About This Report

This report presents the Independent Evaluation Group’s independent assessment, or validation, of the World Bank Group’s 2018 capital increase package (CIP). The report builds on management’s own reporting and other complementary evidence to assess the World Bank Group’s progress in implementing the CIP’s policy measures and achieving its targets. The report also assesses the quality of management’s CIP reporting.

The validation’s main intended audiences are the Board of Governors, to whom the CIP’s original commitment of an independent assessment was made; the Board of Executive Directors, through the Committee on Development Effectiveness; and the management of the International Bank for Reconstruction and Development and the International Finance Corporation.

Work on this report started before, and was independent of, the Evolution Roadmap, which is considering how to evolve the Bank Group’s mission, resources, and operating model.

The World Bank Group’s shareholders endorsed a capital increase package (CIP) on April 21, 2018. This package boosted the Bank Group’s financial firepower with a $7.5 billion paid-in capital increase for the International Bank for Reconstruction and Development (IBRD), a $5.5 billion paid-in capital increase for the International Finance Corporation (IFC), a $52.6 billion callable capital increase for IBRD, and internal savings measures.1 The CIP had two parts: (i) a financing package to enhance IBRD’s and IFC’s financial capacity and (ii) a policy package that committed Bank Group management to policy actions linked to the Bank Group’s 2016 Forward Look strategy. The CIP committed to reporting annually on its implementation and an independent assessment after five years. This report fulfills the commitment to an independent assessment.

The CIP’s intention was to significantly expand IBRD’s and IFC’s financing capacity, thereby enabling both institutions to better achieve their strategic priorities. The CIP’s goal was to increase IBRD’s annual commitments to about $36 billion and IFC’s to $25 billion by fiscal year (FY)30, subject to external factors. The CIP also committed IBRD and IFC to increasing their private capital mobilization (PCM) and financing for certain priority areas previously identified in the Forward Look strategy.

The Forward Look and the Capital Increase Package

In 2016, the Bank Group’s management and shareholders agreed to a foundational strategy document—Forward Look: A Vision for the World Bank Group in 2030. The Forward Look set out a vision and strategy for the Bank Group’s global role, with the objective of shaping “a common view among shareholders on how the World Bank Group can best support the development agenda for 2030” (World Bank Group 2016b, 1). The Forward Look reaffirmed the Bank Group’s value proposition, which includes working on both national and global issues and engaging with both the public and private sectors. The Forward Look’s strategic priorities were as follows:

• Continue to work with the full range of client countries but with different pricing and product offerings to different client segments. These country segments include countries below and above IBRD’s graduation discussion income (GDI) level, which is set at a gross national income of $7,155 per capita; small states; recent International Development Association (IDA) graduates; and for IFC, IDA, and countries classified as being in a fragile and conflict-affected situation (FCS). This priority is known as serving all clients.
• Expand the Bank Group’s role in delivering global public goods and leading on global themes, including gender, climate change, major crises, disease outbreaks, and fragility, conflict, and violence (FCV).
• Increase the Bank Group’s role in generating knowledge and convening partners.
• Increase the Bank Group’s public capital mobilization and PCM, bringing together the joint capabilities of the Multilateral Investment Guarantee Agency (MIGA), IFC, and the World Bank (IBRD and IDA).
• Improve the effectiveness of the Bank Group’s operational model.

In 2018, the Bank Group’s shareholders agreed to a CIP for IBRD and IFC that responded to the principles stated in the Forward Look. The CIP was meant to allow IBRD and IFC to expand their financing operations and implement the Forward Look. In return, management committed to “implementing the necessary operational and cultural changes to make the [Bank Group] operationally fit for purpose to follow the strategic directions set forth in the Forward Look and for achieving the Sustainable Development Goals” (World Bank Group 2018b, i). Specifically, management committed to a package of financial measures and integrated policy reforms for both IBRD and IFC. This linking of a capital increase to extensive formal commitments was historically unique (box 1.1). The capital increase’s policy package was anchored in the Forward Look and shared most, but not all, of its strategic priorities, including differentiating support across client segments (serving all clients), leading on global themes, mobilizing private and public resources and creating markets, and improving the Bank Group’s operating model. The CIP introduced policy measures and made formal commitments that reflected these strategic priorities.

The multiple overlapping global crises since 2018 have created challenges for developing and achieving the Forward Look’s and CIP’s goals. The Forward Look and the CIP both assumed that the Bank Group would have to respond to the occasional crisis, but the reality has turned out differently. The Bank Group has been forced to respond to multiple major crises since 2018, including COVID-19, the fallout from Russia’s invasion of Ukraine, unprecedented food insecurity, and the developing world’s debt crisis, among others. All of these have caused major development setbacks and undermined the Bank Group’s ability to achieve the Forward Look’s and CIP’s priorities. With crises becoming more frequent and severe, the Bank Group expects that crisis prevention, preparedness, and response will continue to be a major part of its work (World Bank Group 2022c).

Objective and Scope

This report’s purpose is to fulfill Bank Group management’s commitment to the Board of Governors that there would be an independent assessment after five years of the CIP’s progress. The Independent Evaluation Group (IEG) conducted the assessment as an extended validation without the extensive data collection typical of a full-fledged evaluation. As such, the report’s main objective is to validate management’s own reporting on the CIP and independently assess the Bank Group’s progress toward the CIP’s targets and policy commitments in the context of the Forward Look.

This validation covers IBRD and IFC but not MIGA or IDA. MIGA did not receive a capital increase and is therefore not covered by this review. IDA is also outside the scope because IDA replenishments are separate from the CIP. This report focuses on the CIP’s policy package while excluding the Bank Group’s efficiency measures, including budget commitments and related savings measures that Group Internal Audit (GIA) is reviewing.

Approach and Methods

Three questions guided this assessment:

• To what extent has CIP reporting by management of the World Bank and IFC been relevant and adequate?
• To what extent have the World Bank and IFC implemented the CIP’s policy measures?
• What kind of progress have the World Bank and IFC made toward achieving results related to CIP and Forward Look’s priorities and policy measures, and how did the CIP contribute to this progress?

This validation reviewed management’s regular CIP reporting and collected evidence from IEG evaluations and technical discussions with counterparts. Management has reported extensively on the Forward Look and CIP implementation through Forward Look, and CIP updates to the Board of Governors, Corporate Scorecards (CSCs), Strategy and Business Outlooks, and board reports on the CIP’s individual priority areas (including FCV, climate change, and gender issues). The CIP’s financial aspects are reported in the Bank Group’s budget papers and IBRD’s Financial Sustainability Framework (FSF) reporting. The validation reviewed all of this reporting and uses evidence from 25 IEG evaluations with direct relevance to the CIP’s priority areas and the Management Action Record’s reporting on the implementation of the recommendations of these evaluations. The IEG validation team conducted interviews with Bank Group and Executive Director staff and had technical discussions and email exchanges with the World Bank and IFC business units in charge of implementing or reporting on the CIP.

IEG devised a systematic validation framework with the following elements. First, the validation adopted the CIP’s structure with four priority areas organized into 12 thematically similar clusters, listed in table 1.1. Second, the validation team compiled each cluster’s commitments, policy measures, indicators, and targets. Third, it gathered all the relevant evidence on each of these clusters. Fourth, it distilled findings into this report, assessing the following for each cluster: (i) the adequacy of management’s reporting, which corresponds to the first validation question; (ii) the implementation of policy measures and achievement of targets, which corresponds to the second validation question; and (iii) the progress on results or outcomes, both expected and unexpected, which corresponds to the third validation question (see appendix A). The validation used a simple rating scale to assess management’s reporting on and implementation of the CIP. A theory of change helped the validation distinguish between actions, outputs, and outcomes (see appendix A). The validation defines the CIP’s five intended outcomes as the Bank Group’s enhanced engagement with all client country segments, expanded role in leading on global themes and delivering global public goods, increased public and private resource mobilization, operating model’s increased effectiveness, and improved financial sustainability (table 1.2). The validation assessed IBRD and IFC jointly whenever feasible and separately when the targets or policy measures from each institution diverged.

Source: Independent Evaluation Group.

Note: CIP = capital increase package; FCV = fragility, conflict, and violence; GDI = graduation discussion income; IBRD = International Bank for Reconstruction and Development; IFC = International Finance Corporation.

Source: Independent Evaluation Group.

Note: CIP = capital increase package; FCV = fragility, conflict, and violence; GDI = graduation discussion income.

The validation distinguished between formal commitments and other policy measures. The CIP text defined formal commitments as specific actions with targets that the Bank Group is held accountable for pursuing. The validation further defined formal commitments as measures that were (i) explicitly underlined in the CIP document’s text, (ii) specified with a target, (iii) listed in the CIP document’s annex summary, or (iv) listed in the Forward Look and CIP updates’ status tables with indicators, targets, and results (World Bank Group 2019a, 2020a, 2021d, 2022b). By contrast, the CIP document also discussed policy measures, which the validation understood to be important or critical actions the Bank Group would take to achieve the CIP’s priorities. Box 1.2 defines these and other key terms, and appendix B lists all of the CIP’s commitments and policy measures.

The validation has a few limitations stemming from its underlying evidence sources. The evidence base is formed by the information available in Bank Group reporting and internal monitoring systems. Many of the data come from the Bank Group’s monitoring indicators, which are of uneven quality. The validation deals with this by assessing the indicators’ relevance. The implementation status of some policy measures was difficult to ascertain because of gaps or a lack of clarity in management’s reporting. Moreover, the reporting rarely discussed the outcomes of the policy measures and priority areas, instead focusing on actions or outputs. To fill this knowledge gap, the validation reviewed relevant IEG evaluations; however, recent IEG evaluations are not available for all of the clusters, so the validation assessed policy measure and priority area outcomes with uneven depth.

Main Findings and Structure of the Report

The report’s main findings are as follows: The Bank Group has made notable progress on the CIP priorities of increasing the Bank Group’s financial sustainability, promoting global themes (including climate change), and, for IBRD, engaging with different client country segments and increasing its financing for below-GDI countries. However, the Bank Group made the least progress in creating markets; IBRD made the least progress in mobilizing private capital and domestic revenues, and despite notable efforts, IFC made the least progress toward achieving its ambitious targets for increasing financing for low-income and fragile countries. Furthermore, the CIP contributed to action on CIP clusters where the Bank Group already had clear strategies or action plans, supportive internal organizational arrangements, and well-defined indicators and targets. The CIP clusters with the least progress were those where the Bank Group lacked a clear vision and measurable indicators or had weak oversight, limited collaboration, and inadequate incentives. The report’s findings have clear implications for designing and reporting on future corporate initiatives.

Each of the next four chapters assesses the reporting, implementation, and outcomes of each of the four priority areas. These are (i) differentiating the Bank Group’s offerings to different client country segments (or serving all clients); (ii) leading on global themes, including gender, FCV, climate change, regional integration, and knowledge and convening; (iii) mobilizing public and private capital and creating markets; and (iv) improving the effectiveness and financial sustainability of the World Bank and IFC operating models. Chapter 6 sums up the validation’s findings and provides lessons for designing and reporting on future corporate initiatives. Appendix A describes the methods used, and appendix B lists the CIP’s commitments and policy measures.