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1. Greening the US Sovereign Bond Guarantee Program: A Proposal to Boost Climate-Directed Sovereign Finance in Developing Countries

Author:
Scott Morris, Rowan Rockafellow, and Alan Cameron
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
Sovereign bond guarantees (SBGs) are an effective but underutilized instrument available to the US government in support of developing country partners. By protecting bond purchasers in the event of a foreign issuer country’s default, SBGs substantially reduce borrowing costs for developing country governments. In this CGD policy paper, we estimate the costs and benefits of historical US sovereign bond guarantees in order to model the use of SBGs for climate finance purposes. We demonstrate that the US government-provided SBG has the effect of conferring the US government’s cost of borrowing on the partner government. On that basis, it represents substantial savings for these countries. Based on this analysis, we propose a $20 billion “Green” SBG program aimed at financing climate change mitigation efforts in 28 emerging market economies. We estimate that the US government could support $20 billion in bond issuances through a subsidy outlay of $2 billion, resulting in a 22 percent reduction in borrowing cost of the target countries, which represents $4 billion in budgetary saving for their governments. We propose that the subsidy appropriations in support of the guarantees be retained and recycled within the Green SBG program, which would substantially improve the financial leverage of the program over time. We also suggest that the program could be used for climate adaptation purposes by targeting a different group of developing countries
Topic:
Climate Change, Development, Finance, Sustainability, and Green Transition
Political Geography:
North America and United States of America

2. Operationalizing Climate Adaptation at the US International Development Finance Corporation: The Case for an Agriculture-Led Agenda in Low-Income Countries

Author:
Clemence Landers, Jocilyn Estes, and Scott Morris
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
The US International Development Finance Corporation (DFC) could be well placed to lead among development finance institutions (DFIs) on agriculture adaptation to climate change. With its mandate to support private investment in developing country markets, overcoming barriers to investment in agricultural adaptation—where agricultural growth is an estimated two to four times more effective at reducing poverty than growth originating from other sectors—is exactly the type of activity DFC is intended to pursue. Yet, DFC is paradoxically prone to the same investment incentives and disincentives as private investors with an investment portfolio that tends to favor lower risk, higher deal size (and lower overhead) transactions. So, while global estimates for adaptation investments financing needs total close to $140-$300 billion by 2030, a fraction of the global mitigation needs measured in the trillions of dollars, the barriers to project level investment in agriculture adaptation and resilience raises the risk that DFC will continue to favor larger and lower risk mitigation investments in more established markets. This paper reviews DFC’s agriculture portfolio, and based on this review, proposes elements of an agriculture strategy that can overcome barriers to adaptation and resilience investments in the most climate vulnerable markets.
Topic:
Agriculture, Climate Change, Environment, and Finance
Political Geography:
Global Focus

3. How Effectively Is the Asian Development Bank Responding to COVID-19? An Early Assessment

Author:
Azusa Sato, Rakan Aboneaaj, and Scott Morris
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
In 2020, the Asian Development Bank (ADB) joined efforts by other multilateral development banks (MDBs) to rapidly scale up support to developing countries to address COVID-19. Beyond headline numbers, there has been less focus on how ADB’s support was distributed by country income group, sector, modality, and product. Using an updated dataset on commitments and disbursements between 2018 and end of December 2020, we compare “pre-crisis” and “crisis period” trends. We overlay ADB data on other publicly available datasets reflecting population size, mobility levels, and government fiscal stimulus to evaluate the responsiveness and size of ADB support vis-à-vis other MDBs. Our findings show ADB’s response was most significant in the countries that most needed support—low income economies with sharp GDP declines and limited fiscal response capacity. The health and public sector management sectors had significant surges in commitments, and impacted the modality used. While there was a rise in grant and concessional financing in 2020, non- concessional loans and sovereign operations still dominated during the crisis period. We suggest further work on how these changes impact development outcomes, with a view to recalibrating the bank’s strategies in some sectors and products in the medium term.
Topic:
Development, Finance, Pandemic, COVID-19, and Banking
Political Geography:
Asia

4. Promoting Investment in Research for Development Outcomes: A Research Ventures Fund at the World Bank

Author:
Scott Morris
Publication Date:
08-2019
Content Type:
Policy Brief
Institution:
Center for Global Development (CGD)
Abstract:
This note proposes a new Research Ventures Fund (RVF) at the World Bank to better prioritize R&D investments in support of development progress. The RVF would employ financing mechanisms that are consistent with research needs: significant scale and scope, patience, and tolerance for failure. Existing development-oriented research consortia like CGIAR would provide a promising start for RVF funding allocations. Donors to the IDA-19 replenishment should take the first step in securing funding for the new fund in 2019.
Topic:
Development, International Cooperation, Science and Technology, World Bank, Finance, Research, and Banking
Political Geography:
Global Focus

5. ABCs of the IFIs: The African Development Bank, the Asian Development Bank, and the International Fund for Agricultural Development

Author:
Scott Morris, Erin Collinson, and Alysha Gardner
Publication Date:
10-2019
Content Type:
Policy Brief
Institution:
Center for Global Development (CGD)
Abstract:
The African Development Bank (AfDB), the Asian Development Bank (ADB), and the International Fund for Agricultural Development (IFAD) are among the international financial institutions seeking pledges from donor countries as part of upcoming replenishment cycles in 2019 and 2020. The United States is a leading donor to these funds and has played a crucial role in shaping the institutions’ agendas throughout their histories.
Topic:
Agriculture, Development, Finance, Banks, Institutions, and Banking
Political Geography:
Africa and Asia

6. The International Development Finance Club and the Sustainable Development Goals

Author:
Scott Morris
Publication Date:
12-2018
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
The Sustainable Development Goals (SDGs) face a key dilemma . Although major multilateral institutions like the World Bank and the other core multilateral devel- opment banks (MDBs) have played a leadership role in shaping the SDG financing framework, there is a sig- nificant misalignment between the structure of these institutions and SDG financing needs . Specifically, the SDGs put countries, not multilateral institutions or foreign donors, at the forefront in achieving desired outcomes . Further, the SDG financing agenda identi- fies an important role for the private sector and other nonsovereign actors . Although the MDBs will remain key players in SDG financing, other leading actors—and particularly, other ways of organizing across institu- tions—will be needed to meet the SDGs . The International Development Finance Club (IDFC) is uniquely positioned to play a leadership role on the SDGs . A diverse group of development finance insti- tutions (DFIs), IDFC members collectively embrace a strong country-led focus and private-sector orienta- tion . Members represent a variety of models . Some act as national banks, focused primarily on domestic financing . Others act as bilateral aid agencies and DFIs . Still others act as regional and multilateral develop- ment institutions . Together they bring considerable financial and strategic resources to meet SDG financing needs, and they appear to be well matched to respond to key SDG requirements, including the call for nation- ally led development strategies and the need for sub- stantial private-sector and nonsovereign investment, particularly in infrastructure . This report surveys 22 IDFC member institutions to identify the club’s role in meeting SDG financing needs . Through institutional snapshots, aggregated financial data, qualitative inputs, and case studies, the report reveals a high degree of SDG relevance in these development institutions . We find that the total assets of IDFC institutions are significantly greater than the total assets of core MDBs, indicating that as an orga- nization, IDFC has untapped power as an organiz- ing platform for the SDG agenda . We also find a high degree of alignment between IDFC-reported activities and the full range of SDGs, though only a minority of IDFC members inform their operations with an explicit SDG strategy . Most relevant to the question of leveraging private financing for the SDGs, especially infrastructure, our survey indicates that as a group, IDFC members primarily finance nonsovereign enti- ties, especially private firms, in the course of pursuing development objectives . The IDFC could play a stronger leadership role on behalf of its membership by better aligning its mandate with the SDG agenda . We see a future in which IDFC members adopt common standards for SDG frame- works and for tracking the inputs and outputs relevant to the SDGs . Members should consider the degree to which they wish to make the club a meaningful plat- form for coordination, deliberation, and visibility for the broader SDG agenda . This agenda implies a wid- ening set of demands on members and may require a more robust secretariat to support a wider range of reporting activities, information gathering, agenda setting, and convening . Through a greater commitment to SDG-oriented activ- ities, IDFC members could demonstrate the value of organizing around national, bilateral, and multilateral development institutions to address the leading devel- opment challenges in the years ahead .
Topic:
Development, Finance, Sustainable Development Goals, and Sustainability
Political Geography:
Global Focus