To achieve the Sustainable Development Goals (SDGs) by 2030, development institutions will need to leverage an unprecedented amount of private sector capital. Consistent with the above, private capital mobilization (PCM) has become a Bank Group-wide effort, to be explicitly pursued in the context of the Mobilizing Finance for Development (MFD) strategy and the Cascade approach.
This evaluation offers IEG’s first systematic assessment of the Bank Group’s approaches with PCM and the achievements of development outcomes in engaging with investors and project sponsors. The evaluation findings suggest that i) Bank Group PCM approaches have been relevant to both country and corporate clients, ii) PCM approaches partially meet investors’ priorities and expectations, iii) PCM approaches are mostly effective in mobilizing private capital and iv) PCM potential exists even in low income and lower-middle income countries. The evaluation also highlights important gaps: IBRD PCM targets have not cascaded to Regional units and Global Practices (GPs), and IFC PCM approaches are not consistently aligned with investors’ risk appetites. The COVID-19 crisis response requires mobilizing both public sources and institutional investor capital sources in the short to medium term.
The evaluation identifies three near-term actions that can enhance the ability of the Bank Group to mobilize private capital and thus improve the probability of meeting corporate targets and improving outcomes:
- To meet the 2030 PCM targets, prioritize client countries for PCM approaches, with corresponding targets cascading to the Regional units and GPs (IBRD). Country strategies can be used to discuss PCM opportunities and priorities, including in LMICs and LICs, while also engaging in longer-term strategic discussions about attracting institutional investors who have much longer investment horizons. IBRD needs to cascade PCM objectives to the Regional units and GPs, with clear incentives for operational units to meet them.
- Expand PCM platforms, guarantees, and disaster risk management products commensurate with project pipeline development (Bank Group). There is room for guarantees to grow to support new project financing or refinancing efforts. World Bank disaster risk management products and programmatic PPP solutions are experiencing a renewed demand. They could be scaled up with support from World Bank Treasury and Infrastructure, PPP, and Guarantees units, especially in view of client governments’ responses to pandemics.
- Develop new PCM products and improve product alignment with the needs of new investor groups and partners (IFC and MIGA). Simpler products comparable to investors’ existing portfolios and with exposure to emerging markets and developing economies are relevant to most investors. Global and regional clients also seek innovative instruments. Pooled currency facilities and short-term liquidity facilities will be even more relevant in view of the COVID-19 crisis. There is market demand for political risk guarantee solutions that offer comprehensive coverage or support collective investment vehicles targeting LMICs and LICs. Pilot approaches on innovative instruments and better investor alignment can scale up PCM and improve development outcomes.