Publish What You Fund has published the Aid Transparency Index for 10 years. The Aid Transparency Index is the only independent measure of aid transparency among the world’s major bilateral and multilateral development agencies. In later editions, the Aid Transparency Index has included assessments of multilateral DFIs. For the first time in 2022, these DFIs had their sovereign and non-sovereign portfolios assessed separately. It is therefore important to explain the need for a new index of DFIs’ transparency and outline the principal differences between the two indexes. In turn, this will help to explain the different scores that institutions receive in the two assessments.
At its core, the Aid Transparency Index is primarily a measure of the extent and quality of data that aid agencies and other institutions (such as DFIs) publish in the IATI Standard. While being an IATI publisher is not a prerequisite of inclusion in the Aid Transparency Index, it remains the fact that in the most recent edition of the index all but three of the institutions included published IATI data. The predominance of IATI publishers in the Aid Transparency Index is partly a result of the Aid Transparency Index’s success in incentivising the publication of aid data to a globally recognised open data standard. Furthermore, publication in the IATI Standard is fundamental to scoring highly in the Aid Transparency Index; institutions that do not publish IATI data cannot score above 51.875 points. Across its history the Aid Transparency Index has been successful in improving the quantity and quality of aid data that is disclosed. It has also provided a basis for comparing data across a range of institutions; from bilateral aid agencies, to development banks, philanthropic organisations and United Nations agencies.
While there are clear benefits of comparability across this range of donors, DFIs have their own unique attributes that are not covered in the Aid Transparency Index. DFIs have different mandates to other aid agencies, including their role in mobilising private sector investment and financial additionality, which we believe warranted a separate index process. Also, there are characteristics of a subset of DFI activities that necessitate a form of transparency that is not adequately covered by the IATI Standard. DFIs have historically financed activities that contain significant environmental and social risks. These include the financing of major infrastructure projects and routing of capital through financial intermediaries. Our research into these subjects highlighted the need to measure transparency in new ways that are not included in the Aid Transparency Index. In some cases, prioritising formats other than IATI.
The strength of IATI is its standardisation of aid information, its timeliness, and the fact that it is fully open, machine-readable data, accessible from a central registry. This means it can be compared, aggregated and disaggregated for macro or micro-level analysis. There are, however, aspects of DFI business models that are fundamental to many of their mandates that are currently not accommodated by the IATI Standard. A number of these relate to the financial aims and structuring of DFI investments, including the use of co-financed financial instruments, the mobilisation of private finance, and the use of concessional funding in the form of technical assistance and blended finance. As these types of data cannot currently be published in the IATI Standard, they are not captured in the Aid Transparency Index, and it is necessary to assess the disclosure of them in other ways.
The Aid Transparency Index and the DFI Transparency Index both measure transparency, but the DFI Transparency Index allows for a more customised assessment that is tailored specifically to DFIs’ business models. These differing methodologies inevitably result in different scores for institutions that are included in both indexes. This is not inconsistent, but rather reflects that an institution may have different aspects of transparency being measured leading to different outcomes.
We recognise that for DFIs included in both the Aid Transparency Index and the DFI Transparency Index the current arrangement may not seem ideal. We have sought to reduce the burden of this arrangement by aligning the indexes to the greatest degree possible, while retaining their individual significance and the logics behind their use. We will continue to assess the relationship between the two indexes.