More than 160 high-level speakers took part in some 20 events at the 2nd edition of FiCS. Among the topics tackled were Public Development Banks’ efforts to contribute to the Covid-19 recovery and to long-term issues of sustainable agriculture, food systems and the international financial architecture.
The Summit was also an opportunity to take stock of the achievements made over the past 12 months. PDBs have mobilized a record level of financing in response to the Covid-19 pandemic, for affected sectors, businesses and households. According to the first ever comprehensive database of PDBs, prepared by AFD and the Institute of New Structural Economics (INSE) of Beijing University and updated this week on the eve of the summit, PDB investments reached a total of more than US$2.5 trillion last year – about 12% of global investments in 2020. This amount is unprecedented, and is an increase of some 13% compared to 2019.
The new database identifies 527 Public Development Banks and financing institutions, and provides a refined set of five criteria that determine what constitutes a PDB or DFI.
- Are stand-alone entities
- Utilize fund-reflow-seeking financial instruments as their main products and services
- Have funding sources that go beyond periodic budgetary transfers
- Deploy proactive public policy-oriented mandate
- Benefit from government steering their corporate strategies
Some 70% of PDBs are national, 9% multinational, and the rest are subnational. They invest in a vast variety of sectors to address market failures and mobilize the private sector, including in rural and agricultural development, promoting exports and foreign trade, social housing, infrastructure and micro, small, and medium-sized enterprises.
Focus on nature and biodiversity
Increasingly, their activities focus on adaptation and biodiversity, where the FiCS initiative seeks to promote nature-based solutions as powerful levers to support moves to make societies more resilient and adaptive to climate pressures.
Water has been a crucial area of PDB intervention. A report commissioned by AFD in July 2021 confirms that national PDBs are key players in financing water in the countries where they operate, particularly in Europe and the Latin American and the Caribbean (LAC) regions. Water sector investments represent on average between 5% and 15% of PDBs’ portfolio (comparisons can be inexact given varying definitions and measures).
To find out more: Public Development Banks – A Progress Report One year On
Given the increasingly extreme weather events and the need to try to predict future ramifications, PDBs joined forces to set up a Task Force on Foresight for Sustainable Development Finance, hosted by the OECD-DAC Friends of Foresight Community.
This year, the Finance in Common Summit mobilized PDBs for a transition of food systems compatible with climate and biodiversity imperatives, by building a Coalition for Action for Inclusive and Sustainable Food System Finance led by the International Fund for Agricultural Development (IFAD).
The FiCS agriculture coalition and its partners (encompassing farmers’ associations, smallholder enterprises and civil society organizations) is establishing a new PDB Platform for Green and Inclusive Food Systems. The Platform will deliver technical assistance, support for innovation and tools to assess risks and measure the social and environmental impact of investments.
With more than 40 PDBs specialized in agriculture, particularly in emerging and developing countries, and 72 PDBs with large portfolios in the agricultural sector, representing two-thirds of the world’s formal financing of smallholder farmers, this coalition has the potential to create long-lasting benefits. It will be able to direct and leverage private funding to transform agriculture, food systems and value chains, with an emphasis on sustainability, resilience, nature protection and social inclusivity.
To find out more: AFD’s Support for Public Development Banks and the SDGs
Development banks and financing institutions are already meeting the target set at the UN Climate Action Summit for the period 2019-2025, with IDFC members collectively financing green projects amounting to US$185 billion in 2020, reaching a total of some US$1 trillion since COP21.
A Secretariat, hosted by AFD as chair of the FiCS from 2020 to 2022, and headed by a Secretary General, will oversee and coordinate the Summit’s action.