Private Capital Mobilisation – why we need to speak up, not just pay up

Dr Hubert Danso, Chairman and CEO of Africa Investor (Ai) Group, Chair, CFA Asset Owners Council, Co-Chair SMI Africa Council.

The concept of Private Capital Mobilisation (PCM) is being touted as a big part of the solution to the ever-growing SDG and climate financing gap for emerging markets and developing economies (EMDEs) requiring additional trillions annually to 2050. Development experts and governments are increasingly calling upon the private sector to plug the tens of trillions of dollars gap in development finance and investment needed, to address challenges around the new collective quantified goal on climate finance (NCQG), green industrial infrastructure investing requirements, and a host of other issues in emerging economies, which will be central themes at the UN Summit for the Future, the UN Financing for Development (FfD) Summit, CoP29 and the G20.

Current efforts by Multilateral Development Banks (MDBs) to mobilize private capital are grossly sub-optimal, with the potential to close only a mere 10% of EMDEs private financing gap between now and 2030-2050, even after recently announced significant private capital mobilization reforms. The domestic and global institutional investment community, as universal owners, are required now more than ever to assist through institutional investor-public partnerships (IIPPs), close the outstanding 90% of EMDEs private financing gap left by the MDBs private capital mobilization market failure.

The expectations about what the private capital can contribute are high. And from our side, I’m not sure we have the information we need to fulfill this role.

Data is the lifeblood of our industry. It is even more vital in sectors and geographies where we have less experience and need the data to guide us, identify opportunities, and illuminate potential risks. I’m talking about emerging markets. Emerging markets are the places where our resources can have the most impact yet where we need data the most. The pioneers in this space, the MDBs and bilateral development finance institutions (DFIs) such as the International Finance Corporation (IFC), African Development Bank or IDB Invest are increasingly conceding to political and investor pressure to share more and more information about the performance of their investments.

However certain areas, such as the risk and default data held within the Global Emerging Markets (GEMs) database owned by their exclusive club of the most influential MDBs, aren’t moving quickly enough. The delivery of the G20 mandated directive to the GEMs Consortium, to implement GEMs 2.0 as a separate entity to interface with investors and transition GEM’s 2.0 from mere disclosure, to leverage the investor-led GEMs 3.0 initiative, a broader asset allocation at-scale data platform with private risk takers representing over US$200 trillion of assets, would more effectively bridge the climate and SDG financing gaps in EMDEs.

PCM data is another area with too little transparency.

To be clear, when I’m talking about PCM data I’m referring to information about the private sector entities which come in alongside DFIs to provide resources to specific investments. This could be in the form of syndications, instances where DFIs have provided guarantees or a number of other examples. Current PCM data is available from two sources – the OECD and also a joint report produced by the MDBs. Both provide very high levels of data aggregation that are almost meaningless if you want to understand what types of private entities are in what types of deals in which sectors and geographies. I know firsthand just how many of you are passionate about doing more in emerging markets, targeting impactful mandate-aligned resilient investments, and ensuring that we play our part. But we’re going to need better data to understand what that “part” entails, and where we can best contribute.

The irony with Private Capital Mobilisation data is that we need the information yet are commonly cited as the main barrier to it becoming available. This was the case at the launch of Publish What You Fund’s new report on Private Capital Mobilisation during the World Bank’s Spring meetings. After introductions by the US Treasury Department, an IFC representative stated that clients and mobilised parties wouldn’t accept the disclosure of information using the approach which Publish What You Fund is proposing. Their approach seeks to capture the benefits of disclosure while still protecting sensitive information. To achieve this they propose project-level disclosure that provides the type of mobilised party but not the identity of the individual investor. Specifically, in line with our proposals, they are suggesting that DFIs publish, for each investment, the following information:

• Investment name
• Investment value
• Total amount mobilised
• Geography
• Investment instrument
• Sector
• Disaggregated mobilisation amounts
• Typology of mobilised party e.g. International Bank, Pension Fund, Sovereign Wealth Fund, Family Office, etc.

Publish What You Fund have gone to the effort of speaking to many clients and mobilised parties of DFIs. They are all saying the same thing. This approach is reasonable. DFIs commonly cite concerns about such granular data being subject to “reverse engineering” to identify specific parties, explaining that they fear this would put them in breach of their confidentiality agreements with clients. The stakeholder organisations which Publish What You Fund consulted don’t hold this concern, and I can see why. Much of this information is already publicly available, or at least available through paid-for platforms. Where it’s not it can often be inferred by combining multiple information sources. More importantly, it feels wholly reasonable within the limits of standard business practice in our sector. As a minimum DFIs should be checking with their clients as to whether this information represents a genuine concern for them and if not amend disclosure agreements accordingly.

Ultimately everything in our sector can be reverse-engineered to figure out who is involved in which deals. But there is a difference between listing all of the parties in a transaction so that a deadline-pressured journalist can drop the name of your organisation into an article without any real due diligence, versus the approach being proposed here. If there is any risk to any party as a result of this approach I’m convinced that the benefits of making this data publicly available will outweigh those risks ten-fold.

Let’s not forget that PCM is about us. We’re the ones being counted as mobilised. So we need to be clear. We need this data. We believe that Publish What You Fund’s proposed approach to disclosing PCM data meets our needs and is wholly reasonable within existing business practices and confidentiality agreements. And we are willing for all of the investments where our resources are being counted as “mobilised” to be subject to this level of disclosure. We’ll play our part, but we need DFIs and Heads of State, as sovereign shareholders of MDBs to ensure MDBs play theirs.

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