The Private Sector Investment Lab is a collaborative initiative between the World Bank Group and CEOs of leading global private sector institutions. Its goal is to develop solutions that address existing barriers to private sector investment in emerging markets and developing economies.
The Lab is developing approaches that can be implemented and scaled to effectively mobilize greater volumes of private capital to tackle the world's most pressing development challenges. Mobilizing more private capital is a World Bank Group priority. It touches on many aspects of our new playbook for development and is being tracked in .
The core goal of this initiative is to enhance the Group's catalytic role in mobilizing private capital for emerging markets by mitigating risks for private sector investors and fostering enabling environments that support the development of bankable projects.
The Lab's core group of 15 CEOs and Chairs come from AXA, BlackRock, HSBC, Macquarie, Mitsubishi UFJ Financial Group, Ninety One, Ping An Group, Royal Philips, Standard Bank, Standard Chartered, Sustainable Energy for All, Tata Sons, Temasek, and Three Cairns Group. Mark Carney, UN Special Envoy on Climate Action and Finance and Co-Chair of GFANZ, and Shriti Vadera, Chair of Prudential plc, are co-chairs.
Since the Lab's launch in 2023, private sector leaders have provided the World Bank Group with valuable feedback that has helped us better align our strategies, and undertake several new initiatives, with a view to increasing the speed and scale of private capital flows for development.
Several initiatives are already underway to implement other lab recommendations, such as a Renewable Energy Access program for 300 million people in West Africa, development of new concessional funding programs from IFC, a pioneering capital markets transaction to distribute assets from IFC¡¯s balance sheet in form of asset backed securities.
Other initiatives in active implementation include solutions to mitigate foreign exchange risk in long term loans to emerging market projects, the establishment and rollout the Unified Guarantee Program, and a long-term program to develop mechanisms for mobilizing institutional investor capital for urgent development priorities at scale using the combined capabilities of the World Bank Group.
Following a PSIL meeting on the sidelines of UNGA 2024, it was agreed that the PSIL would continue but with a shorter frequency of CEO level meetings. It was agreed that the Lab would focus on supporting WBG in its ongoing work to develop and deploy at scale, the new approaches and instruments it is developing in response to PSIL recommendations. These new solutions will continue be tested with PSIL Members and other counterparts to achieve proof of concept prior to scale. Furthermore, it was agreed that new members may be added most likely from the real sector, such as project developers.
WBG will engage both with PSIL members and non-members in identifying and pursuing execution opportunities for PSIL recommendations.
To date, the Lab has delivered recommendations in five areas:
- Regulatory certainty
- Increased use and more efficient delivery of WBGguarantees
- Foreign exchange risk mitigation
- Increased use of originate-to-distribute models for mobilization of private capital?
- Increased deployment of equity and junior capital
Specific follow-ups include:
- Guarantee Program: has been overhauled to simplify and improve access to guarantees through a single convenient marketplace. The platform brings all guarantee products under a unified storefront to streamline and clarify offerings to our clients, provide increased and unified advocacy for guarantees, and grow our guarantee business by leveraging the unique value propositions of each of our institutions.
- Foreign exchange risk solutions: We are actively developing solutions for foreign exchange risk mitigation, including solutions to increase local currency financing and facilitate private investment, especially for the green transition to a low-carbon economy.
- Capital markets and securitization: Exploring options to develop more effective originate-to-distribute programs that crowd-in private sector capital into emerging market assets. An-IFC-led initial transaction securitizing IFC originated assets is already in process, which will be followed by a program of regular issuances with the possibility of broadening the originator base to include other multilateral development banks and development finance institutions over time.
- Equity and junior capital: IFC is planning to significantly grow its equity book to provide long-term capital to support companies' growth and promote higher environmental, social, and governance standards.? IFC is also working to develop a concessional capital vehicle that will enable the Corporation to develop greater ability to deliver junior capital and other forms of credit enhancement to high impact transactions which is expected to mobilize much higher volumes of private capital for these development priorities.
- Regulatory Certainty: WBG is working to enable greater clarity on regulatory policies, taking a sectoral focus and an outcome-oriented approach to this work to create bankable project opportunities for the private sector to participate at scale.