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00:00Well, good afternoon. Hope everyone's had a good Canadian finance conference so far.
00:04My name's Catherine Jiglinski. I help lead the investing team here at Bloomberg News,
00:08and I'm honored to introduce Andrea Dorr, who works as Global Head of Funding at the World Bank.
00:14And it was interesting in preparing, I said, the World Bank has funded a lot more than you think,
00:18more than $15,000, 15,000 development projects across so many countries that I dare not even tally.
00:25Andrea, could you maybe just give us a bit of an overview of how the World Bank works
00:29and how your role really fits into it?
00:32First of all, well, good afternoon, everyone.
00:34And I want to first thank Bloomberg and NBF for the opportunity to be back here.
00:40Great to see a full room, and I think probably a number of investors, hopefully, also in attendance.
00:48So I just want to say thank you.
00:51Like you mentioned, I head the funding team for the World Bank.
00:55And it has been, you know, it's, I've been at the institution for almost two decades, actually.
01:03Time has gone by fairly quickly.
01:05So the group that I lead, the response for the bank in the international bond market.
01:12In fact, we have been a very active issuer across the market for decades now.
01:21It's the World Bank, in fact, maybe what I could probably go back and probably explain the financial model of the bank.
01:29The bank, basically, shareholders have put in a certain amount of capital in the bank.
01:33In fact, if you take, for example, IBRD, the International Bank for Construction and Development, which is the largest entity of the World Bank Group,
01:41shareholders have put in just over, say, $22 billion in terms of paid-in capital.
01:47There's a portion of callable capital, but $22 billion of paid-in capital.
01:52We have taken that $22 billion and going to the capital market and leveraged that $22 billion to raise funds for the bank.
02:00And over the 80-year-plus history of the bank, we have raised over a trillion dollars.
02:08So it's a really efficient model.
02:12So what we do, we take that fund and we un-lend it to our member countries, developing countries, to be used for development projects.
02:22So the leverage of that $22 billion, and the goal here is for us to raise funds at the lowest possible cost.
02:31And the reason that we're able to do that is because we're a strong financial institution.
02:37We're rated AAA.
02:39We've seen policies in terms of risk policies, very strong risk policies, and great backing from our shareholders.
02:46So we've been able to raise funds at a lower cost and pass on that benefit to our member country.
02:52So that in terms of the financial sort of model.
02:56Example in terms of how much funds that we have raised on a yearly basis, if we take IBRD, the International Bank for Construction and Development,
03:03is the largest entity of the World Bank Group.
03:06It provides funding to middle-income countries.
03:08Last year, we raised the highest amount in the bank history, $64 billion.
03:11We expect a similar amount of funding from the institution.
03:16So we raise an average between $60 to $65 billion a year.
03:20We also raise a notable amount for either the International Development Association.
03:26It's a part of the World Bank Group that provides funding to the lower-income country.
03:32And so last year, we raised $19 billion for that entity.
03:36So it's a very impactful institution, like you mentioned, in terms of some of the projects
03:40that we finance globally, the largest source of development finance and expertise for developing
03:46countries, and the bank in terms of the impactful sort of investment.
03:51Yeah.
03:51And I was going to say, you have a great vantage point looking at all sort of investors and
03:56appetite for these types of deals.
03:58You know, earlier this year, the World Bank issued a USD bond with its largest ever 10-year
04:03order book, and even re-entered the Canadian dollar bond market for the first time since
04:09January 2024.
04:10So could you talk a little bit about investor demand for these offerings and your approach
04:14when it comes to entering the USD bond market or the Canadian dollar one?
04:19Maybe I'll start with Canadian dollars.
04:20Since it's a Canadian dollar conference and we have many Canadian investors in the room,
04:24we have been very active in the Canadian market.
04:27In fact, we have done, since our first transaction a couple of decades ago, we have raised over
04:33$10 billion in the Canadian market.
04:36It's a market that we have a great relationship with many investors in that market.
04:41We try to take a very strategic approach to that market and try to be present in the market
04:47at least on a yearly basis.
04:49The product we provide is driven, obviously, by investors' demand.
04:52We try to make sure that we're in constant dialogue with investors to be able to calibrate
05:01the demand in terms of the funding requirements with investor demand.
05:06We have been able to issue across many maturities.
05:12The most common or popular one in terms of demand has been the five-year part of the curve.
05:18Last year, it was probably the longest.
05:23We were consistently, like I said, in the market.
05:26But the last 18 months prior to getting back in the market in August, we were out of the
05:31Canadian market.
05:33And the reason it wasn't because of a lack of demand and a lack of commitment from the
05:38World Bank in terms of Canadian investors.
05:41It was simply due to the fact that the cross-currency swap.
05:45Our balance sheet, say, for IVRD, is in U.S. dollars.
05:48So when we're issuing the Canadian dollars, we need to swap it back into U.S. dollars.
05:53So unfortunately, we need to take into consideration the cross-currency.
05:56And we also have a fiduciary responsibility to raise funds, as I say, at the lowest possible
06:01cost because we're passing on that benefit to the developing countries.
06:06So we need to compare the cost of funding in any currency, not just Canadian dollars, to
06:11say U.S. dollars, to euros and some of the big markets that we also issue into, and to
06:17be able to get the lowest cost.
06:19And that's the reason why we were thrilled when the cross-currency realigned a couple of
06:24months ago that we were able to come back to the Canadian market and issue a 1.5 billion
06:29transaction.
06:30And the reception was great, and we want to thank all the investors that participate in
06:35the transaction, and those of you that may potentially be in the room.
06:38It was a fantastic transaction, and we hope we'll be able to come back to the market fairly
06:44soon again.
06:45I didn't mention terms of, we did mention terms of the U.S. dollars.
06:49U.S. dollars is the largest source of funding.
06:51For us, it's the deepest market.
06:53At least two-thirds of our funding come from the U.S. dollar market.
06:56Our goal is to probably to diversify our funding source globally, and we have investors, and
07:03we issue not just in the U.S. on Canadian dollars.
07:06We issue on average within 20-plus currencies a year.
07:10But the U.S. market is the deepest market for us.
07:13You mentioned that we did a very successful 10-year transaction.
07:17It's, you know, in terms of duration, 10-year is a significant trade, a 5 billion trade in
07:23the U.S. dollar market.
07:26We try to create a curve across all currency in terms of depth, in terms of liquidity, to
07:32provide investors liquidity in that market.
07:35We work with NBF, I think, in one of our largest transactions earlier this year in dollars as
07:42well.
07:42So dollars, euros, Canadian dollars, the goal is to diversify our funding source, raise, get the lowest
07:51possible cost so that we could pass that benefit to our developing countries to be able to fund
07:57those development projects.
07:59It makes a ton of sense.
07:59And that's a large number of currencies, which leads me to my next question is, it's a geopolitically
08:05tricky world right now.
08:06And could you talk a little bit as the head of funding, like, how do you evaluate, you
08:10know, what markets you're going to tap, given this context that maybe, you know, relations
08:16between different nations are more strained than they have been?
08:18And how does that sort of factor into your thinking about how we're going to fund our
08:22projects?
08:23Yeah.
08:23In terms of how we fund the bank with the geopolitical backdrop, what we have observed is
08:31an increase in volatility in the market.
08:35But I guess everything is relative, you know, volatility, market disruption, that's relative.
08:43But it hasn't impacted our ability to access the market.
08:46As I mentioned earlier, we funded the highest amount in the bank history, $64 billion this
08:52year.
08:52So it has not impacted.
08:53What it has impacted is the way in which we approach the market.
08:57We've got to be quick, we've got to be very agile, because windows open and close very
09:04quickly.
09:05We're not the only issuer in the market.
09:07If we see a good window, sure, my colleagues, you know, whether it's in Europe or my other
09:13colleagues in other institutions would see, I expect, would see a good window.
09:18So our ability to come in and go out fairly quickly is becoming increasingly important.
09:23So, like I said, we have fewer issuance windows, and we need to be able to fund, and we want
09:29to be able to fund at the lowest possible cost.
09:33So whilst, like you said, the geopolitical backdrop, we have gone through many cycles.
09:40We have gone through many cycles, and each of them is different in one way, and in some
09:45cases, they are the same.
09:47So it has been, for us, has not impacted our ability to really fund the bank.
09:53That makes a ton of sense.
09:54Could you talk a little bit about, you guys have kind of a range of financing mechanisms,
09:58different types of bonds.
09:59Could you talk about investor preference for the types of bonds, and how you've sort of
10:02varied them over the years, and kind of innovated within different structures?
10:07We have been in the market, and I've been in the market, like I mentioned, for a couple
10:10of decades, and I have seen an evolution in investor preferences.
10:16When I started, I remember investors' focus, and they're still focused on return.
10:22It's important.
10:23But we are seeing the advent of impact investing.
10:27We've seen more investors, I've mentioned that in the past, focus on impact.
10:31And we have been able to respond to the changes in investors' preferences and investor demand.
10:37And, for example, we issued the first market first green bond, and that was in response
10:43to investor demand.
10:44We have seen then investors that are concerned about climate risk and wanted to invest in
10:51climate-friendly projects.
10:53We, subsequent to that, have issued what we call more broader sustainable development
10:59bonds, which not only focus on green, but also focus on social.
11:03We are a big social institution, and so we have also transitioned, as well, more recently,
11:10you'd see in the last couple of years, with what we call outcome bonds.
11:14And outcome bonds is basically bonds where the return is linked to the performance, or measurable
11:21performance, in terms of a project.
11:24We have one example was the Amazon-link bond.
11:29So basically, investor investing in this bond, where the return, part of the return, was used
11:37to finance the reforestation of reforestation in the Amazon.
11:45So basically, what it means, it was the largest outcome bond, $225 million, $46 million of that,
11:51so investor gave a portion of that coupon, was used directly for that project.
11:58So investors take directly that project risk, and investors could directly measure in terms
12:05of the actual impact of the investment.
12:09In return, the carbon from that project, if materialized, is monetized, and investors in
12:17exchange will get a portion of that fund back.
12:20So it's, we have done, I think that was the largest outcome bond project that we've done,
12:27and we have done five so far, almost.
12:31That kind of leads me to a big question.
12:33Like, obviously, you guys have different structures, but you also focus a lot on the impact and the
12:39outcome of what happens with your different projects.
12:41Could you maybe tell us a little bit about how you guys measure success?
12:45Like, what is a really successful, you know, bond raise and project that you sort of align together?
12:51You see, any project that we fund in the development world is fun to achieve positive impact.
12:58You know, the main goal of the bank is to reduce extreme poverty and boost share prosperity
13:06on a livable planet.
13:06We have a big focus now on jobs because we believe this is important in order to be able,
13:14creating jobs is important to able to address the issue of poverty because, you know,
13:24in fact, it is estimated that in the next decade there will be over a billion people looking for jobs.
13:32So that has been a big focus here.
13:35So helping countries both in terms of the infrastructure, whether on the capital side or on the human side,
13:44whether in terms of fixed roads, health care, access to energy, education, because that's important.
13:53Also supporting policies to ensure or to build a private sector friendly environment to be able to mobilize more private sector funding into the country.
14:08So a big focus on jobs, and we believe that is important.
14:13There's also a big focus in terms of really trying to calibrate the bank balance sheet to be able to do more.
14:20You know, like I mentioned, there's a billion people, you know, that will be in the workforce.
14:24The private sector funds cannot do it alone.
14:27We need to be able to crowd in private sector funding.
14:30So working with other MDBs as well, working in the private sector to be able to mobilize more funding.
14:37So we actually, to be able to really be able to create impact at scale.
14:43So that has been the focus.
14:45So job is, creating jobs is a big, big focus of the institution, and it's important in terms of elimination of poverty.
14:53Yeah, that makes a ton of sense.
14:55Thank you guys so much.
14:56Andrea Dole, we, Udor, we appreciate you so much.
14:58I really want to thank, you know, I really want to thank all the investors that have continued to support this, the World Bank mandate.
15:05So thank you very much, and I look forward to, we'll continue to be in the market, and I look forward to your continued support.
15:12I always say I sell two things, World Bank bonds, and hopefully I'm good at it, and if not, I also sell St. Lucia.
15:18Thank you, that's where I'm from.
15:20Thank you so much.
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