Improving private capital mobilisation data

The financing gaps to achieve the Sustainable Development Goals (SDGs) and to address the climate crisis are well known, but multilateral development banks (MDBs) have insufficient resources to address this alone. Ensuring that MDB resources are encouraging private funds to invest alongside them, rather than crowding them out, is essential. Fundamental to this is better mobilisation reporting.

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 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.

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:

1. Improve existing methods
2. 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.