By Toby McIntosh
The international steering committee that controls the Global Emerging Markets Risk Database (GEMs) has decided to make the data more transparent, according to a World Bank report.
Opening up the GEMs data has been encouraged by the private sector and others, who say that access to the information from 24 public institutions about lending risk will increase private investment in developing countries. (See March 30, 2023, EYE article.)
The European Investment Bank, which administers GEMs, told EYE March 30 that “there are currently ongoing discussions” on greater transparency.
That was a slight understatement, according to the World Bank report, which says the seven-person GEMs Steering Committee, “has endorsed a proactive agenda comprising engagement with investors, key data providers, and G20 members.”
Further, the report continues, “The GEMs Consortium is working on the modalities of making data available externally with appropriate safeguards and quality standards with priority to private sector data.”
World Bank, Others, Encourage Move
The report recommends that the World Bank “continue to collaborate” with other multi-lateral development banks (MDBs) and credit rating agencies (CRAs). It notes again that the GEMs Consortium “is working on how to make data available with appropriate safeguards.”
The “appropriate safeguards” are undefined, but are likely to control the kinds of information disclosed and the conditions for its use.
EYE has requested further information from EIB on the Steering Committee’s decision.
The GEMs database, with information provided by the World Bank and other MDBs, contains comprehensive data about the probabilities of loan defaults by borrowers and expected losses. The 33-years-worth of data is used by the 24 members of the GEMs consortium to evaluate future lending risks in the developing world, but is not available to the public. The GEMs steering committee is composed of representatives from the World Bank, the EIB and other MDBs.
The World Bank report, of which GEMs is only a tiny part, is due to be considered on April 12 by the Bank’s influential Development Committee. The Development Committee’s decisions will be forwarded to the Bank’s Board, which will meet later this week.
Wider access to the data would help the private sector, including commercial credit rating agencies, analyze investment risks, according to advocates for breaking the current confidentiality seal. They expect the data to show lower risk that is now assumed and so result in more investment in the developing world.
Pressure to reveal GEMs data is coming not only from a coalition of major private investment companies, the Investment Leadership Network, but also from public interest groups. World Bank President David Malpass spoke in favor of it, as have US government officials. A panel of experts supported by the Group of 20 countries, the Capital Adequacy Frameworks Panel, has outlined ways to restructure GEMs and release more data.
Amy Hepburn, the Chief Executive Officer of the Investor Leadership Network (ILN) Secretariat, told EYE she is hopeful that the data will be shared with private investors because a scarcity of good risk data is holding back investment to the developing world. “We need some data to help us price risk in terms of what is real and what is perceived,” Hepburn said.
Although she has heard there might be issues to deal with, such a need to sanitize the GEMs data, Hepburn said, “We never have been a very comprehensive answer on why this isn’t achievable.”
Supporters of GEMs transparency had hoped that the cause would get a nudge when MDB leaders met for the World Bank/IMF Spring Meeting, underway this week. But judging by the Bank’s summary, the GEMs Steering Committee had made a decision already.
GEMs issued a limited amount of aggregated data in two-volume 2020 report, but the material was heavily aggregated. However, there seems to be on instance in which data was shared with an investment fund..
2019 GEMs Data-Sharing Deal Unexplained
In 2019, a Dutch company, ILX, announced on Twitter “a GEMs data sharing agreement” with the EIB, but the details the agreement are unclear.
The EIB communications office told EYE April 11 that “the agreement with ILX was indeed signed in 2019 and consisted of sharing certain aggregated credit risk statistics as a one-off exercise. The agreement is therefore no longer operational.”
ILX did not reply to EYE’s request for more information.
ILX manages “an emerging market focused private credit fund that provides institutional investors access to investment opportunities of the development finance asset class, by investing in private-sector loans arranged by Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs).”
With pictures of a signing event, the tweet called the deal “a milestone in utilising these aggregated MDB/DFI EM credit statistics to mobilise private institutional capital for #financefordevelopment #climatefinance #SDGs.”
The sharing agreement was a success, according Marielle Brunelle, Global Communications and Business Development Manager at the Investor Leadership Network, saying it gave ILX a “jumpstart.”
