Support for innovative financial tools could generate up to $70 billion over 10 years
WASHINGTON, April 19, 2024 — New financial instruments designed to boost lending capacity and enable the World Bank Group to take on more risk for shared global challenges have received a significant endorsement. A set of 11 countries announced commitments today for the Portfolio Guarantee Platform, hybrid capital mechanism, and new Livable Planet Fund totaling $11 billion.
The World Bank Group’s unique leveraging capability enables the resources pledged to hybrid capital and the Portfolio Guarantee Platform to be multiplied six to eight times over 10 years. Under certain conditions, the leverage amount could reach tenfold.
The resources pledged today could provide up to $70 billion in urgently needed funds, which can be deployed to address cross-border challenges and advance development goals.
“We worked hard to develop these new financial instruments that boost our lending capacity, multiply donor funds, and ultimately allow us to improve the lives of more people,” said Ajay Banga, World Bank Group President. “The generosity of these countries is both an endorsement of the progress we have made to reform the Bank, and a sign of their shared commitment to development globally.”
Belgium, France, Japan, and the United States pledged to the Portfolio Guarantee Platform, while Denmark, Germany, Italy, Latvia, the Netherlands, Norway, and the United Kingdom made commitments to hybrid capital.
“Latvia's move to invest in the World Bank hybrid capital is an important game-changer. This investment amplifies our backing for Ukraine and neighbouring nations facing turmoil. We're joining forces in a responsible multilateral push, increasing the World Bank's lending capacity. It's all about crafting greater impact and propelling forward momentum,” said Arvils Ašeradens, Minister of Finance, Latvia.
Japan is committed to providing the first contribution to the new Livable Planet Fund.
The World Bank Group has implemented a series of reforms and developed innovative financial instruments as part of the Capital Adequacy Framework review, which was recommended by the G20 Expert Group. These reforms include:
- Adjusting the loan-to-equity ratio to secure $40 billion over 10 years from the IBRD’s balance sheet.
- Increasing the bilateral guarantee limit by $10 billion.
- Working to maximize callable capital benefits by publishing a detailed report for rating agencies to better assess its potential value and the Bank’s financial capacity
- Introducing hybrid capital, giving shareholders and partners an opportunity to invest in bonds with special leveraging potential.
- Developing the Portfolio Guarantee Platform that provides a shared approach to risk that will make World Bank financing more widely available.
- Launching a Livable Planet Fund that enables governments’, philanthropies’ and other partners’ contributions to incentivize cooperation across borders and tackle shared challenges.
The World Bank Group has taken the additional steps to develop IBRD 50-year loans at no additional cost for borrowers. These loans will be utilized for projects that provide cross-border benefits. Additionally, we created a system to reduce interest rates for projects that address global challenges, which will be partially funded through the Livable Planet Fund.
CONTRIBUTOR QUOTES
BELGIUM
“Belgium is delighted to provide a USD70 million Portfolio Guarantee to the World Bank’s Global Solutions Accelerator Platform. As Belgium strongly supports the World Bank Group’s new vision to create a world free of poverty on a livable planet, this contribution will help to expand the Bank’s lending capacity to assist IBRD clients address Global Challenges such as Pandemic Prevention and Preparedness, including Health System Strengthening and Climate Change, as well as Biodiversity.”
Vincent Van Peteghem, Deputy Prime Minister and Minister of Finance, Belgium
DENMARK
"The World Bank is one of the most important global actors when it comes to raising financing to address the world's climate and development challenges. I am glad that this Danish contribution will support the World Bank reform, which should give the bank even greater impact and ensure better results in developing countries."
Dan Joergensen, Minister for Development Cooperation and Global Climate Policy, Denmark
FRANCE
“Today marks an important step on the road to make the World Bank Group better equipped to meet the global challenges of our time, in full alignment with the Paris Pact for People and the Planet. As we strive for a better Bank, I trust that the platform launched today will be an important milestone, to help countries develop projects that have positive effects for them, but also for their neighbors and the world. We strongly support the provision of funding for – among others – the protection of forests, access to water and coal phase out, which will be crucial to answer development needs, climate change and the biodiversity crisis altogether.”
Bruno Le Maire, Minister for the Economy, Finance and Industrial and Digital Sovereignty, France
GERMANY
“Jointly, we have succeeded in creating a better bank over the last 18 months. Today, we are taking a big step further making it bigger. The financial commitments made by G7 and European countries are not only recognition of these ambitious and groundbreaking reforms. They are also a strong signal of global solidarity. Now, more than ever before, the World Bank Group will be able to tackle global challenges which do not stop at national borders and continue fighting hunger, poverty and inequality.”
Svenja Schulze, Federal Minister for Economic Cooperation and Development, Germany
ITALY
“Italy supports the ongoing season of reforms to evolve the World Bank toward a bigger and better Bank and commits additional extraordinary support through hybrid capital, another key progress of the successful implementation of the G20 CAF, launched by the Italian Presidency in 2021.”
Giancarlo Giorgetti, Minister of Economy and Finance, Italy
JAPAN
“Japan is proud to be part of the Framework for Financial Incentives, both as one of the first and the largest contributors to the Global Solutions Accelerator Platform with the amount of $1 billion through the Portfolio Guarantee Platform and as the very first country that is committed to contributing to the Livable Planet Fund. We hope our contribution will be used to help clients tackle global challenges, including pandemic prevention and preparedness.”
Shun’ichi Suzuki, Minister of Finance, Japan
THE NETHERLANDS
“The Netherlands is committed to tackling global challenges, such as climate change and fragility. Today we announced a contribution to the World Bank that will unlock around EUR 500 million in new lending to help developing countries finance the energy transition, protect biodiversity and strengthen health systems to prevent future pandemics. We are proud of being part of this initiative, as the entire world benefits from the increased resilience, stability and prosperity of developing countries.”
Steven van Weyenberg, Minister of Finance, and Liesje Schreinemacher, Minister for Foreign Trade and Development Cooperation, the Netherlands
NORWAY
“Norway welcomes the World Bank’s ongoing work to become a better Bank, while stepping up efforts to also become a bigger Bank. At a time of increasing needs globally, we value the powerful leveraging that World Bank development finance delivers. Our contribution supports a joint ambition for the World Bank to do even more to tackle global challenges such as climate change and food insecurity."
Anne Beathe Tvinnereim, Minister of International Development, Norway
UNITED KINGDOM
“If the world is serious about shifting the dial on poverty and climate change, we need to put our money where our mouth is. The World Bank’s efforts to mobilise extra funds do just that. Our own pledge of £100 million for hybrid capital, which will unlock £1 billion of additional financing capacity over the next decade, will turbocharge our ability to tackle urgent global problems and deliver real impact.”
Andrew Mitchell, Deputy Foreign Secretary and Minister for Development and Africa, United Kingdom
UNITED STATES
“The United States strongly welcomes the innovative financial instruments developed by the World Bank as part of the evolution agenda. We are proud to support this effort, including through President Biden’s request to Congress for a contribution to the Portfolio Guarantee Platform that would enable tens of billions of dollars in additional IBRD lending capacity for projects that address priority global challenges and funding of select trust funds and financial intermediary funds that would further incentivize projects with cross-border impacts.”
Janet Yellen, Treasury Secretary, United States
Information and photo produced by World Bank