Social Progress, Climate Action in Latin America and the Caribbean
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IDB Group Unveils $3.5 Billion Capital Inrease to Drive Social Progress, Climate Action in Latin America and the Caribbean
by ESG News
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March 11, 2024
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The aim is to increase impact and scale of IDB Group
IDB, IDB Invest Governors agree on new Institutional Strategy, laying out priorities for 2024-2030
IDB Invest: new business model and $3.5 billion capital increase approved
IDB Lab: $400 million more resources and a more scalable and catalytic business model approved
The Boards of Governors of the Inter-American Development Bank (IDB) and IDB Invest approved three transformative changes to increase the impact and scale of the IDB Group’s development work in Latin America and the Caribbean, including a new Institutional Strategy and a $3.5 billion capital increase to support a new business model for IDB Invest, the Group’s private-sector arm.
The Board of Governors of the IDB also approved $400 million more resources and a more scalable, catalytic and sustainable business model for IDB Lab, the Group’s innovation and venture capital arm.
The new Institutional Strategy puts impact and scale at the forefront of the IDB Group’s work for the 2024-2030 period. It aims to boost the Group’s results and impact through a series of measures, including developing a results-based, programmatic approach in work with member countries, upgrading lending tools and measurement metrics, investing more in knowledge capacity, and enhancing a culture of impact and meritocracy across the IDB, IDB Invest and IDB Lab.
The Governors, who are the top economic and financial authorities of the IDB Group’s 48 member countries, approved the reforms today at the conclusion of the 64th Annual Meeting of the IDB Board of Governors and the 38th Annual Meeting of the IDB Invest Board of Governors.
“These meetings have been truly historic. For the first time in the 65 years of our institution, our Boards of Governors have simultaneously approved three transformative changes that will make the IDB Group a bigger, better and more agile institution. These changes will significantly boost our ability to support Latin America and the Caribbean in addressing its challenges and unlocking its potential to ignite a development turning point – all to improve lives with greater impact and at greater scale,” said IDB President Ilan Goldfajn.
“Our region faces a triple structural challenge of rising social demands, scarce fiscal resources and low growth, with the additional major effects of climate change. But at the same time, there is a great opportunity for the region to become part of the solution to shared global challenges,” President Goldfajn added. “This could be an inflection point not just for the IDB Group but also for the region.”
Strategic Objectives and Greater Scale
The new Institutional Strategy has three core objectives: reduce poverty and inequality, address climate change and bolster sustainable regional growth.
To achieve these goals, the IDB Group will work through seven operational focus areas. Three of these are cross-cutting through all sectors: biodiversity, natural capital and climate action; gender equality and inclusion of diverse population groups; and institutional capacity, rule of law and citizen security.
The other four focus areas are social protection and human capital development; productive development and innovation through the private sector; sustainable, resilient and inclusive infrastructure; and regional integration.
To meet its objectives, the IDB Group will bolster its financial capacity.
The capitalization of $3.5 billion and the new business model would allow IDB Invest to scale its ability to channel resources to the region from the current approximate $8 billion per year to around $19 billion.
The new IDB Invest business model will allow it to shift toward an impact-driven originate-to-share approach. It will be able to take on more risk, expand its field presence, and deploy innovative products to deliver better results at the project and portfolio levels.
To ensure that the IDB Group further leverages innovation to drive social inclusion, climate action, and productivity in the region, the IDB and IDB Invest Boards of Governors approved a proposal for IDB Lab to enhance its operating model and become an innovation hub for development. This approval allows IDB Lab to seek $400 million in new funding, which would be deployed in the 2026-2032 period.
The hub model – which builds upon unique features of IDB Lab, including its higher risk appetite, grassroots network and agility in deploying financing – aims to triple the entity’s resource mobilization per dollar deployed and to scale up 40% of its projects. Additionally, the new model will help ensure that all IDB Lab projects benefit poor and vulnerable populations.
The institutional strategy intends to strengthen synergies across the IDB Group, between IDB, IDB Invest and IDB Lab.
The Strategy also calls for the IDB Group to work with other multilateral development banks (MDBs) as part of an integrated system,
The IDB Group will intensify its work to develop innovative financial instruments to mobilize more resources for addressing development gaps and tackling climate change. The IDB Group has pioneered innovative solutions, including debt-for-nature swaps; climate-resilient debt clauses, which pause payments for countries hit by natural disasters; currency hedge platforms; and new ways to reward borrowers that achieve nature and climate objectives, as our BID Clima; among others.
The new strategy, along with the new business model and capital increase for IDB Invest, and the new model for IDB Lab will increase the scale of the Group’s work by placing financial innovation and mobilization of private-sector resources front and center of each investment decision, strengthening selectivity and crowding-in private investors at scale. Taken together, the reforms, along with efforts by each institution to optimize their balance sheets, will enable the IDB Group to increase its financing capacity to up to $112 billion over the next 10 years.
Reforms for More Impact
Among the reforms set out in the new Strategy, the IDB Group will ensure that impact and development effectiveness is woven into the fabric of its structure, operations and organizational culture.
A new Impact Framework will include a set of measurable indicators to translate the institutional priorities into clear metrics and will serve as the primary tool for monitoring and measuring the IDB Group’s performance.
The new strategy also foresees changes to internal processes to enhance the culture of impact and meritocracy at the IDB Group. The first priority is to clearly define and quantify success, measure and track progress, intended impact and evaluating outcomes. In parallel to this sharpened focus on impact, the IDB group is also making changes to its human resource processes, including in its selection processes to ensure a culture of meritocracy.
The new strategy includes proposals for greater and more efficient investment in knowledge, including training support for countries. It also calls for a catalogue of “cases” – including successes and failures of programs and operations over the years. This will allow the Group to provide more informed advice to member countries based on accumulated evidence-based knowledge. This will enable the IDB to become the knowledge bank of the region.
The strategy also includes changes to the Group’s approach to lending instruments to make them joint toolboxes for member countries. Specifically, the institutional strategy proposes reforming Policy Based Loans (PBL) to improve the quality and impact of policy reforms. The objective is to strengthen the quality, relevance, and accountability of PBLs and strategically use them to support reforms that foster resource mobilization, the enabling environment for private sector development, and the provision of regional and global public goods.
Related Article: Invesco Exits Climate Action 100+ Coalition, Joining Other Major US Asset Managers
A roadmap for implementing these and many other reforms has been approved by the IDB and IDB Boards of Executive Directors.
“I am very thankful to the Board of Governors for their support and the guidance provided by our Executive Directors. I am very grateful and proud of our staff and confident in their talent, resourcefulness, and dedication as we implement these changes and make our institution more agile. I call the sum of these reforms IDB Impact+, a new framework through which we’ll achieve much more impact, plus much more scale,” President Goldfajn concluded.
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