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Against this backdrop, it would seem that priorities other than corporate governance should take precedence for development finance institutions. But at their annual gathering, which took place at the end of March in Lima, representatives of these institutions recommitted to promoting good corporate governance practices in their investments. The reason: a growing body of evidence quantifies the strong link between good corporate governance and sustainable economic development. As a result, implementing corporate governance practices has become a mission-critical element of development institutions.
“In the past year alone, we have seen that more DFIs have altered their investment approach to incorporate corporate governance,” said Darrin Hartzler, Manager of the IFC Corporate Governance Group. “Like IFC, many more are requiring governance assessments as a component of their investment due diligence.”
Event draws more than 100, focus on governance challenges for key economic sectors
The XI Development Finance Institutions Conference on Corporate Governance drew more than 100 participants from over 18 countries, including representatives of major multilateral and development institutions as well as senior executives from state-owned enterprises, microfinance institutions, and the private sector.
During the conference, the group explored the unique governance challenges faced by microfinance institutions and state-owned companies—both of which play outsized roles in many emerging market economies. The group also weighed the possibility of inviting mainstream financial institutions to future events, as the push for corporate governance gains momentum within the broader investment community.
Board diversity a growing priority
On the issue of board diversity, the group discussed progress made, as more women ascend the career ladder. They also addressed the significant gaps remaining: according to McKinsey, women represent only 4 percent of CEOs, 13 percent of board directors, and 20 percent of executive committee members at companies around the world.
According to IFC’s Sanaa Abouzaid, increasing women’s participation at all levels of the corporate ladder—but particularly at the top—is an economic imperative for emerging market countries. “Recent research shows that all nations could see significant GDP gains by balancing the gender scales but that this effect is even more pronounced in countries that are struggling economically,” she said.
Other sessions touched on timely topics such as the role of governance in integrating stock exchanges, as is happening in Latin America with the MILA integrated market.
OPEC Fund for International Development, newest signatory to the Corporate Governance Development Framework
Also at the conference, the group of DFIs committed to the principles of good governance through the Corporate Governance Development Framework and welcomed their newest signatory, the OPEC Fund for International Development (OFID). The framework provides guidelines for integrating corporate governance in credit and investment operations, conducting client governance assessments, and collaborating with other signatories. During their gathering, the signatories discussed ways to support each other in implementing the guidelines, through sharing of knowledge and experience and through formal training.
With OFID, the number of DFIs committing to the framework now totals 35—a critical mass of institutions deploying corporate governance as a tool to improve company performance and enable access to capital. In turn, this will bring about more broad-based cultural shifts in emerging markets at all stages of development, enhancing the overall business environment, stimulating growth, and catalyzing additional investment for longer term economic gains.
Agenda: 11th Annual DFI Corporate Governance Conference , March 29-30, 2017
Fact Sheet: Corporate Governance Development Framework, April 2017
Website: Corporate Governance Development Framework, IFC
Framework: A Framework for Integrating CG into Investment Operations (PDF)
Photo Album: 11th Annual DFI Corporate Governance Conference