10 policy recommendations for decision makers on Public Development Banks

Major planetary concerns, including climate change, loss of nature and inequalities among human beings, call for very large scale concerted action at all levels. The challenge is to favor major structural transformation of all economies to achieving higher productivity, while becoming low carbon and more inclusive. Public Development Banks (PDBs), whether at a local, national, continental or international scale, are key instruments to help governments finance the rapid recovery from the COVID crisis and achieve long-run transformation of existing economic models to ones that serve people and planet far better.

By providing direct public financing and mobilizing private finance, PDBs should transform themselves with tools and indicators that allow them to proactively select and support long-term productive investments, emphasizing low-carbon operations, as well as those that support poorer regions and people. They should set up a “sustainable development analysis grid” to select operations, based on criteria that help maximize development impact; financial returns are important, but secondary for PDBs. They must also ensure that none of their financing encourages activities that run counter to the achievement of sustainable development goals (SDGs), including climate and nature.

An international research program was set up, sponsored by International Development Finance Club (IDFC), Agence française de développement (AFD) and Ford Foundation: “Realizing the Potential of Public Development Banks for Achieving Sustainable Development Goals”. It includes 20 prominent researchers from all over the world, including from Institute of New Structural Economics (INSE) of China, Columbia and Boston Universities from United States, FERDI and IDDRI from France, ODI from England, UNDESA and UNCTAD from the UN system, as well as development banks such as BNDES and BDMG.

The researchers produced 16 research papers, including in each of them key recommendations for decision makers to increase and improve the role as well as the efficiency of PDBs in promoting sustainable and inclusive structural transformation.

This overview has been published in the framework of the International Research Initiative on Public Development Banks working groups and released for the occasion of the 14th AFD International Research Conference on Development.