Public Development Banks in Action: A Progress Report One Year On
published on 19 October 2021
In Latin America and the Caribbean, where GDP contracted by 7% in part due to the Covid pandemic, Public Development Banks stepped in to channel some $90 billion in credit. PDBs play a major role at the financial and economic levels. The world’s first-ever Finance In Common Summit in Paris last year demonstrated that greater collaboration among PDBs could help not only reorient financial flows, but also tackle major development issues. They signed a Joint Declaration of Public Development Banks of the World last November, and designed a roadmap for action. One year on, how much have they achieved? We examine 15 areas of action, from climate resilience and water finance, to the private sector in Africa.
In the Joint Declaration adopted by Public Development Banks in Paris in November 2020, they made a commitment to finding solutions in a wide range of challenges, from climate and biodiversity to oceans, energy social investment. For each theme, PDBs formed coalitions, set targets and outlined the steps necessary to meet them.
We highlight 12 salient areas of action detailed in the Progress Report from the First Year of Life of the Finance in Common Coalition.
PRIVATE SECTOR IN AFRICA
Objectives include:
To dedicate at least US$4 billion for African Micro, Small and Medium Enterprises (MSMEs) by the end of 2021, deepen cooperation among signatory institutions and support clients with technical assistance.
Progress as of October 2021:
The coalition reached US$1.3 billion of its US$4 billion investment target to benefit African MSMEs (by December 2021), despite the exceptional market circumstances. Signatories also provided technical assistance to MSMEs totaling more than US$7 million. Due to the Covid-19 crisis, the financing of MSMEs in Africa has become a key priority in the policy agenda of governments and of EDFI’s shareholders, as illustrated by the Summit on Financing of African Economies in May 2021.
CLIMATE CHANGE: ALIGNMENT WITH THE PARIS ACCORD
Objectives include:
To commit to climate-related disclosure, align all new financing with the objectives of the Paris Agreement at the project and portfolio level by 2022, exclude new coal and fuel oil financing by 2030, reach net zero GHG emissions by 2050 at the latest and limit other fossil fuel financing to PA aligned projects by 2030.
Progress as of October 2021:
IDFC, EDFI, and the working group of MDBs progressed on their respective operational tools for aligning with the Paris Agreement by further developing methodologies and analytical frameworks to be published by COP26.
Building on the operational framework (May 2021), several IDFC members started using the toolbox to operationalize the principles of alignment. In addition, IDFC has finalized the 2020 Green and Climate Finance Mapping (to be released at the 2021 Finance in Common Summit) which highlights groundbreaking investment volumes for the period 2015-2020 (US$1 trillion), including adaptation investment. For the first time, the mapping includes climate finance to promote biodiversity.
ADAPTATION AND RESILIENCE
Objectives include:
To facilitate partnerships and private finance for adaptation and resilience, accelerate investment in climate adaptation and resilience and scale up adaptation finance for resilient infrastructure and insurance.
Progress as of October 2021:
The Adaptation and Resilience Investors Members regularly engage on the actions needed for increasing investments in adaptation and resilience and improving capabilities on physical climate risk assessment.
AGRICULTURE AND FOOD SECURITY
Objectives include:
To share knowledge and best practices (on the transformational impact of investment in food and agriculture or the added value of various PDB business models to progress on the SDGs, for example), increase dialogue and identify challenges and bottlenecks faced by PDBs in using their investments to catalyze a shift to more sustainable food systems. Also, to speak with a shared voice at international fora on the importance of channeling investments to agriculture and food systems for sustainable, inclusive, and job-led economic growth.
Progress as of October 2021:
The coalition emphasized the role of PDBs in financing more sustainable and inclusive food systems at the Food Systems Summit (September 2021) through the organization of a dedicated event and the broadcasting of a video. AFD and IFAD proposed a coalition involving PDBs with an agricultural portfolio under the Food Systems Summit, linking with the Food Systems Summit and the 2021 Finance in Common Summit. A concrete outcome of this unique coalition will be a platform for technical assistance and experience sharing, which will be announced at the 2021 Finance in Common Summit.
BIODIVERSITY
Objectives include:
To contribute to the definition, development, and implementation of the universal post-2020 Global Biodiversity Framework under the COP15 process, to support links between the CBD and public finance communities to address the needs arising from the Global Biodiversity framework, and to support a harmonized approach of PDBs regarding economic activities and projects that have an impact on biodiversity.
Progress as of October 2021:
MFW4N held four working meetings on the integration of biodiversity finance as part of the IDFC Green Finance Mapping and the preparation of the biodiversity-related toolbox (forthcoming publication). It organized a thematic session at the IUCN World Conservation Congress titled “How can Public Development Banks Support the Post-2020 Global Biodiversity Framework?” The group plans to hold a thematic session on nature-based solutions at COP26 (IDFC pavilion).
GENDER EQUALITY
Objectives include:
To strengthen accountability for gender equality, increase and/or re-orient funding for gender equality actions, integrate gender issues into climate and biodiversity commitments, and strengthen dialogue with the actors involved in the fight against gender inequality.
Progress as of October 2021:
The coalition held five meetings to advance the two focus areas of the FiCS Gender Declaration (50 PDBs participated, among them 25 signatories of the Gender Statement), with a capitalization report (Public Development Banks Driving Gender Equality - An Overview of Practices and Measurement Frameworks) to be issued at the 2021 Finance in Common Summit.
Bilateral meetings with networks and groups of PDBs expanded awareness about the coalition, further mobilizing the broader PDB community. And the Generation Equality Forum featured five milestone commitments: (a) Launching the 2XCollaborative Gender-Lens Investing Initiative, (b) Unlocking funding for gender and climate change, (c) Improving transparency and accountability for gender equality, (d) Integrating best practices through the Women’s Empowerment Principles and (e) Strengthening roadmaps and action plans to meet the goals of the Generation Equality Forum. Also, the joint secretariat has conducted a study on gender and climate.
SOCIAL INVESTMENT
Objectives include:
To promote a shared definition of Social Investment, to assess the financing needs, and to address the underfinancing of Social Investments.
Progress as of October 2021:
The PDBs launched a report on the linkages between the social investment, economy, climate and security agendas, and designed a baseline survey targeting the FiCS community. Members approved the coalition’s roadmap of activities until 2022, and two events have been prepared: a thematic session during the 2021 Finance in Common Summit on 19-20 October (“Do More, Do better! Partnering for Social investment”), and a panel discussion during COP26 (“Social and Climate Agendas at Par for a Just Transition”).
Resilient cities and subnational development banks (SDBs)
Objectives:
To help SDBs enlarge their portfolios of investment and structure project pipelines at the local level, foster dialogue between SDBs, governments, local authorities, and technical and financial partners through training and experience sharing and reinforce local financial markets.
Progress as of October 2021:
The Alliance of Subnational Development Banks in Latin America welcomed 18 new members on 16 September 2021 and prepared its first public workshop (dedicated to the role of Subnational Development Banks (SDBs) in post- Covid recovery, 23 September). The Alliance also launched a study on Latin American SDBs that is mapping the needs and resources of local financing in the region. The Secretariat of the Alliance presented its work at the UN High-Level Political Forum’s Local 2030 side event entitled “Accelerate post-pandemic recovery and SDG localization through joined up local action.”
Sport & development
Objectives include:
To develop a common vision on the economic, social and environmental power of sport, to design, implement and evaluate best practice S&D projects, activities, and partnerships, and to leverage the positive human, social, economic and environmental impacts of sport around the world. Objectives also include supporting projects through which sport enhances human and sustainable development, as well as their contribution to peace, solidarity and global governance, and the provision of funding and expertise to the actions of the members of the Olympic and Paralympic Movement towards a more sustainable world.
Progress as of October 2021:
The coalition prepared its operational roadmap taking into account members’ needs and gathered the two working groups, and organized plenary meetings. These meetings allowed for the exchange of knowledge and experiences among PDBs in the field of sport and development and sport infrastructure, as well as in other fields, such as road safety. This has enabled members to agree on key working documents and events (e.g., terms of reference; a thematic session during the 2021 Finance in Common Summit). A leaflet was produced with an eye to engaging other PDBs.
WATER FINANCE
Objectives include:
To improve the financing of water and sanitation in order to achieve SDG 6 and the Paris Agreement goals, and to contribute to biodiversity protection.
Progress as of October 2021:
The Water Finance Coalition’s working group created a network and facilitated regular, focused discussions, and the sharing of experience and best practice on the challenge of water financing. Each meeting gathered around 75 participants representing more than 40 institutions, including PDBs17 and other stakeholders (OECD, European Commission, SWA).
The working group published a Global Study on the Role of National Public Development Banks in Financing the Water and Sanitation SDG 6, which analyzes the involvement of PDBs, in particular national PDBs, in the sector’s investment and makes policy recommendations for key Players. These recommendations were presented at World Water Week 27 August 2021 and the report is available online. Next, the working group will review the coalition’s work on financing climate adaptation through investments in the water sector.
FORESIGHT FOR SUSTAINABLE FINANCE
Objectives include:
To promote forward-looking and anticipation approaches and capacities in the financing of sustainable development.
Progress as of October 2021:
The Task Force was set up by the OECD-Development Co-operation Directorate (DCD) DAC-Friends of Foresight community in March 2021. The Secretariat has since circulated a survey to compile expressions of interest to participate and/or support the Task Force, and to elaborate on its concept and activities. The Task Force held its launch webinar on 18 October 2021, aiming to bring foresight to the forefront of sustainable development finance. Its aim is also to highlight the inherent need for PDBs to be more future-aware, anticipate, and integrate uncertainty, based on their long-term mandates and the complex sustainability issues they address.
Alignment of financials chains with the Paris Agreement
Objectives include:
To share knowledge, experience and and best practices, discuss emerging trends and develop guidance on how to advance the alignment of financial chains, from capital markets, corporate banking and institutional investors to development banks, commercial bank intermediaries and to the project/corporate level.
Progress as of October 2021:
The Group held on 1 July 2021 the first in a series of webinars to be organized by COP26, to discuss the rationale for, approaches to and implications of counterpart alignment assessment. It benefited from contributions of several FiCS partners including AFD, EIB, CDC (UK), investors, insurers, commercial banks, the COP26 presidency, UNEP FI and the secretariat of the “Mainstreaming Initiative”. A high-level event is planned during COP26 to take stock of recent developments and discuss perspectives to foster this new frontier of alignment ambition.
