–to tackle social issues, strengthen private sector and combat climate change

THE Board of Governors of the Inter-American Development Bank (IDB) and IDB Invest, on Monday, approved a roadmap for a series of institutional reforms of the IDB and made a proposal for a capital increase for IDB Invest, the Bank’s private-sector arm.

This was disclosed during the 2022 Annual Meeting of the Boards of Governors of the IDB and IDB Invest.

“Our record year in 2021 proved how the IDB can optimise its balance sheet and mobilise resources, but the new IDB can do even better. This is a historic moment for the IDB and IDB Invest.

The boards’ actions mean we are gaining the muscle, flexibility and tools needed to support the urgent needs of Latin America and the Caribbean in the 21st century,” IDB’s President, Mauricio Claver-Carone, said at the bank’s annual meeting.

He continued: “The pandemic hit our most vulnerable citizens hard. Now the region faces rising inflation, higher global interest rates, and shifting geo-economic and geopolitical concerns. We rose to the occasion in 2020 and 2021, but we can now do even more by leveraging our strengths. Thanks to the Governors’ actions, we are now empowered to better help the region by mobilising more private-sector resources and doing more in critical areas such as climate change and gender equality.”

The new business model envisioned for IDB Invest, or IDB Invest 2.0, will be developed over the next six months and submitted to the board for approval this fall. The approval to advance with the new vision signifies confidence in IDB Invest’s ability to develop an even more impactful approach to development.

The new model will allow it to scale up work with investors and companies throughout the region. IDB Invest’s innovative, new approach will focus on originating more impactful projects, de-risking private-sector investment, and using new financial and technical tools, to help crowd-in investment.

The new business model goes hand-in-hand with the mandate for a capital increase proposal for IDB Invest, the details of which will be presented to the Boards of Executive Directors this fall.

The bank noted that these new capacities will help IDB Invest build on the record level of mobilisations it achieved in 2021 and enhance its role as the region’s foremost private-sector-mobilisation partner for development.

A more ambitious IDB Invest will work even closer with the IDB, which will also have new tools to creatively collaborate with, and support, borrowing member countries to create enabling business environments that attract investment and are more conducive to job-creation.

This 21st-century business model will help the IDB promote reforms to improve social protection and health, inclusion, labor markets climate action and gender equality.

“It will also help the IDB work well with governments to correct market failures and structural bottlenecks that today prevent investment, improve institutions, strengthen the rule of law, and improve the business climate. This dovetails with IDB Invest’s new focus on originating socially impactful projects, de-risking them and offering them to institutional investors,” the IDB related.

The new approach also calls for transitioning IDB Lab from an innovation lab to an innovation hub, allowing it to do more to scale up the impact of private-sector projects and leverage its capacity to take on risk to do experimental work in frontier sectors and invest in early-stage projects.

IDB Lab’s agility and ability to respond rapidly to clients’ needs will enhance the bank’s capacity to test innovative ideas and carry out pilot programmes that could be expanded to meet regional development goals.

The Governors’ endorsement will make the IDB more innovative and responsive, with enhancements to project design, a new Comprehensive Portfolio Management System to measure and achieve results, and updated financial and technical instruments.

This will lead to more effective support for government reforms, new contingent and rapid-disbursement facilities, more innovative climate-change instruments, increased execution capacity for counterparts, and risk-appetite and equity-investment policies that will favour private-sector projects and operations.

“I am immensely proud of the analytical work done by our experts, and I thank our Boards of Governors and our Executive Directors for their overwhelming support,” President Claver-Carone said, adding: “This is not the destination, but truly the beginning of our journey to help our member countries, as we make the IDB the gold standard of operational excellence. Our region deserves no less.”

The next annual meeting of the IDB and IDB Invest will take place in Panama.