Mobilisation transparency
Crowding in: An advanced approach for measuring and disclosing private capital mobilisation
To close the ever-growing financing gap to meet the Sustainable Development Goals and tackle the climate crisis, there have been calls for multilateral development banks (MDBs) and development finance institutions (DFIs) to both receive more resources and to mobilise more private capital. But mobilization rates have largely stagnated and are not on track to achieve the scale of financing necessary to meet global demands. In addition, the approaches currently used to measure and disclose mobilisation don’t allow us to fully understand and analyse mobilization, to see what is most effective and how it can be better incentivized.
Following discussions with DFIs, shareholders, private sector representatives, and subject matter experts, Publish What You Fund has developed a proposed new approach to the measurement and disclosure of private capital mobilisation (PCM). It builds on the existing MDB and OECD approaches and sets out the improvements needed to ensure accountability, learning – and ultimately – to increase the scale of mobilisation. We have defined a consistent methodology for measuring mobilization that accurately captures the broad range of activities across timelines and aligns with incentives to prioritise the most promising kinds of investments.
Critically, our proposed approach calls for increased levels of disaggregation in mobilization disclosure. Following consultation with private investors, we have identified an approach to disclosure that is ambitious but achievable and provides the needed balance between sufficient disclosure and protection of commercially sensitive information. To truly understand what works and where, it is vital that we see disaggregated and granular PCM data, including transparency of investment, instrument, country, sector, amounts mobilised, and the typology of the mobilised party. The blanket presumption of confidentiality relating to PCM data must change to a presumption of disclosure, with exceptions only where legitimate confidentiality concerns exist.
See our proposed approach
Download the executive summary
Following a period of consultation, we are refining our proposals and will launch our final recommendations in the autumn of 2024.
Watch our launch event: Improving the measurement and disclosure of private capital mobilisation by MDBs/DFIs
We launched our report on 16 April, with the Center for Global Development in Washington DC and online. Key public and private stakeholders discussed the importance of mobilising more private capital in emerging markets and developing economies, how MDB approaches need to evolve, and the best ways to disclose, assess, and report on their performance.
Mobilisation project
Our 18-month programme, initiated in April 2023, aims to increase understanding around what works to mobilise private investment by creating an improved mobilisation reporting approach for leading MDBs and DFIs. This project is funded by the MDB Challenge Fund. The MDB Challenge Fund is administered by New Venture Fund and supported by grants from the Bill & Melinda Gates Foundation, Open Society Foundations and the Rockefeller Foundation.
The issue
Current financial flows, whether as official development assistance (ODA) or development finance provided by MDBs and DFIs, are not sufficient to meet the challenges of today. Significant financing gaps exist in achieving the SDGs and in climate adaptation and mitigation funding. There is a broad recognition that it is necessary to mobilise significant volumes of private capital to meet these challenges. Following a 2015 statement from the heads of leading MDBs on the need to move from billions to trillions in resource flows, the mobilisation of private capital has become one of the core functions of MDBs and DFIs.
However, in the time since the “billions to trillions” statement, leverage ratios have proven to be insufficient to meaningfully bridge financing gaps. Since the onset of the confluence of crises including the Covid 19 pandemic and the Russian war of aggression in Ukraine, mobilisation rates have largely stagnated. We are therefore at a critical juncture where the demand for development financing continues to increase and mobilisation of private capital is not keeping pace.
The role of measurement and transparency
Significant work has been done in developing methods to measure the mobilisation of private capital, resulting in two broadly adopted approaches: the MDB harmonized approach and the OECD approach. While these approaches helped to establish guidelines on the measurement of mobilisation, they both arguably contain limitations. Furthermore, reporting in line with each approach has generally been limited to aggregate reporting with only limited levels of disaggregation around country income level and sector. Finally, reporting has been irregular with significant time delays in data disclosure.
Publish What You Fund launched the DFI Transparency Tool in November 2021 and the first DFI Transparency Index in January 2023. These products have provided guidance on, and measured transparency at 30 leading MDB and development finance institution (DFI) portfolios. The Index highlighted the fact that there is currently almost no transparency of disaggregated mobilisation data. This presents a major barrier to improving mobilisation efforts.This programme aims to create an improved mobilisation reporting approach for leading MDBs and DFIs to increase understanding around what works to mobilise private investment. Through a collaborative effort with leading DFIs and other key stakeholders, we will seek to demonstrate the possible ways forward for investment level reporting of mobilisation data. We hope to help to steer what greater transparency looks like and incentivise a sector-wide shift in practices over the coming years.
Our goals
The overall goal of this programme is to expand MDB lending capacity by increasing private capital mobilisation of non-DFI resources for achieving the SDGs, climate targets and gender equality goals. We will achieve this by increasing understanding around what works to mobilise private investment by proposing improvements to existing mobilisation reporting practises. We will also introduce an improved/new mobilisation reporting approach for leading DFIs who are already working on these issues. In collaboration with DFIs, we will demonstrate methods to improve reporting of mobilisation data.
We hope this will result in evidence and insights that can be used by shareholders to increase the mobilisation achieved by their institutions, and provide timely, disaggregated data to help private finance managers make investment decisions and stakeholders to hold DFIs to account.
Our approach
As with all of our work, we will adopt a collaborative and multi-stakeholder approach that seeks to identify the central issues in measuring and disclosing mobilisation data, and establish consensus on a path forward.
We plan to take a two-pronged approach to improving mobilisation reporting:
- Improve existing methods
- Introduce a new framework for reporting mobilisation for adoption by the leading MDBs and DFIs who want to do more on this issue
Publish What You Fund has a proven track record of improving mobilisation data, having successfully advocated for a requirement that IFC disclose mobilisation data for Private Sector Window (PSW) investments. The next step in this work is to identify an appropriate approach to disclose this data. This work will build on the mobilisation requirements enshrined in the DFI Transparency Tool and may inform future iterations of the mobilisation indicator if appropriate.