Development finance institutions provide very little information about investments they make through private sector financial institutions, according to a detailed comparison done by Publish What You Fund, a British nongovernmental organization.
PWYF examined disclosures by 17 bilateral and multilateral development finance institutions (DFIs), noting that their investments via financial intermediaries “have increased dramatically in recent years.”
The research, PWYF concluded, “has demonstrated that levels of transparency are low, particularly at the level of sub-investments, and that this makes it near-impossible to track the flow of development finance through private sector financial institutions.”
“In turn, this makes it hard to understand the development impacts ESG [environmental, social and governance] risks of these investments, the PWYF said. The report does not name the institutions studied, a practice followed in four previous reports on other areas of DFI transparency.
However, names will be used next year when PWYF conducts a “pilot assessment” based on a “DFI Transparency Tool,” which is still under development, but will provide a “roadmap” of best practice.
The PWYF Transparency Initiative has taken a deliberately collaborative approach with the DFIs and also involved expert advisors. The project, begin in November 2019, is described here, along with links to the four previous reports. The draft report on DFIs hasn’t yet been posted, but was circulated in advance of an Aug. 11 webinar. WS5 Working Paper – Financial Intermediaries – Draft.
The previous reports have been critical of DFI transparency in a number of areas. A report on disclosures about environmental and social (E&S) risks found a significant gap exists between policy and implementation. (See Eye article here.) Another report said that DFIs are not very transparent about the results of their lending. (See Eye article here.)
The latest report noted a few bright spots, highlighted an example at the Asian Development Bank where sub-investments by a private equity fund were disclosed.
Are the DFIs indicating a willingness to change? Asked that question during the webinar, PWYF CEO Gary Forster replied, “It’s a mixed bag is the truth.” He said some organizations definitely want to be more transparent, but others “are very nervous” about more DFI disclosure.
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