- 10 months ago
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00:00Thank you so much for being here. Looking forward to a wonderful conversation and thank you Madame la Présidence for being with us.
00:06Let's get straight into it. It feels like with global climate goals now needing trillions and trillions of dollars in new investments
00:14that multilateral development banks have to do more with perhaps less. How is the EBRD faring in the current moment?
00:23So we are clearly a growing bank. So we are well capitalized. We got additional support from our shareholders in the form of the capital increase
00:33which has been decided a few years ago in particular in relation to our activity on Ukraine.
00:39But we are optimizing the resources we have in the form of our capital in order to increase our activity and our investment in the countries in which we work.
00:50We are also enlarging the scope of countries in which we work, enlarging our geography because we are just starting investing in sub-Saharan African countries
00:59in six new countries and Iraq. And so we are really stretching our balance sheet and stretching our capacity in order to provide investment.
01:12And we focus very much on the private sector. The bank mandate is to support the private sector.
01:17So 75% of our investments are in the private sector in different form from SMEs to foreign investment and so forth.
01:24And each country has its challenges, its priority. But we are very much there to support their growth and development.
01:31You have very concrete challenges as to what to supply and where to send your capital, particularly at a time when we're seeing wars.
01:38You know, you're very active in Ukraine. How do you decide how to balance your mandate to, you know, support cleaner energy and the transition as well as those countries that need it most?
01:52So we are very much demand driven. Being private sector, we really work first on the demand of our clients and what they need,
01:59what kind of project they want us to support and to finance. But we also have broad priorities in terms of allocation of capital between the most advanced countries we support,
02:11the least advanced countries because we work from countries like very different scope between Poland or Baltic countries to now a sub-Saharan African country.
02:19So we try to have a sort of overall allocation of resources and capital in terms of preserving, ensuring that we have the right focus on the countries that need us most.
02:30And one of our very important criteria for investment is additionality.
02:35So we finance projects where we believe that we provide something that others, the private sector, private banks could not provide, where we are really additional.
02:44That's a key driving element for us as well as a demand. And we have some sort of strategic priorities, which are supporting the green transition and the energy security,
02:56greening of the economies and so forth, supporting good economic governance, so transformation of the countries and the business environment in which we work in order to facilitate private sector investment,
03:08to have an environment to have an environment which is conducive to growth and job creation and investment, and also inclusion.
03:17Women participation to labor market is a big challenge in a number of countries in which we work, so this is a focus.
03:22We have human capital and a new country like Ukraine, for example, we invest a lot in energy security, keeping the basic infrastructure running,
03:34but also a lot in human capital, because helping people coming back from war or, you know, to reintegrate labor market or businesses to deal with the challenges in the labor market,
03:45mobilization, needs and so forth, is a big challenge. So this is something where we are quite active.
03:50Can I ask you about ODAs, the official development assistance that you get?
03:54How do you continue to replenish in an era where it does feel like there's palpable backlash, particularly when it comes to the climate agenda from some countries?
04:04And if I can add on to that, how much is the U.S. a barrier right now?
04:09So we are not, I mean, as a multilateral development bank, we do not depend directly too much on ODA.
04:17We have our capital, we generate, we invest, the investment generates revenues.
04:21These help us, we do not distribute dividends to the shareholders, but we, the revenues, the benefits we have allow us to increase our capital,
04:30to build up reserves, to increase our financing capacity, and part of it is allocated to subsidies to prepare projects and so forth.
04:38But we have donor funding also from any bilateral or international, I mean, organization like the EU.
04:44So this is an important element and this part, I mean, is indeed related to ODA.
04:49But we don't like, we don't have a big fund like IDA or African Development Fund to generate concessional funding at scale.
05:01Because we are private sector, so we work on the condition of the market.
05:05This being said, for a number of activities, we need this donor support.
05:09But for example, to finance project preparation, to finance project where the risk is too high for us and we need some kind of guarantees or risk sharing with donors, donor funding.
05:24And we, this is still working quite well.
05:28We managed to get some important donor support.
05:31I think because the impact we can show, the leverage of the funding, for each euro we are provided, we can show a big, important leverage.
05:40But this is likely to become, I think, a challenge.
05:43And we need to be, I think for me, the key lesson I draw from that is that we need to be very thoughtful about where we allocate these scarce concessional resources.
05:53To be sure that we allocate where they are most needed, where they are really additional and do not use them, I mean, really target them in the most efficient manner possible.
06:03So, in other words, the economic case has to be made as well in a lot of these instances.
06:07Can I ask you about the Bill Gates letter?
06:10Because it created quite the shockwave, I think, in the economy where, you know, Bill Gates was saying there is a certain amount of money.
06:17And at this point, we need to maybe pull back some of that money from climate in order to make sure that particularly children's welfare is taken care of.
06:24What did you think when you read that argument?
06:26I think it's a bit simplistic because, in a way, of course, you have some trade-off and you have to allocate some scarce resources in the most efficient manner.
06:36I think when you think about impact of natural disaster, impact of heating waves on healthcare and so forth, you have this.
06:48This is not unrelated.
06:49So, what's going on on the environment, pollution, increase of temperature, increase of floods and so forth, this has a huge impact also on health.
07:00So, I think that it's not one or the other.
07:04We need to find ways to support both.
07:07But, as I was saying, we need also to rely more, I mean, to use these very scarce resources in a very efficient manner.
07:14When we can bring the private sector, when there is no need for concessional funding, we can go for, I mean, pure market funding.
07:24And I think the good news, in a way, is that in the mitigation agenda, for example, to support green transition, reduce emission and so forth,
07:34there is such a big progress in terms of price, in terms of affordability, in terms of competitiveness, that this is, I mean, allows to develop market approach, merchant approach,
07:45which facilitate the deployment of these new energy sources, contributing to energy security, but also at a low cost and much lower cost than three years ago or five years ago.
08:00So, I think this technological transition, which is really taking place at a quick, rapid pace, is facilitating this kind of trade-off.
08:12We talk about Baku to Belém and the roadmap that we hope will get fleshed out during this COP.
08:18Have you any suggestions for how that might happen?
08:21After all, $1.3 trillion does sound like a lot of money.
08:24But, as we heard from Bloomberg NEF, $1.4 trillion was spent just cleaning up natural disasters and climate-related disasters last year alone.
08:34So, indeed, it looks a lot of money, but, indeed, not doing anything and not investing in this area would be, I think, would cost a lot also.
08:43What I think is important is that there is a very broad range of contribution to, I mean, from local investment, domestic market, government funding, their own investment, developing and emerging countries financing their own investment, to MDB's role, to private sector.
09:03So, I think the key element for me to be successful in this area is partnership, to work together and to combine and to have a clear strategic vision, strategic objective, clear policy framework at the country level.
09:18That, I think, is absolutely key to bring the different partners from MDB's to private sector together and know where they can invest, what are the opportunities, and facilitate investment.
09:29And that's where we will, how we will make progress.
09:33So, in a way, we have to liaise between this, what appears as this very big figure, very aspirational, and what we can do on the ground, project by project, country by country, to support the right level of investment, working with partners in the public sector, but also in the private sector.
09:52Because a lot of work we are doing, for example, in the bank, is working, and it's very closely related to the previous speaker you had, which is working with business partners in the manufacturing sector, agribusiness, to facilitate, to help them invest in decarbonisation, more energy efficiency, and so forth.
10:14And there you also have clearly a business case, you need to find the right solution, sometimes you need to increase the awareness of the small businesses, for example, about the opportunities they may have found, and the technologies they may have found in the market, allowing them to be more efficient, to save, to be more competitive in the way they use energy, and then be able to sell, to export, and to develop their businesses.
10:40So I think it's, I mean, the link, very often we speak about this big aspiration, in COP in particular, we speak about this big aspiration, but also looking at very concrete, positive projects that are developed, and can be scaled up, in order to bring progress in the ground, and for people.
10:58And indeed, you do a huge amount of work with small and medium-sized enterprises in all of these countries.
11:03You mentioned before that you've been able to bring on some insurers, and that has helped with risk sharing, and so on.
11:09How do you bring on pension funds, and more long-term money?
11:14How do you attract those, so that perhaps you can get involved in bigger ticket items?
11:18Yes, so one, mobilising private sector is one of our top priorities.
11:23First of all, we invest in the private sector, but we also want more private share, some of our investment, with more private sector investors.
11:30And for that, we use a multiplicity of sort of instrument, from traditional A-B loans, you know, where we have institutional co-investing with us,
11:41to unfounded risk participation with insurers, who are looking for diversification of risk, interested in taking some risk on emerging markets and developing countries.
11:52We are going to work, we are working on market transactions for securitization, and we do that, I mean, all MDBs working together in order to really learn from each other,
12:04but also, I mean, build a market, which, where you have, I mean, different MDBs offering different, similar type of product to the market.
12:13But, we, pension funds are a very important partner for us.
12:19We work, for example, with a partner, ILX, who is a fund gathering, funding from pension funds, in particular in European countries, countries like Netherlands, Nordic countries.
12:33Pension funds are very interested in long-term sustainability impact investment, and this fund, build upon pension fund, with an allocation of resources from pension fund,
12:47is co-investing with us in, through B-Loans, in a number of projects, so in emerging markets.
12:54And it can be from a project in Turkey, but also in Uzbekistan, in Egypt, so quite a wide range of countries with different level of risk.
13:02And it's, I think, a very efficient way, because it's, for the pension fund, it's a very small allocation of their own investment, but bring them impact.
13:13And I think it's, for their pension years, it's also a way to bring value.
13:19So, that's a scheme, a kind of theme we would be happy to expand on.
13:22And I know you've been doing a lot of work on risk assessment, which is particularly important, because, as you've found,
13:30some of these projects aren't quite as risky, perhaps, as some investors would think, or as, you know, maybe the perception is.
13:37Yes, so there have been a lot of work on that, and, in particular, we, with other MDBs, published our data on risk of default,
13:48recovery in case of default, and so forth, which is called the GEMS database.
13:54And I think it gives a very interesting picture, because it shows that on the investment we are doing in the private sector,
14:00the level of default, the level of risk is much smaller than the general risk perception.
14:07And we had, yesterday, an interesting roundtable where standard impulsions were participating,
14:12and there were things that, for them, this database and this data, and the more granular data we can bring,
14:18the better it is, is helpful to reassess the risk.
14:22And they updated their methodology in order to take into account the fact that projects prepared by MDBs,
14:32which benefit also from the sort of preferred creditor status, because of MDB participation,
14:38are, I mean, really less risky than the general perception can be.
14:44And then it unlocked a lot of potential capital from investment, according to their methodology.
14:49So this is something we need to continue to work upon in order to increase our capacity to fund,
14:55and also to, more importantly, to attract more private investors together with us.
15:00Yes. Now, I know that you are going to give us some announcements on maybe country platforms at COP30.
15:07I don't know if you can give us a little preview today, perhaps not.
15:10Either way, what is your best hope for this particular COP?
15:13So I think developing country platforms is very important, because as I was saying,
15:19the policy environment, the strategic commitment from a country to do this, to commit to some objective,
15:25have a clarity on what is a, I mean, long-term, medium-term, long-term investment plan in the energy sector,
15:31for example, or in the water sector, this is very important to drive investors.
15:35It's also a very effective tool to coordinate within the government.
15:38You know, sometimes you have the Ministry of Finance, of equipment, of energy, having a joint view, very clear,
15:46and bringing together all MDBs and bringing together the private sector is the best way, I think, to deliver results.
15:52We've been doing that with a number of countries already, in Egypt, North Macedonia, Turkey,
15:57here, and we hope to be able to deploy this model, and I think this will be one of the outcomes of this COP,
16:03to have more of this type of approach, as well as, I think, a further focus on resilience and adaptation,
16:11and moving from, globally, from commitment to implementation.
16:17Well, thank you so much, Madame la Présidente.
16:19I wish you a very successful COP30 with lots more announcements to come.
16:26Thank you very much.
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