Fiscal 2019 marked the second full year of implementing IFC’s ambitious new strategy to create markets and unleash private sector investments and solutions, particularly in regions with the highest rates of poverty and fragility. Called “IFC 3.0,” the strategy has required us to fundamentally reshape our business model and the way we work. It has demanded that we be more proactive, entrepreneurial in spotting market opportunities, and innovative in designing profitable projects that maximize development impact.
We made significant progress over the past fiscal year in rolling out new tools and approaches to support the full implementation of IFC 3.0. Country strategies were introduced to improve our country-level engagement. Upstream units were launched to sharpen our focus on creating new projects. An Anticipated Impact Measurement and Monitoring (AIMM) system was fully rolled out for all investment projects to enhance development impact assessment. And a new Accountability and Decision-Making Framework was put in place to clarify decision-making roles and accountabilities and to increase operational efficiency.
We also continued to integrate the previously rolled out IDA18 Private Sector Window, Country Private Sector Diagnostics, and our “Cascade” approach to pursuing private sector solutions where sustainable while preserving scarce public resources for where they are needed the most.
Complementing these actions were organizational changes that will help us better respond to the needs of our clients and shareholders. A workforce planning exercise was undertaken to ensure that we have the right people in the right roles throughout IFC.
Delivering Results in Volatile Markets
Macroeconomic volatility in emerging markets made it a difficult year for investors. Currencies depreciated between 10 and 30 percent in many large countries where IFC operates. Growth slowed in many more, and equity values suffered.
Despite deep internal reforms and volatile market conditions, we delivered $19.1 billion of long-term financing through 269 projects in FY19. Over a third of these were directed toward private sector development in the world’s poorest countries—those eligible to borrow from the World Bank’s International Development Association (IDA)—as well as fragile and conflict-affected situations (FCS). In addition, IFC extended $4.5 billion in short-term trade finance, of which $2.5 billion was in IDA and FCS countries.
We continued to prioritize advisory services for challenging markets as well. In FY19, we delivered nearly 60 percent of our advisory program to clients in IDA countries, while 21 percent went to FCS. Sub-Saharan Africa accounted for the largest share of our advisory services in FY19, with about one-third of the total.
Improving Country-level Engagement
Our ability to deliver IFC 3.0 at scale will depend in large part on cultivating proactive and upstream country-level engagement. Our new FY19 country strategies uncover areas where projects and markets can be created, and they will build stronger project pipelines and increasingly guide the deployment of IFC resources. Over the past fiscal year, 25 strategies were developed and 26 more are under development for FY20.
Another key step to support country-level engagement was our creation of upstream units. Introduced in FY19, these units will become operational in FY20. Working off priorities outlined in our country strategies, the upstream units will play the role of incubator and integrator in imagining and designing new projects, and they will help to coordinate upstream efforts across the entire World Bank Group.
Unearthing Green Shoots
The Nachtigal Hydropower project in Cameroon demonstrates what can be achieved under the IFC 3.0 approach to market creation when we work with governments, private sector partners, other development finance institutions, and World Bank Group colleagues. The project will increase Cameroon’s power-generation capacity by nearly one-third, bring clean affordable power to millions while helping to sustain economic growth, and save the country $100 million in generation costs annually.
Similarly, in Rwanda where there are about 3,000 mortgages in the banking system for more than 3 million households, IFC and the World Bank are collaborating to build the foundations of a mortgage market by supporting capital market development and expanding access to housing finance. The Rwanda Affordable Housing project will facilitate the creation of a mortgage refinancing company that incentivizes lenders to scale up their housing financing through the provision of long-term funding for affordable housing.
IFC also continued to replicate the success of the World Bank Group’s Scaling Solar program in FY19, moving beyond four African countries to Uzbekistan. Scaling Solar is a “one-stop shop” program for governments to rapidly mobilize private sector funded, grid-connected solar projects at competitive tariffs. Uzbekistan, which is heavily dependent on natural gas for its electricity generation, is looking to develop up to 5 gigawatts of solar power by 2030 and is using the Scaling Solar approach to tender at least an initial 100 megawatts.
Throughout FY19, IFC and our clients received more than 40 prestigious awards. To mention a few, IFC was named the Development Finance Institution of the Year for the Middle East and North Africa by IJGlobal. Our Nachtigal Hydropower project was named the Multilateral Development Deal of the Year by Project Finance International and the African Power Deal of the Year by IJGlobal. And we received the Excellence in Latin American Local Capital Market Development award from LatinFinance.
Assessing Our Impact
The AIMM system, which underscores IFC’s seriousness in achieving development impact, became fully operational for all new investment projects last fiscal year, with more than 750 projects having been assessed and scored. Starting in July 2019, the AIMM system is being rolled out on a pilot basis for advisory services.
IFC believes in leading from the front. We have been a leader in environmental and social standard setting for two decades, promoting and advancing such initiatives as the Equator Principles and Green Bond Principles. Building on this history, IFC launched with partners the Operating Principles for Impact Management at the 2019 Spring Meetings of the World Bank Group and International Monetary Fund.
These Principles seek to set the market standard for credible impact investing. As of the end of June 2019, they have been signed by 63 institutions, and we are in discussions with more than 40 others to sign the Principles. In addition, IFC published the report Creating Impact: The Promise of Impact Investing, which provides the analytical underpinning for the Principles.
Being Accountable and Transparent
Accountability could not be more important to IFC. We are accountable to the people benefiting from and affected by the projects we support, as well as to our creditors and borrowers, shareholders, and development partners.
To support our shift to more challenging markets, we decided to move our Environmental, Social, and Governance (ESG) Advice and Solutions Department to our Operations vice presidency effective July 2019. This will increase the ownership of ESG issues by investment and advisory project teams and strengthen our focus on ESG impact at the project and sector levels. At the same time, to improve Environmental and Social (E&S) risk management and accountability throughout the project cycle and to ensure independence from operations, we announced the creation of a new E&S Policy and Risk Department from July 2019 to serve as the E&S “regulator” with a direct reporting line to the Chief Executive Officer.
We also introduced in FY19 our first Quarterly Operations Report to the Board of Directors. This report improves transparency by providing IFC’s year-to-date operational performance, including program, portfolio, operational risk, and pipeline overview. In particular, for the first time in IFC history, we delivered a multi-year pipeline presentation to the Board.
IFC is committed to creating markets and opportunities under our IFC 3.0 strategy, especially for countries that have least benefited from private-sector led investment and solutions. To effectively deliver IFC 3.0 at scale and to meet our client and shareholder expectations, we will continue to refine our tools and approaches to support implementation of our strategy while amplifying efforts to invest for impact. In doing so, we will be more proactive and innovative, accelerate upstream initiatives, and operationalize the “Cascade” approach to leverage the private sector to solve development challenges.
Philippe Le Houérou
IFC Chief Executive Officer