MEETING THE MOMENT 2021 ANNUAL REPORT CONTENTS 2 Letter from the IFC Board 4 Letter from David Malpass, World Bank Group President 7 World Bank Group Response to the COVID-19 Pandemic 8 Letter from Makhtar Diop, IFC Managing Director ABOUT 13 Our Management Team RESULTS 14 World Bank Group 2021 Summary Results IFC 16 IFC 2021 Year in Review STRATEGY IN ACTION 20 Meeting the Moment International Finance Corporation (IFC), a member CRITICAL FUNCTIONS of the World Bank Group, is the largest global 43 Measuring Up development institution focused on the private 46 Sustainability sector in emerging markets and developing 48 Accountability and Oversight economies. We work in more than 100 countries, using our capital, expertise, and influence to create 50 Independent Auditor’s Report markets and opportunities for better lives. In fiscal year 2021, we invested $31.5 billion in total Additional information is commitments, including $23.3 billion in long-term available on IFC’s Annual Report 2021 website: finance and $8.2 billion in short-term finance, to www.ifc.org/AnnualReport. private companies and financial institutions in emerging and developing economies, leveraging Cover: Meeting the Moment tells the power of the private sector to end extreme the story of IFC stepping forward to take bold, transformative poverty and boost shared prosperity. For more action at a time of unprecedented global need. information, visit www.ifc.org. OUR PURPOSE ACCOUNTABILITY We apply our financial resources, technical exper- We are accountable to our partners, clients, and tise, global experience, and innovative thinking to communities we serve as we aim to achieve our create markets and opportunities that help coun- development objectives in an environmentally tries mobilize private sector solutions to address and socially responsible manner. IFC has been the most pressing development challenges. working hard to deliver on a series of account- ability and transparency reforms we committed to in the last few years, including in response to WHERE WE WORK an independent external review of IFC’s environ- As the largest global development institution mental and social (E&S) accountability. focused on the private sector, IFC operates We have also taken important steps to improve in more than 100 developing countries. We transparency around our use of blended finance bring over 60 years of institutional knowledge and our investments in financial intermediaries to the countries in which we work, applying (FIs). We believe that continuous evolution lessons learned in one region to solve problems toward more transparency is one of the most in another. important things we can do as a development institution to maintain the trust of our stake- WHAT WE DO holders and gain crucial feedback as we develop new solutions to the biggest development The World Bank Group has set two goals for the challenges. world to achieve by 2030: end extreme poverty and boost shared prosperity in every country. IFC contributes to these goals by supporting the PARTNERSHIPS private sector in developing countries to create Today’s development challenges are too vast markets and open up opportunities for all. IFC for any one institution to solve on its own. They focuses on investing, providing advice, and require collaboration and coordination. IFC brings mobilizing finance for private financial institu- together a variety of players to address these tions and companies. Our products and services challenges collectively, partnering with more are tailored to meet the specific needs of clients than 30 government development agencies, as while our ability to attract other investors brings well as with several foundations, corporations, added benefits: we introduce our clients to and other multilateral organizations. better ways of doing business and new sources of capital. These partnerships complement the funding for IFC’s work, helping incubate new ideas, and allow proven solutions to be scaled up. They facil- IMPACT itate knowledge transfer and build business and Measuring the results of our work lies at the institutional capacity, strengthening IFC’s own heart of everything we do. We set corporate impact. They are integral to our strategy and a targets for development impact. This ensures growing, evolving pillar of our work. that IFC and our clients are reaching the people and markets that most need our help. The Anticipated Impact Measurement and Monitoring (AIMM) system, launched in 2017, is now fully integrated into IFC’s operations. Highlighting our impact in FY21, IFC’s invest- ment clients: Contributed to the creation of nearly • 2.6 million jobs Reached nearly 13.7 million customers in • power, water and gas distributions Reached nearly 45 million patients, • over 7.9 million students and nearly 3.6 million farmers Additional results are available on our website: www.ifc.org/AnnualReport IFC ANNUAL REPORT 2021 1 LETTER FROM THE IFC BOARD IFC BOARD The past year has been immensely challenging around Given the immense financing needs, we agreed to the world ­ — as — especially for developing countries ­ bring forward the IDA20 replenishment process, which the COVID-19 pandemic reversed decades of prog- we expect will be completed by December 2021. At the ress in ending extreme poverty, achieving shared 2021 Spring Meetings, the Development Committee prosperity, and reducing inequality. The World Bank also asked the Bank to scale up its work to address Group responded swiftly and extensively to the health, rising levels of food insecurity and to support countries economic, and social impacts of the crisis to help spur in achieving SDG 2, and nutrition for all, along with recovery. But more needs to be done to address the other partners. needs of the marginalized and those who live in the poorest areas. The Board discussed and approved Green, resilient, and inclusive several important initiatives and programs in support development. The Bank Group continues to both of countries’ immediate needs and of long-term support countries in achieving the twin goals of ending development goals. extreme poverty and boosting shared prosperity. In responding to the COVID-19 crisis, the Bank Group has Vaccines. We have made key and timely decisions an opportunity to help low- and middle-income coun- on proposals by Bank Group management to respond tries build the foundations for a strong and durable to the pandemic and finance vaccination efforts, recovery based on a framework that we discussed, including mechanisms for prompt delivery. The Bank which supports green, resilient, and inclusive develop- Group is partnering with WHO, COVAX, UNICEF, and ment. We believe that this, in turn, can help address others, including private manufacturers, to help facili- the longer-term challenge of climate change. tate transparent, affordable, and fair access to vaccines for developing countries and to continue strength- Climate. We hope that the ambitious new targets ening global preparedness for future pandemics. for climate financing outlined in the Climate Change Action Plan 2021–25 and the alignment of the Bank Assisting the poor. To help start the Group’s financing with the Paris agreement ­ — comple- process of recovery, the Bank Group registered a mented by the approach to green, resilient, and historic increase in the delivery of lending for projects inclusive development and efforts to build long-term and initiatives to assist low- and middle-income — will help deliver on the resilience for food security ­ countries, including small states, in tackling multifac- twin goals and the Sustainable Development Goals. eted challenges, safeguarding human capital, and providing social safety nets to target their Knowledge framework. We welcomed most vulnerable people. the discussion of the new Strategic Framework for Knowledge, which strives to better integrate knowledge into solutions for clients and the global community. We look forward to implementation of this framework, which will strengthen the Bank Group’s role as a source of solutions. 2 IFC ANNUAL REPORT 2021 IFC BOARD Evangelia Bouzis Takashi Miyahara Richard Hugh Arnaud Buissé Gunther Beger United States Japan Montgomery France Germany United Kingdom Abdelhak Bedjaoui Louise Levonian Monica E. Medina Nigel Ray Hayrettin Algeria Canada Peru Australia Demircan Turkey Merza Hussain Rajesh Khullar Alphonse Ibi Taufila Abraham Hasan India Kouagou Nyamadzabo Weintraub Kuwait Benin Botswana Brazil (Dean) Mohd Hassan Junhong Chang Eva Valle Maestro Koen Davidse Geir H. Haarde Ahmad China Spain The Netherlands Iceland Malaysia (Co-Dean) Matteo Bugamelli Abdulmuhsen Roman Marshavin Katarzyna Armando Manuel Italy Saad Alkhalaf Russian Federation Zajdel-Kurowska Angola Saudi Arabia Poland IFC ANNUAL REPORT 2021 3 LETTER FROM THE IFC BOARD The World Bank Group remains ready to help our clients on the path to recovery. Debt. As countries face increasing debt burdens, our Accountability mechanisms. We also Governors, together with the IMF, have given the Bank reaffirmed the importance of accountability mech- Group a mandate to address fiscal and debt distress in anisms for people and communities who believe IDA countries in a way that supports green, resilient, that they have been, or are likely to be, adversely and inclusive development and poverty reduction. affected by Bank Group projects and investments. We We are hopeful that the G20 Common Framework, have approved enhancements to the Bank Group’s along with extension of the Debt Service Suspension social and environmental accountability framework, Initiative to the end of 2021, will allow beneficiary including changes to the World Bank Inspection Panel’s countries to dedicate more resources to tackling toolkit and to the reporting line of the Compliance the crisis, investing in healthcare and education, Advisor Ombudsman for IFC and MIGA. promoting growth, and improving their long-term approaches on debt. Leadership, staff, and return to office. November 2020 marked the transition Private sector. Recognizing growing credit to a new Board of Executive Directors, and in February constraints, the private sector is a critical player in we welcomed Makhtar Diop as IFC Managing Director helping client countries attain their development goals, and Executive Vice President. create and develop markets, mobilize resources, and respond to COVID-19, including through IFC’s Global We look forward to the widespread availability of Health Platform and MIGA’s response programs. We COVID-19 vaccines across the globe, the safe return expect the Bank Group to keep building partner- of the Bank Group’s staff to the office, and the overall ships across a common strategic framework to help return to a new normal. Our utmost appreciation goes generate private sector solutions that address devel- to the staff for their ongoing dedication to the Bank opment challenges. Group’s mission and their perseverance and hard work over the past year, despite the immense and sudden Racial justice. There were important efforts change in their working environments. this year to address racial injustice within the Bank Group and with our clients, including a set of recom- The World Bank Group remains ready to help our mendations put forth by the End Racism Task Force to clients on the path to recovery. We hope that the new fight racism and racial discrimination. We look forward fiscal year bring good health and strong development to implementation of these recommendations through outcomes for all. an action plan that will reaffirm this institutional value, which is embedded in the Bank Group’s Code of Ethics. 4 IFC ANNUAL REPORT 2021 LETTER FROM DAVID MALPASS President of the World Bank Group Message from the President Since the start of the COVID-19 pandemic, the World Bank Group has worked hard to help countries fight the pandemic’s health, economic, and social impacts. From April 2020 through the end of fiscal 2021, the Bank Group committed over — the largest crisis response in any such period of our history. We have $157 billion ­ helped countries address the health emergency, procure billions of dollars of medical supplies, deploy COVID-19 vaccines, strengthen health systems and pandemic preparedness, protect the poor and vulnerable, support businesses, create jobs, promote growth, and expand social protection. Despite this unprecedented global effort, the pandemic has reversed gains in global poverty reduc- tion for the first time in a generation, pushing nearly 100 million people into extreme poverty in 2020. I remain deeply concerned about fragile states, which have been particularly hard-hit by unsustainable debt burdens, climate change, conflict, and weak governance. And though I am hopeful for the global economy to rebound, many of the world’s poorest countries are being left behind, with inequality widening both within and between countries. We are committed to working with our partners to find solutions to these urgent challenges ­ — including by promoting transparency, human rights, and a rule of law that extends accountability to all institutions. We are working to save lives, protect the poor and vulner- able, support business growth and job creation, and rebuild in better ways toward a green, resilient, and inclusive recovery. Ensuring safe, fair, and widespread immunization will be key to curb the pandemic and advance recovery: we are supporting countries’ access to COVID-19 vaccines, including through COVAX and directly from manufacturers. The World Bank has expanded its financing available for COVID-19 vaccines to $20 billion over two years ­ — in fiscal 2021 alone, we committed $4.4 billion for 53 countries. Working with WHO, Gavi, and UNICEF, we developed mechanisms for safe distri- manufacturing capacity, including in Africa, and the bution in 140 low- and middle-income countries. We production of essential services and medical equip- are partnering with the African Union and the Africa ment, including test kits and personal protective Centers for Disease Control to support the Africa equipment. IFC-led investments include the mobili- Vaccine Acquisition Trust (AVAT) in order to help coun- zation of a €600 million financing package to boost tries purchase and deploy COVID-19 vaccines for up to COVID-19 vaccine production in South Africa, support 400 million people across Africa. And we are working to vaccine manufacturers in Asia, and investments in with the IMF, WHO, WTO, and other partners to track, medical equipment manufacturers and suppliers. coordinate, and advance delivery of vaccines to devel- oping countries. To address many countries’ risk of debt distress, we’ve played a key role in the G20’s Debt Service Suspension IFC is doing vital work to build resilient health systems Initiative, alongside the IMF. The effort has helped and expand the manufacturing and supply chains more than 40 countries to suspend debt service for COVID-19 vaccines. Through its Global Health payments in excess of $5 billion, freeing up fiscal space Platform, IFC committed $1.2 billion to support vaccine as countries combat the crisis. While I am pleased the IFC ANNUAL REPORT 2021 5 LETTER FROM DAVID MALPASS President of the World Bank Group initiative has been extended to the end of 2021, more investible projects in places where they are needed needs to be done, particularly to reduce the stock of most, particularly in IDA and FCS markets, and build a debt in the poorest countries. With the IMF, we are pipeline of investments in a post-pandemic world. helping implement the G20 Common Framework for Debt Treatments, which aims to reduce countries’ debt In February, I was pleased to announce the appoint- burdens for the long term. ment of Makhtar Diop as IFC’s Managing Director and Executive Vice President. His leadership and experi- As the world emerges from the pandemic, climate ence will enable the World Bank Group to build on the change will remain a central challenge. The World unprecedented speed and scale of our response to the Bank Group is the largest multilateral provider of global crisis and support vital recovery efforts through climate finance for developing countries. Over the past the private sector. five years, we have delivered over $83 billion ­— in fiscal 2021 alone, our climate finance totaled over $26 billion. MIGA issued $5.2 billion in guarantees to help coun- Our new Climate Change Action Plan, launched in tries achieve their development goals. These efforts June, seeks to integrate climate throughout devel- are expected to provide 784,000 people with new or opment efforts, with a focus on greenhouse gas better electricity service, support about 14,600 jobs, reduction and successful adaptation. The plan generate over $362 million in taxes for countries, and commits us to 35 percent of Bank Group financing enable about $1.3 billion in loans, including to local having climate co-benefits over the next five years; businesses. MIGA continued to make progress across 50 percent of IBRD and IDA climate financing will its strategic priority areas, with 85 percent of its proj- support adaptation and resilience. We will align all ects in fiscal 2021 dedicated to climate mitigation and World Bank financing with the goals of the Paris adaptation, projects in fragile and conflict-affected Agreement starting on July 1, 2023. For IFC and MIGA, settings, and IDA countries. 85 percent of Board-approved real sector operations will be aligned starting July 1, 2023, and 100 percent As part of our ongoing commitment to fight racism starting July 1, 2025. We will support countries’ prepa- and racial discrimination in our workplaces and our ration and implementation of Nationally Determined work, our senior management and I welcomed 80 Contributions and long-term strategies; these, in turn, recommendations submitted in fiscal 2021 by the will inform our Country Partnership Frameworks. Bank Group’s Task Force on Racism. The first set of And we will support countries’ transition away from 10 foundational recommendations are already being coal to affordable, reliable, and cleaner alternatives implemented, and more are under review. I am grateful for electricity. Our efforts will help countries grow to all those who have come forward to engage on this their economies while reducing emissions, adapting important topic as we continue to work for tangible, to climate change, building resilience, and protecting meaningful, and long-lasting change. natural resources, including biodiversity. Over the past year, our staff have gone above and In fiscal 2021, IBRD committed $30.5 billion to middle- beyond to support our clients, even as we transitioned income countries, and IDA committed $36.0 billion on to home-based work and coped with the pandemic’s grant and highly concessional terms to the poorest impact on our own lives, families, and communities. countries. I welcomed the G20’s endorsement of They have ensured the highest quality standards even advancing IDA’s 20th replenishment cycle to 2021, which as we stepped up our support to clients. I am grateful will provide the poorest countries with more resources for this commitment to our mission, and I look forward to overcome the crisis and work toward recovery. I am to welcoming staff back to our offices as circum- also pleased that, after nearly three decades, Sudan stances permit. cleared its arrears to IDA in March, enabling full reen- gagement with the Bank Group and paving the way for There is no path to sustainable, long-term growth the country to access nearly $2 billion in IDA financing. without continuous progress in reducing poverty and inequality. With the dedication of our staff, the IFC delivered a strong fiscal performance, reaching support of our partners, and our relationships with a record high of $31.5 billion in financing, including countries, I am confident that we will help countries $23.3 billion in long-term finance and $8.2 billion overcome this crisis and return to the path of inclu- in short-term finance. IFC also scaled up its short- sive, sustainable growth. term financing offerings and kept trade flowing. With COVID-19 severely impacting private enter- prises across emerging markets, IFC provided critical support through liquidity and trade financing, allowing companies to remain in operation, preserving jobs, David Malpass and enabling long-term private sector intervention President of the World Bank Group once pandemic impacts subside. We are accelerating and Chairman of the the execution of the IFC 3.0 strategy to create more Board of Executive Directors 6 IFC ANNUAL REPORT 2021 World Bank Group Response to the COVID-19 Pandemic The World Bank Group has mounted a broad and decisive response to the pandemic ­ — the largest in our history. From April 2020 through the end of fiscal 2021 (June 30, 2021), Bank Group financing totaled over $157 billion. The scale of this response reflects the Bank Group’s strong financial position, underpinned by the 2018 IBRD and IFC General Capital Increases and the IDA19 Replenishment. It includes: $45.6B $53.3B in financing from IBRD for of IDA resources on grant and middle-income countries. highly concessional terms for the poorest countries, with built-in debt relief for countries at risk of debt distress. $42.7B* $7.6B from IFC to private companies in guarantees from MIGA to and financial institutions. support private sector investors and lenders. $7.9B from recipient-executed trust funds. *Includes long-term commitments from IFC’s own account, short-term finance commitments, and core mobilization. IFC ANNUAL REPORT 2021 7 MEETING THE MOMENT “At a time when so many others had to step back, IFC stepped forward: helping developing countries weather the worst of the health crisis, preserve jobs, and scale up climate solutions.” Makhtar Diop, IFC Managing Director HISTORIC GLOBAL OUR RESPONSE WITH CHALLENGES THE PRIVATE SECTOR • COVID-19 and its • Largest-ever economic impact investment volume • Climate change • Expanded climate financing • Fragility and conflict • Developing investment pipeline for fragile countries HOW WE DELIVERED Collaborating for greater impact with clients, partners, co-investors Resilient staff committed to flexibility and innovation Using de-risking tools and creating mobilization platforms 8 IFC ANNUAL REPORT 2021 Makhtar Diop IFC Managing Director Much can be learned in times of crisis. They hold We launched a $4 billion financing initiative to help up a mirror, forcing us to reckon with what we see. developing countries access healthcare supplies What did COVID-19 reveal? A world more inter- needed to fight the pandemic. We mobilized connected than ever before, where health and $8 billion in liquidity financing to keep businesses economic outcomes are intertwined, conflict is on in affected industries open, including $400 million the rise, and progress against inequality is fragile. to reach small and women-owned businesses. We But perhaps the most important revelation is this: delivered a record $4 billion in climate financing for when a moment arrives that requires urgency and our own account. action, extraordinary things are possible. These numbers represent lives saved. I joined IFC in the midst of a global pandemic and in Businesses lifted. Communities protected. a world defined by uncertainty. It was a humbling Opportunities created. experience that gave me a front row seat for this organization’s extraordinary capabilities in the most Our accomplishments this year are a testament to challenging of circumstances. At a time when so the strength and resilience of IFC’s teams around many others had to step back, IFC stepped forward: the globe. They stayed laser-focused on our mission helping developing countries weather the worst of even as they dealt with their own personal hard- the health crisis, preserve jobs, and scale up climate ships related to the pandemic. Their dedication solutions while ensuring countries facing fragility, inspires me every day and gives me confidence that conflict, and violence are not left behind. we are prepared for what the future demands of us. The pages that follow tell a more complete story, The future demands that we be bold enough to but a few facts are worth highlighting. In Fiscal Year venture into the world’s most difficult places. That 2021, IFC made $31.5 billion in total commitments we be persuasive enough to convince our private around the world, including $11.9 billion in fragile, sector partners to work with us to redefine impact conflict-affected, and poverty-stricken countries. investing. In short, the future demands our fear- lessness. And we intend to deliver by setting our most audacious goal yet: doubling IFC’s impact and mobilizing two dollars for every dollar we invest. IFC ANNUAL REPORT 2021 9 Tackling challenges, maximizing opportunities We will begin by tackling the twin challenges that threaten our planet and our people. First, we must act on one of our generation’s most urgent tasks: addressing climate change. Time is running out to head off the worst-case scenarios predicted by scientists, and it is the world’s most We must also shore up the micro, small and vulnerable — those who have contributed the least medium enterprises who are still struggling in to climate change — who will suffer for it. the wake of the pandemic. Access to capital has always been the biggest constraint on business IFC recognizes that if we don’t do our part to growth in developing countries, with pre- limit global warming, we will never accomplish pandemic data pointing to a nearly $8 trillion our mission. In the face of such stakes, there is financing deficit. That gap is almost certainly only one option: to meet this moment head on larger now, with enterprises that were already and fundamentally change how we operate. We credit constrained having little buffer to help have committed to aligning 100 percent of our weather the disruptions caused by COVID-19. direct investments with the objectives of the Paris Agreement by Fiscal Year 2026. IFC’s recent commitment of $2 billion in new financing for micro-, small-, and medium-sized These same investments in climate solutions will enterprises in Africa is only the beginning of also help us address the second major challenge our support efforts. These businesses are the facing the world: ensuring the current health economic foundation for countries around the pandemic does not allow a pandemic of inequality world — delivering essential services, creating to take root. jobs, and lifting families out of poverty — and we must ensure their long-term survival. COVID-19 dealt a devastating blow to emerging markets, reversing years of economic progress in We are particularly focused on using our invest- a few short months. As many as 150 million people ments to regain ground on gender equity. The are expected to slip into extreme poverty by the pandemic forced countless women out of the end of 2021. There is no question that the private labor market and into unpaid care work. If we sector will be the primary driver of recovery. don’t want to lose an entire generation of female With IFC’s leadership and expertise, we can entrepreneurs, we must support women-owned and will ensure that recovery is green, inclusive, businesses — and IFC’s Banking on Women initia- and resilient. tive has already invested more than $3 billion in 104 financial institutions in 56 countries to support Our efforts must focus on several fronts sustainable financial services for women. concurrently — first among them the systemic healthcare vulnerabilities the pandemic exposed. Investing in climate solutions, health, and small Developing countries need equitable access to businesses will go a long way toward ensuring vaccines and medical supplies to fight COVID-19 a green, inclusive, and resilient recovery from and other diseases. IFC is helping to facilitate the pandemic. But addressing challenges will this by rethinking its approach to investing in only get us so far. We also must be relentless the healthcare industry. We will be focused on about maximizing opportunity — and there is addressing market gaps, improving local manufac- perhaps no greater opportunity than bridging turing and distribution capacity, and supporting the digital divide. public-private partnerships to strengthen health system resilience. The best time to prepare for The pandemic made plain what we have known the next global health crisis is right now, and we to be true for some time: the digital economy is intend to do our part. the economy of the future. There is practically unlimited potential in developing countries if we give young people the skills, tools, and resources they need to become the next generation of coders, digital creators, and tech entrepreneurs. But while the pace of digital adoption around the world has increased in the past 18 months, emerging markets still lack the universal digital connectivity that could spur further growth. 10 IFC ANNUAL REPORT 2021 FY21: A YEAR OF RECORD RESULTS FOR IFC $31.5B LONG-TERM FINANCE TOTAL COMMITMENTS AROUND THE WORLD $23.3 LONG-TERM INVESTMENT BILLION COMMITMENTS SHORT-TERM FINANCE $8.2B IN SHORT-TERM FINANCE outpacing the previous annual high of US$7.4 billion in FY18 KEY THEMES $4B IN CLIMATE 25% IDA-17-eligible and fragile countries FINANCING FOR OUR accounted for 25 percent of IFC’s own OWN ACCOUNT account long-term finance commit- ments; climate business for 32 percent. $1.58B committed in new long-term finance for financial institutions specifically targeting women. IFC ANNUAL REPORT 2021 11 IFC’s commitments to the telecom, media, and technology sector in emerging markets topped $1 billion for the first time this year, with almost three-quarters going to Africa. But this is only the beginning of our efforts. A resilient recovery must include bringing digital connectivity to the entire developing world, allowing the poorest and most marginalized among us to access online learning and work opportunities. Raising the bar In order to achieve our ambitious goals, IFC must take the high bar we’ve set for ourselves and raise it even higher. Our first duty is to lead from within. Accountability markets in the places that need them most. Our within our institution has never been stronger Upstream initiative — which continued to build after the recent internal reforms and the new out our long-term pipeline even at the height of Independent Accountability Mechanism (CAO) the pandemic — will be our primary vehicle for Policy that came into effect on July 1, 2021. We now creating early project development opportunities have new processes in place that give stronger and represents perhaps our brightest hope for voice to those who are negatively affected by the future. IFC-supported projects, promote people’s access to the CAO, and provide more opportunities for We also must find bold and creative ways to bring IFC and our clients to resolve concerns of local even more private capital into the developing world. communities early and proactively. This holds us Despite the challenges of the pandemic, we still accountable, allows us to better assess our impact, managed to mobilize our second highest amount of and ultimately supports our goal of ensuring the capital in IFC’s history. But even this is not enough benefits of development are felt by all. to achieve the ambitions we have set for ourselves. We have also doubled down on our commitment Nurturing partnerships new and old will be to diversity within our ranks. The wide range of essential to our success. We will create innova- backgrounds, experiences, and viewpoints within tive funding platforms that allow us to broaden IFC is undoubtedly our biggest asset, and this year’s and diversify the ranks of our investors. And at appointment of our first dedicated Diversity, Equity every turn, we will proactively address the factors & Inclusion Program Manager will ensure it stays that are holding private sector entities back from that way. investing in emerging markets — including through regulatory reforms and standard setting. Taking these steps to strengthen IFC internally will leave us well positioned to continue showing bold The pandemic showed there is no moment IFC leadership externally in a post-pandemic world. cannot meet. I am so grateful for the incredible We must have the same clarity of vision and bias team that brought us to this moment, and that toward action outside of a crisis that we do during is so prepared to carry us into a brighter future. one. This will mean increasing our own appetite I hope you will join me in looking toward the for risk, especially when it comes to creating months and years ahead with optimism — for our organization, our clients, people and communities we serve and the green, inclusive, and resilient future we will build together. Makhtar Diop IFC Managing Director 12 IFC ANNUAL REPORT 2021 OUR MANAGEMENT TEAM Our leadership shapes IFC’s strategies and policies and oversees the effective deployment of our resources, with a focus on maximizing development impact and meeting the needs of our clients. IFC’s Management Team brings together years of development experience, a broad array of expertise, and complementary cultural perspectives. Makhtar Diop IFC Managing Director Stephanie von Georgina Baker Elena Bourganskaia Karin Finkelston Friedeburg Vice President, Chief of Staff Vice President, Senior Vice President, Latin America and the Partnerships, Operations Caribbean, and Europe Communication, and and Central Asia Outreach John Gandolfo Mohamed Gouled Ruth Horowitz Monish Mahurkar Vice President and Vice President, Vice President, Vice President, Treasurer Risk and Finance Equity Mobilization Corporate Strategy Division (AMC) and Resources Alfonso Garcia Mora Sérgio Pimenta Christopher Vice President, Vice President, Stephens Asia and Pacific Middle East and Africa Vice President and General Counsel, Legal and Compliance Risk As of June 30, 2021 IFC ANNUAL REPORT 2021 13 WORLD BANK GROUP SUMMARY RESULTS WORLD BANK GROUP 2021 SUMMARY RESULTS WORLD BANK GROUP GLOBAL COMMITMENTS In fiscal 2021, the World Bank Group delivered record levels of financing at an unprecedented pace; conducted in-depth analysis and research; and partnered with governments, the private sector, and other institutions to help developing countries address the wide-ranging impacts of the COVID-19 pandemic and work toward a green, resilient, and inclusive recovery. $98.8B in loans, grants, equity investments, and guarantees to partner countries and (BILLION) private businesses. Total includes multiregional and global projects. Regional breakdowns reflect World Bank country classifications. EAST ASIA EUROPE LATIN AMERICA MIDDLE EAST AND AND CENTRAL AND THE AND SOUTH SUB-SAHARAN THE PACIFIC ASIA CARIBBEAN NORTH AFRICA ASIA AFRICA $13.5B $10.9B $17.5B (BILLION) (BILLION) (BILLION) $6.2B (BILLION) $15.6B $35.2B (BILLION) (BILLION) 14 IFC ANNUAL REPORT 2021 WORLD BANK GROUP SUMMARY RESULTS The Institutions of the World Bank Group The World Bank Group is one of the world’s largest sources of financing and knowledge for developing countries. It consists of five institutions that share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable growth and development. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD) Lends to governments of middle-income and creditworthy low-income countries. INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) Provides financing on highly concessional terms to governments of the poorest countries. INTERNATIONAL FINANCE CORPORATION (IFC) Provides loans, equity, and advisory services, and mobilizes additional capital from other sources to stimulate private sector investment in developing countries. MULTILATERAL INVESTMENT GUARANTEE AGENCY (MIGA) Provides political risk insurance and credit enhancement to investors and lenders to facilitate foreign direct investment in emerging economies. INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES (ICSID) Provides international facilities for conciliation and arbitration of investment disputes. World Bank Group Financing for Partner Countries By fiscal year, millions of dollars World Bank Group 2021 2020 2019 2018 2017 Commitments a 98,830 83,547 68,105 74,265 68,274 Disbursements b 60,596 54,367 49,395 45,724 43,853 IBRD Commitmentsc 30,523 27,976 23,191 23,002 22,611 Disbursements 23,691 20,238 20,182 17,389 17,861 IDA Commitmentsc 36,028 30,365e 21,932e 24,010e 19,513d Disbursements 22,921 21,179 e 17,549 14,383 12,718d IFC Commitmentsf 20,669 17,604 14,684 19,027 18,345 Disbursements 11,438 10,518 9,074 11,149 10,355 MIGA Gross issuance 5,199 3,961 5,548 5,251 4,842 Recipient-Executed Trust Funds Commitments 6,411 3,641 2,749 2,976 2,962 Disbursements 2,546 2,433 2,590 2,803 2,919 a. Includes IBRD, IDA, IFC, Recipient-Executed Trust Fund (RETF) commitments, and MIGA gross issuance. RETF commitments include all recipient executed grants, and therefore total WBG commitments differ from the amount reported in the WBG Corporate Scorecard, which includes only a subset of trust funded activities. b. Includes IBRD, IDA, IFC, and RETF disbursements. c. Amounts are net of full terminations and cancellations approved in the same fiscal year. d. Figures include the commitment and disbursement of a $50 million grant for the Pandemic Emergency Financing Facility. e. Commitments and disbursements exclude IFC-MIGA Private Sector Window (PSW) activities. f. Includes long-term commitments for IFC’s own account and short-term finance commitments. Does not include funds mobilized from other investors. IFC ANNUAL REPORT 2021 15 IFC YEAR IN REVIEW IFC 2021 YEAR IN REVIEW IFC operates in accordance with our Board-approved IFC 3.0 strategy and the IFC Strategy and Business Outlook Update FY22–24. Financial Highlights Dollars in millions, as of and for the years ended June 30 2021 2020 2019 2018 2017 Net income (loss) attributable to IFC1 $ 4,209 $ (1,672) $ 93 $ 1,280 $ 1,418 Grants to IDA 213 – – 80 101 Income (loss) before grants to IDA 4,422 (1,672) 93 1,360 1,523 Total assets $ 105,264 $ 95,800 $ 99,257 $ 94,272 $ 92,254 Loans, equity investments, and debt securities, net 44,991 41,138 43,462 42,264 40,519 Estimated fair value of equity investments 12,024 10,366 13,113 14,573 14,658 Key Ratios Return on average assets (U.S. GAAP basis) 1 4.2% (1.7)% 0.1% 1.4% 1.6% Return on average capital (U.S. GAAP basis) 1 14.9% (6.3)% 0.3% 5.0% 5.9% Cash and liquid investments as a percentage of next three years’ estimated net requirements 114% 96% 104% 100% 82% Debt-to-equity ratio 2.1 2.2 2.2 2.5 2.7 Total resources available ($ in billions) 30.7 28.2 27.8 24.7 23.6 Total resources required ($ in billions) 20.5 20.3 21.8 20.1 19.4 Total reserve against losses on loans to total disbursed portfolio 4.9% 6.3% 4.7% 5.1% 6.1% 1. Financial results are not directly comparable due to the adoption of ASU 2016-01 on July 1, 2019, which resulted in all unrealized gains and losses on equity investments being reported in Net Income since the fiscal year 2019. 16 IFC ANNUAL REPORT 2021 IFC YEAR IN REVIEW Operational Highlights Dollars in millions, for the years ended June 30 2021 2020 2019 2018 2017 Investment Commitments1 $ 31,500 $ 28,430 $ 24,890 $ 30,699 $ 25,807 Long-Term Investment Commitments FOR IFC’S OWN ACCOUNT $ 12,474 $ 11,135 $ 8,920 $ 11,629 $ 11,854 Number of projects 313 282 269 366 342 Number of countries 71 67 65 74 75 MOBILIZATION2 $ 10,831 $ 10,826 $ 10,206 $ 11,671 $ 7,461 Syndicated loans $ 3,647 $ 4,989 $ 5,824 $ 7,745 $ 3,475 IFC initiatives & other $ 3,693 $ 3,370 $ 2,857 $ 2,619 $ 2,207 Asset Management Company (AMC) Funds $ 244 $ 50 $ 388 $ 263 $ 531 Advisory Mobilization3 $ 3,246 $ 2,417 $ 1,137 $ 1,044 $ 1,248 TOTAL LONG-TERM INVESTMENT COMMITMENTS $ 23,305 $ 21,961 $ 19,126 $ 23,301 $ 19,316 Short-Term Investment Commitments Annual Commitments4 $ 8,195 $ 6,469 $ 5,764 $ 7,398 $ 6,491 Investment Disbursements For IFC’s account $ 11,438 $ 10,518 $ 9,074 $ 11,149 $ 10,355 Syndicated loans $ 1,309 $ 2,231 $ 2,510 $ 1,984 $ 2,248 TOTAL INVESTMENT DISBURSEMENTS $ 12,747 $ 12,749 $ 11,584 $ 13,133 $ 12,602 5 Portfolio Exposure Number of firms 1,822 1,880 1,930 1,977 2,005 For IFC’s account $ 64,092 $ 58,650 $ 58,847 $ 57,173 $ 55,015 Syndicated loans $ 15,658 $ 16,161 $ 15,787 $ 16,210 $ 16,047 TOTAL PORTFOLIO EXPOSURE $ 79,750 $ 74,811 $ 74,635 $ 73,383 $ 71,062 Advisory Services Advisory Services program expenditures $ 244.0 $ 274.4 $ 295.1 $ 273.4 $ 245.7 Share of program in IDA countries6 54% 57% 59% 57% 63% 1. Investment Commitments include Long-Term Investment Commitments and Short-Term Investment Commitments. 2. Defined as “core mobilization” — Non-IFC financing or risk sharing arranged on commercial terms due to the active and direct involvement of IFC for the benefit of a client. Excludes $1,300 million of unfunded risk transfers that are accounted for under IFC’s own account. 3. Advisory Mobilization includes third-party private financing that has been mobilized for Public Private Partnerships, as a result of IFC’s role as lead transaction advisor. It also includes Corporate Finance Services, for projects in which IFC has provided transaction advisory services to help private sector clients expand into new markets, diversify and restructure operations or bring in new equity investors. 4. FY20 Annual Report reflected Short Term Finance (“STF”) Average Outstanding Balance for FY17-FY19. FY21 Annual Report is using Short-Term Investment commitment for FY17-FY21. In FY20 Annual Report, Short-Term Investment commitment was reported as US$6,473 million, the figure has been revised to US$6,469 million. Short-Term Finance includes Global Trade Finance Program (GTFP) and Global Trade Supplier Finance Program (GTSF). 5. Portfolio exposure is defined as the sum of the (i) committed exposure for IFC’s debt investments, (ii) fair market value of IFC’s equity investments, and (iii) total undisbursed equity commitments. Effective July 1, 2018, to accommodate change in accounting standards impacting how IFC reports its equity holdings, IFC has introduced the new term “Portfolio Exposure,” which, instead of disbursed and outstanding balance, uses the fair market value of IFC’s equity investments. Therefore, FY19 onwards Portfolio Exposure For IFC’s account and prior years are not directly comparable. 6. All references in this report to percentages of advisory program expenditures in IDA countries and fragile and conflict-affected areas exclude global projects. IFC ANNUAL REPORT 2021 17 IFC YEAR IN REVIEW FY21 Long-Term Commitments Dollar amounts in millions, for IFC’s own account as of June 30, 2021 Total $ 12,474 100.00% By Industry Financial Markets $ 5,899 47.29% Health & Education $ 1,321 10.59% Infrastructure $ 1,045 8.38% Agribusiness & Forestry $ 1,009 8.09% Tourism, Retail & Property $ 992 7.95% Manufacturing $ 833 6.68% Funds $ 636 5.10% Telecommunications & Information Technology $ 601 4.82% Natural Resources 1 $ 138 1.10% By Region East Asia and the Pacific $ 2,830 22.69% Latin America and the Caribbean $ 2,792 22.39% Sub-Saharan Africa $ 2,435 19.52% Europe and Central Asia $ 1,962 15.73% South Asia $ 1,516 12.15% Middle East and North Africa $ 928 7.44% Global $ 12 0.10% By Product Loans2 10,802 $ 86.60% Equity3 1,157 $ 9.28% Guarantees 475 $ 3.81% Risk-management products $ 40 0.32% FY21 Portfolio Exposure4 Dollar amounts in millions, for IFC’s own account as of June 30, 2021 Total $ 64,092 100% By Industry Financial Markets 24,418 $ 38% Infrastructure 9,981 $ 16% Funds 6,246 $ 10% Manufacturing 4,341 $ 7% Agribusiness & Forestry 4,082 $ 6% Health & Education 3,848 $ 6% Tourism, Retail & Property 3,767 $ 6% Trade Finance 3,098 $ 5% Telecommunications & Information Technology 2,720 $ 4% Natural Resources1 1,591 $ 2% By Region5 Latin America and the Caribbean 12,490 $ 19% East Asia and the Pacific 11,786 $ 18% Sub-Saharan Africa 11,221 $ 18% South Asia 10,004 $ 16% Europe and Central Asia 8,997 $ 14% Global 5,752 $ 9% Middle East and North Africa 3,840 $ 6% 1. Includes IFC’s activities in oil, gas, and mining. ­ 2. Includes loan-type, quasi-loan products. 3. Includes equity-type, quasi-equity products. 4. Portfolio exposure is defined as the sum of the (i) committed exposure for IFC’s debt investments, (ii) fair market value of IFC’s equity investments, and (iii) total undisbursed equity commitments. 5. Excludes individual country shares of regional and global projects. 18 IFC ANNUAL REPORT 2021 IFC YEAR IN REVIEW IFC’s Largest Country Exposures6 As of June 30, 2021 (Based on IFC’s account) PORTFOLIO EXPOSURE GLOBAL COUNTRY RANK ($ MILLIONS) % OF GLOBAL PORTFOLIO 1 India $ 6,905 10.77% 2 China $ 4,745 7.40% 3 Turkey $ 4,436 6.92% 4 Brazil $ 3,684 5.75% 5 South Africa $ 2,491 3.89% 6 Nigeria $ 2,000 3.12% 7 Colombia $ 1,762 2.75% 8 Vietnam $ 1,665 2.60% 9 Mexico $ 1,590 2.48% 10 Indonesia $ 1,527 2.38% 6. Excludes individual country shares of regional and global projects. FY21 Long-Term Commitments by Environmental and Social Category CATEGORY COMMITMENTS ($ MILLIONS) NUMBER OF NEW PROJECTS A $ 215 7 B $ 5,421 130 C $ 153 24 FI 7 $ 14 0 FI-1 $ 134 3 FI-2 $ 4,673 102 FI-3 $ 1,866 46 Total $ 12,474 312 7. FI category applies to new commitments on previously existing projects. Visit www.ifc.org/escategories for information on category definitions. FY21 Advisory Services Program Expenditures Dollar amounts in millions Total $ 244.0 100% By Region Sub-Saharan Africa $ 77.4 32% East Asia and the Pacific $ 34.3 14% Europe and Central Asia $ 33.1 14% Global $ 30.4 12% South Asia $ 23.5 10% Middle East and North Africa $ 23.4 10% Latin America and the Caribbean $ 21.8 9% By Business Area Advisory by IFC Industry $ 156.2 64% Financial Institutions Group 56.4 23% Manufacturing, Agribusiness & Services 37.3 15% Transaction Advisory 36.0 15% Infrastructure & Natural Resources 21.3 9% Disruptive Technologies and Funds 5.2 2% Creating Markets Regional Advisory $ 59.4 24% Other Advisory, including Environment, Social & Governance $ 28.4 12% IFC ANNUAL REPORT 2021 19 STRATEGY IN ACTION In a year unlike any other, IFC produced remarkable results despite challenging conditions, delivering record levels of financing for our clients. More importantly, IFC found opportunity within crisis, repositioning itself to make a bigger impact in the years ahead. Now, more than ever, we are focused on creating jobs, building skills, and developing new markets. We are engaging earlier — and more proactively — to create investment opportunities and solve development challenges in priority sectors such as healthcare, affordable housing, and climate business, among others. (See more on our Upstream work on page 34.) It is clear that the private sector is a key driver of recovery from the COVID-19 pandemic. IFC is finding new creative ways to unlock more private investment in this moment of need. We are responding with speed and purpose, helping clients to weather the devastating impact of the pandemic, rebuilding markets, preserv- ing jobs, and leading efforts to enable a post-pandemic recovery that is green, inclusive, and resilient. MEETING THE MOMENT INDIA 20 IFC ANNUAL REPORT 2021 22 CLIENT VOICES: WORKING TOGETHER TO AMPLIFY IMPACT 24 STAFF VOICES: RESILIENCE AND OPPORTUNITY 26 RELIEF, RESTRUCTURING, AND RESILIENT RECOVERY 34 CREATING OPPORTUNITIES FOR NEW PRIVATE SECTOR INVESTMENT 38 ENABLING RECOVERY THROUGH RAPID DIGITAL TRANSFORMATION 40 THOUGHT LEADERSHIP IFC ANNUAL REPORT 2021 21 STRATEGY IN ACTION CLIENT VOICES WORKING TOGETHER TO AMPLIFY IMPACT Working closely with us, our clients around the world delivered business results with development impact. Here are a few of their thoughts. Sustained Credit for Local Production of Local Entrepreneurs COVID-19 Vaccines “IFC’s innovative financing will allow us to expand “We are grateful for the opportunity to access a our support to Mongolian micro and small funding package arranged by IFC. Aspen’s teams enterprises while contributing to the nation’s are working tirelessly to optimize production effort to rebound from the COVID-19 crisis.” of the Johnson & Johnson COVID-19 vaccine for Africa at our manufacturing site in Gqeberha, Altanzul Zorigt, CEO of Transcapital, – South Africa.” a non-bank financial institution, Mongolia. Read more Stephen Saad of Aspen, Africa’s largest – pharmaceutical company, South Africa. Read more Opening Doors to The Power of Partnerships Digital Medicine “The best partnerships are informed by a common “The COVID-19 crisis allowed us to transform a goal and an experience of learning together. By traditional strategy based on linear growth to a combining the expertise and resources of the digital model that could grow exponentially.” Rockefeller Foundation with the global footprint of the IFC, we are demonstrating the power of – Carlos Orellana, CEO of eye care clinic salauno, partnerships to deliver real impact.” Mexico. Read more Dr. Rajiv J. Shah, Rockefeller Foundation President – and IFC’s partner in a new initiative to mobilize up to $2 billion of private sector investment in climate-smart distributed renewable energy solutions, Global. Read more 22 IFC ANNUAL REPORT 2021 Supply Chain Solutions Building a Business for Small Shops in Sustainable Banking “[TradeDepot] made it much easier for me to “Green banking offered us a unique opportunity stock my store without leaving my location. to be a pioneer in a market that was largely They would supply me at least once a week, and undeveloped, that lacked green finance expertise.” sometimes two or three times in a week. There was no need for me to go to the market, and Andrii Kravets, Chairman of the Board, – their prices are good.” Ukrgasbank, Ukraine. Read more Blessing Chibueze, a shop operator in Lagos, Nigeria. – Read more Ride-Hailing Services that Support Women “We realized the impact that safe transport has on women’s empowerment and financial inde- pendence. Our company and our investments in technology enable women passengers to make safe trips while providing flexible and lucrative employment for women drivers.” – Jiffry Zulfer, CEO of PickMe, Sri Lanka. Read more SOUTH AFRICA IFC ANNUAL REPORT 2021 23 STRATEGY IN ACTION STAFF VOICES RESILIENCE AND OPPORTUNITY Our staff combine a remarkable diversity of skills, experiences, and backgrounds. But this year, they all shared a common challenge: the personal need to cope with the pandemic while delivering on IFC’s mission. Looking ahead, IFC’s staff are finding new ways to support a resilient recovery. Here are some of their reflections. Shalabh Zeynep DELHI WASHINGTON, DC Tandon Kantur Ozenci In India, 65 staff members and more than 400 family members tested Zeynep Kantur Ozenci, a principal invest- positive for COVID-19. With the national health system under severe ment officer based in Washington, DC, stress as new cases reached as many as 400,000 per day at the peak of tirelessly led the development of IFC’s the second wave, our India team set up a 24/7 helpline to support one Global Health Platform (see page 27) and another. Volunteer case managers advised colleagues and families on Upstream initiatives focused on build- how to get tested and seek medical attention. They even facilitated hos- ing healthcare resilience in developing pital admission and lifesaving support — until well after staff were safely countries. Like many of her colleagues, home and recovered. she closely monitored what was happen- ing with loved ones in Turkey, her home Amid it all, our India staff continued delivering on IFC’s mission. “Working country, some of whom tested positive together, the team overcame immense grief and loss only to redouble for COVID-19 at the onset of the pan- its efforts to support clients at a truly critical time,” said Shalabh Tandon, demic. Despite long working days and IFC’s acting South Asia Regional Director at the time. “Our work has unsettling news from home, she main- taken on new meaning — not only in helping clients keep the lights on tained a positive outlook. “I am extremely and preserve jobs, but also rebuilding for truly sustainable development.” fortunate to have had this opportunity,” she said. “Not many people have the chance to work on something so mean- ingful as a new global health initiative to increase access to products and services that can literally make the difference between life and death during a pan- demic.” 24 IFC ANNUAL REPORT 2021 Ahmed Lorentz CAIRO DAKAR Okasha Nwachuku In Cairo, Ahmed Okasha, an operations “The pandemic really brought to life what roughly half the world’s officer, became a father for the first time population who lack internet connections must endure, being confined in a city in complete lockdown. “Surviving with their children at home with schools closed and no opportunities for with a newborn during a pandemic was online learning,” said Lorentz Nwachuku, a principal investment officer extremely tough. Going out with him for in Dakar. his vaccinations felt like going out during a war, with all the precautions we had Working remotely, he spent much of the year working to address the to take.” issue in Togo, planning financing for increased 4G connections and broadband access in support of the country’s goal of becoming West He continued to work to help financial Africa’s regional digital hub. At the same time he went even farther institutions in the Middle East increase afield, conducting virtual scoping missions to identify potential connec- their lending to small businesses. He tivity-building opportunities in Niger and Chad. The obstacles involved stayed motivated by the business owners are significant, but do not sway him. “I feel strongly about IFC’s role in who told him how the resulting growth improving Africa’s infrastructure, especially in digital,” he said. “These are had led to increased incomes and provided the kinds of things that excite me about being here.” an opportunity to send their children to better schools. “This is the impact I was looking for when I came to IFC,” he said. Margarete WASHINGTON, DC Biallas Thais SÃO PAULO The same was true for Margarete Biallas, a senior operations officer Mello who found herself grounded in Washington, DC for 18 months, unable to travel. She and her teammates soon adapted, working online to help Thais Mello joined IFC’s Upstream Infra- banks in Ethiopia, Iraq, Sudan, and other challenging markets identify structure team in Brazil in July 2020, new digital finance opportunities. Before the end of FY21, she had helped just as the pandemic was having severe launch a €21 million access to finance program addressing food security effects. She spent her entire first year in Africa. Making the most of the new virtual operating environment, the working from her home in São Paulo, program was developed in partnership with BMZ, the German Federal never once seeing her new co-workers in Ministry for Economic Cooperation and Development, in a year in which person. But by making the most of online no in-person gatherings were possible. “When we looked at the issue meetings and other technology tools, of African food security, doing everything online allowed us to integrate she and her colleagues collaborated day IFC’s agribusiness and financial sector expertise into a more holistic in and day out. They were able to help response than would have been possible before,” she said. roll out a new IFC initiative for municipal water utilities. This experience showed her the essence of IFC’s working culture: “We are not alone. We are part of a team.” IFC ANNUAL REPORT 2021 25 26 IFC ANNUAL REPORT 2021 STRATEGY IN ACTION RELIEF, RESTRUCTURING, AND RESILIENT RECOVERY IFC is helping countries to weather the devastating economic impacts of COVID-19 and to prepare for a more inclusive, sustainable future. Our response package focuses on Relief, Restructuring, and Resilient Recovery, with the goal of enabling the private sector to maintain operations, preserve jobs, and plan for better days ahead. These initiatives build on the strengths of IFC 1.0 and 2.0, the traditional approaches to our business, and also involves rapidly accelerating the implementation of IFC 3.0, which proactively seeks to create markets and build a pipeline of impactful investments in a post-COVID world. This year, we have taken our 3.0 strategy to new heights. The pandemic has changed how we look at the world and our investments. We are now reaching farther than ever to find solutions to tough development challenges — to take urgent and bold actions to meet the moment. RELIEF As the global pandemic emerged in full force in March 2020, IFC launched an $8 billion Fast-Track COVID-19 Facility, providing much-needed liquidity, working capital, and trade financing to keep companies in business, especially in the industries most affected. Our effort contributed to the World Bank Group’s larger crisis response to save lives and livelihoods in client countries and prevent the rollback of development gains lost owing to the pandemic. Trade finance is the single largest component of the Fast-Track COVID-19 Facility to date. IFC’s work in trade finance mitigates banks’ risks amid difficult conditions so that imports of critical goods can keep coming in and local firms can keep exporting into global markets. Our trade finance support came at an especially critical time in Yemen, a country that was already experiencing the world’s worst humanitarian crisis before COVID-19. The pandemic disrupted global supply chains and production in ways that further dampened business activity. IFC’s trade finance facility for Al Kuraimi Islamic Bank is increasing imports of vital commodities that help alleviate poverty and stimulate economic growth in the country. This year we expanded the Fast-Track COVID-19 Facility by adding a $400 million Base of the Pyramid Program. This offers additional support to financial service providers serving some of the segments of the economy hardest hit by the pandemic, such as small businesses, women-owned businesses, informal enterprises, and low-income households. Complementing these relief efforts is IFC’s $4 billion Global Health Platform. Its investments take many forms but all focus on increasing local companies’ supply of critical medical equip- ment and services such as face masks, ventilators, testing kits, and vaccines. One initiative funded through the platform is the African Medical Equipment Facility. Working closely with IFC’s partner banks, the platform helps smaller African healthcare providers import the latest medical technology needed to improve their quality of care. IFC ANNUAL REPORT 2021 27 STRATEGY IN ACTION RELIEF, RESTRUCTURING, AND RESILIENT RECOVERY (cont.) Recognizing that vaccines and their equitable investment in expanding broadband access and laying access are absolutely critical to relief and resilient a solid foundation for a faster, more resilient recovery recovery efforts, IFC’s Global Health Platform also in Africa. committed $1.2 billion to scale up vaccine manufac- turing capacity, including in Africa. To support the We also led a $250 million investment at a critical development of vaccines for African countries, IFC, the time for Cebu Pacific Air, one of the largest domestic French Development institution Proparco, DEG — the airlines in the Philippines. IFC, IFC Emerging Asia Fund, German development finance institution, and the U.S. and Indigo Partners, a specialized private equity firm, International Development Finance Corporation (DFC) jointly invested in the low-cost carrier’s convertible jointly provided a €600 million long-term financing bonds, helping maintain affordable flights in an island package for Aspen Pharmacare Holdings Limited, a nation where maritime transport alone cannot address leading pharmaceutical company in South Africa that the connectivity needs of people, goods, and services. is playing a major role producing COVID-19 treatment The investment will ensure sustainable operations for therapies and vaccines on the African continent. It’s the the airline after the pandemic. The transaction is an largest healthcare investment and mobilization IFC has example of IFC’s role as a provider of patient capital and led globally to date. its ability to consider larger equity investments when combined with mobilized third-party capital. RESTRUCTURING Our pandemic response package also focuses on pre- serving markets so the private sector can continue to play its essential role in development. This requires a two-part focus: on one hand, strength- ening financial institutions’ balance sheets for efficient Focusing on inclusion non-performing loan resolution and helping them revive their lending; on the other, providing specialized The world’s poor have felt the harshest economic long-term finance to protect and restructure viable impact of COVID-19. firms facing liquidity constraints. Many microenterprises and low-income house- On the financial institutions side, we are helping to holds were credit constrained before the pan- create large, well-functioning markets for distressed demic. They now face far greater pressures, asset resolution in several countries — a response to uncertainty, and risks. This has increased the rele- an increase in non-performing loans that threaten vance of the specialized financial institutions that financial stability and undermine the availability and serve them, like Nigeria’s LAPO Microfinance pricing of credit. In India, where government authori- Bank (LAPO MFB). ties anticipate that non-performing loans could reach $200 billion dollars this year, this approach sparked A longtime IFC client, LAPO MFB is its country’s a new partnership called the J.C. Flowers India largest microlender with 800,000 borrowers, Opportunities Fund, between J.C. Flowers, a global mostly women entrepreneurs focused on the investment firm, and Eight Capital Management, a informal sector who take out loans of US $300 or local partner. An IFC investment of up to $100 million less. Many of these businesses fell into crisis amid helped to create the fund, which serves as the coun- the recent lockdown. In response, LAPO MFB had try’s first dedicated platform for mid-size distressed to temporarily close many of its more than 500 assets — a market segment that has been underserved branches nationwide and suspend repayments for until now. most of its borrowers for 60 days. Specialized restructuring investments also keep markets Through our Base of the Pyramid Program, we moving in difficult times. IFC anchored a $620 million made an $8 million-equivalent local currency loan bond issue of Liquid Telecommunications Hold- to help LAPO MFB borrowers bounce back. With ings Ltd., a leading African broadband provider that all branches now fully operational, LAPO MFB is needed to refinance its existing debt. Our $100 million focusing on social and economic empowerment of investment mobilized another $520 million from other the poor and vulnerable who are underserved by investors, freeing the company’s capital for further larger banks. 28 IFC ANNUAL REPORT 2021 Focus on Human Capital: Green, By viewing our engagements through GRID, IFC can leverage private capital to seize the opportunities for Resilient, Inclusive Development recovery and spark job creation. Bringing together the range of tools that encompass the IFC 3.0 strategy, Despite their heavy toll, the unparalleled health, such as Upstream, advisory, as well as our de-risking economic and climate global challenges we faced and mobilization platforms, we are changing the way this year have given countries a unique chance to we engage in key sectors. We are now working more re-imagine the future within the context of these proactively to help countries to create markets and challenges — and with greater intentionality — to encourage stronger private sector participation. ensure long-term sustainable economic growth. IFC’s approach includes a major emphasis on human At the heart of this approach is Green, Resilient, capital, where the pandemic threatens to reverse and Inclusive Development (GRID) — a new decades of hard-won gains, especially for women, World Bank Group strategy addressing risks to girls, and other vulnerable people. Among our areas people, the planet, and the economy in an inte- of focus: grated manner, tailored to the specific needs of each country. A recovery that neglects these Healthcare, where we have created innovative new • interlinkages will not enable countries and private financing models like the Global Health Platform sector players to build the foundations needed to and streamlined processes to ensure quick response, adequately address the complex challenges they while also mobilizing partners to work together to face today. Through the GRID strategy, IFC is an solve health demands from today’s pandemic and anchor of the World Bank Group’s approach to prepare for future ones by building stronger and bring these many strands together, increasing the more resilient health systems. private sector’s role in solving the very real devel- opment challenges that have been exacerbated by Housing, where we are taking an integrated, cata- • the global pandemic. lytic approach to addressing lower-income groups’ demand for affordable homes and accelerating the shift to green mortgages/buildings. Education, where we are helping universities accel- • erate their digital transformation, reaching students online in ways that help build their skills needed for the workforce of tomorrow. VIETNAM IFC ANNUAL REPORT 2021 29 STRATEGY IN ACTION RELIEF, RESTRUCTURING, AND RESILIENT RECOVERY (cont.) RESILIENT RECOVERY As our crisis response efforts continue, it is essential to look to the post-pandemic future — to imagine the kind of world we all wish to live in and to take action to support this vision. For IFC, this means a strong focus on climate and a stronger role for the private sector in a recovery marked by green, resilient, and inclusive development. IFC’s approach recognizes the need to create links between sustainability, inclusion, and economic growth. Climate change, healthcare, gender equality, affordable housing, renewable energy, and our work in fragile and conflict-affected situations top our list of priorities. Looking ahead, we will continue to put our full force into achievements in these areas. The pandemic has made us view our investments in the healthcare industry differently. We have rethought our approach and become bolder and more focused on the future. This has involved moving beyond merely increasing access to critical health supplies and services: we seek to build capacity. We Intensifying action on climate are bringing together different players and finding IFC is ramping up its role in the World Bank solutions to build more resilient health systems that Group’s Climate Change Action Plan. will withstand COVID-19 and beyond. This year, we committed a record $4 billion for Before the pandemic, IFC’s work in the healthcare climate projects, representing 32 percent of IFC’s industry centered on the treatment of chronic own account commitments. diseases and related products and services. Now we increasingly focus on critical products and From the end of fiscal year 2021 through fis- services related to the pandemic, such as vaccines, cal year 2025, we have pledged to increase our pharmaceuticals, diagnostic equipment, oxygen climate investments to 35 percent on average equipment, distribution networks, and digital health. for our own account, up from 30 percent in Larger market gaps must be addressed to build the fiscal year 2020. IFC will align 85 percent of new long-term resilience of health systems, including direct investments with the objectives of the improving local production and distribution capac- Paris Agreement starting in fiscal year 2021, and ity and creating stronger public-private cooperation. 100 percent of these investments starting in fiscal APIs Everywhere, one of our Upstream initiatives, year 2026. IFC is also developing a methodology in supports opportunities for the creation of active partnership with other multilateral development pharmaceutical ingredient manufacturing capacity in banks to assess Paris Alignment for investments in six pilot countries: Bangladesh, Brazil, Kenya, Mexico, financial institutions and funds. Philippines, and South Africa. (See more information on Upstream on page 36.) Our work draws on our ability to mobilize strong partnerships. IFC, along with Proparco — the private sector financing arm of Agence Française de Dével- 30 IFC ANNUAL REPORT 2021 IDA-IFC-MIGA Private Sector Since its inception, just over $1.6 billion from the PSW has been approved to support high-impact Window: de-risking projects, projects, paving the way for investments of more crowding in commercial financing than $3 billion. Approximately 50 percent of these resources have been deployed in fragile or con- flict-affected states. In the countries of the Sahel, The IDA-IFC-MIGA Private Sector Window for example, the PSW has facilitated promotion of (PSW) was launched in 2017 to support private regional value chains and access to finance sector development and job creation in the for SMEs. poorest and most fragile countries. The window helps to mitigate risk. It also enables the World The strong pipeline and demand demonstrate Bank Group to draw on expertise and instruments its important role in enabling impactful projects across member institutions: the World Bank and that might otherwise not happen. In response its business environment and sectoral reforms, to the COVID-19 crisis, for example, IFC worked IFC investments, and MIGA guarantees. with partners in Africa to strengthen healthcare systems, support diagnostic capacity, and provide The IDA PSW is deployed through four facilities, financing for medical equipment and quality care three of which are managed by IFC: in the region, leveraging the Blended Finance Facility. In Nepal, IFC invested through IDA PSW • A Risk Mitigation Facility, to provide proj- in the Dolma Impact Fund II to help provide ect-based guarantees without sovereign indem- financing to SMEs — an engine of growth that nity to crowd-in private investment in large provides more than 60 percent of the country’s infrastructure projects and public private part- jobs. The IDA PSW is also supporting IFC’s Base of nerships (PPPs) supported by IFC; the Pyramid program in the area of microfinance institutions, providing up to $80 million through • A Local Currency Facility, to provide long- first-loss guarantees from the Blended Finance term local currency investments through IFC in Facility. countries where capital markets are not devel- oped and market solutions are not sufficiently IDA support remains critical to help meet financ- available; ing needs, which were elevated even before the COVID-19 crisis. IDA20 will focus on the theme • A Blended Finance Facility, to blend IDA PSW “Building Back Better from the Crisis: Towards a support with pioneering IFC investments across Green, Resilient and Inclusive Future.” sectors with high development impact, including small and medium enterprises (SMEs), agri- business, health, education, affordable housing, infrastructure, climate change mitigation and adaptation, among others. • The MIGA Guarantee Facility, to expand the coverage of MIGA guarantees through shared first-loss and risk participation akin to reinsur- ance. This facility is managed by MIGA. oppement Group, DEG — the German development The pandemic has had a disproportionate effect finance institution, and the U.S. International Devel- on women and girls. Inclusive recovery will require opment Finance Corporation (DFC), made an invest- creating private sector opportunities that provide ment commitment to provide a €600 million financing equal economic access for all, across regions and package to help Aspen Pharmacare Holdings Limited industries. IFC is working with clients to address refinance existing debt, strengthen the company’s pandemic-related inequalities in areas like financial balance sheet, and support operations including inclusion, care for children, employment, gender-based production of vaccines, and other therapies in African violence, digital solutions, and entrepreneurship. We and emerging markets. Aspen is playing a major role are defining the agenda for the future with research producing COVID-19 treatments, therapeutics, and such as Women and E-commerce in Africa, a study that vaccines on the African continent. found Africa’s emerging e-commerce sector could IFC ANNUAL REPORT 2021 31 STRATEGY IN ACTION RELIEF, RESTRUCTURING, AND RESILIENT RECOVERY grow by nearly $15 billion by 2030 if women can reach online sales parity with men. Our investments also support prioritizing the needs of women and girls. We, Equity Investment: along with Banco La Hipotecaria in Panama and its subsidiary in El Salvador, provided US$50 million to Essential to Development expand mortgage financing to Panamanians and Salva- dorians who have limited access to commercial lending Equity capital is the cornerstone of a firm’s capital institutions. Almost half of the investment will be aimed structure, forming the strong base needed to bring at women, supporting female-headed households. products to market, generate revenues, and create jobs. However, the pandemic has sharply reduced Increased investments in climate-smart business foreign and domestic investment flows and equity solutions and emerging technologies form the foun- investments in emerging economies. dation of a resilient recovery. This includes a focus on renewable energy, which supports energy transitions Equity investment has been a key component of in countries that still rely heavily on coal, such as IFC’s investment toolkit for many years — but its Vietnam, which currently gets less than one percent of relevance has grown in the current context, to its installed power capacity from wind despite having provide risk capital to support sustainable busi- vast potential for more. This year, IFC provided Thuan nesses, and help them in their recovery and future Binh Wind Power, a local sponsor, with a 12-year growth. dollar-denominated financing package of $57 million for two new plants with combined capacity of 54.2 Always emphasizing development impact as megawatts. The new wind projects will help Vietnam well as financial returns, our equity investment meet its targets of reducing greenhouse gas emissions approach takes two forms: by 9 percent by 2030 and of shifting to a lower-carbon economy that is both sustainable and inclusive. Direct investments to take minority stakes • in companies and financial institutions. One With a broader scope, IFC is also partnering with The example is this year’s $16.5 million investment in Engine, a venture capital firm founded by the Mas- India’s leading genetic diagnostics and research sachusetts Institute of Technology (MIT) to identify firm, MedGenome, which is increasing access and scale up innovative technology solutions to some to COVID-19 testing and supporting research to of today’s most pressing challenges across emerg- better help understand the virus and manage ing markets. The firm focuses on “deep tech” start- future outbreaks. ups — ones that aim to develop and commercialize complex discoveries with great potential in healthcare, Indirect investments via private equity and • climate, energy, and other areas. IFC is investing $20 venture capital funds. This year’s $3 million million in The Engine’s new fund targeting global tech commitment to the Savannah Fund, a leading solutions that prevent disease, bring clean energy to technology seed fund in Africa, will finance start- off-grid communities, and reduce carbon emissions, ups across the region, with a focus on supporting among others. These build on earlier investments that women entrepreneurs and disruptive companies are enabling the introduction of new technologies to in high-growth sectors such as fintech, educa- decarbonize steel production, screen municipal waste- tion, logistics and e-commerce, healthcare, water for early signs of disease outbreak, and quickly and agtech. diagnose patients for malaria and other dangerous infectious diseases without laboratory equipment, using a mobile application to track disease data in real time. 32 IFC ANNUAL REPORT 2021 The Power of Mobilization Mobilization is a critical component of IFC’s strategy and our annual delivery for clients. It is an area in which we have high ambition: in the future, we seek to mobilize $2 from others for every $1 we invest for our own account. In FY21, IFC attracted more than $10.8 billion from other financial institutions to provide additional financ- ing to borrowers alongside investments for our own account. These mobilization efforts deepen our impact by connecting underserved firms and markets with new sources of finance and directing a greater share of global capital to key development priorities. For even greater mobilization in the future, we are developing innovative co-investment platforms to reach new partners. These will draw on the lessons of existing vehicles such as the Managed Co-Lending Portfolio Program (MCPP) and Asset Management Company that have collectively raised more than To meet growing needs, we $20 billion in recent years, primarily from institutional have increased our staffing of investors. Over the years, we have included commercial equity specialists to expand our banks, fund managers, impact investors, and insurance execution capabilities and are companies to our platforms. supporting our investee compa- nies through their life cycle with Hikma Pharmaceuticals, a multinational pharmaceu- a diverse set of board directors tical company and existing IFC client, approached us in and various forms of advice and 2020 to request rapid support to continue timely deliv- engagement to enhance their eries of medicines across the Middle East and North business performance. With Africa. In response, IFC and its partners delivered a offices in nearly 100 countries, $200 million financing package in record time. deep country and industry knowl- edge, and strong mobilization To meet Hikma’s urgent needs, IFC leveraged two sets capacity, IFC is well positioned to of mobilization partners: institutional investors and help increase equity investment insurance companies. We used institutional investors’ flows in a broad range of markets, funds already available under the MCPP and also intro- including many that are perceived duced insurance companies to the client. Insurers were to be especially challenging. able to quickly respond and underwrite some of IFC’s exposure, enabling us to make a larger investment from our own balance sheet. IFC also mobilized funds to scale up KCB Bank Kenya’s lending activity to climate-smart businesses and support to smaller businesses, especially those owned by women. Our $150 million financing package will GHANA strengthen KCB Bank Kenya’s capital base and allow it to finance eligible projects and businesses, many of which are facing COVID-19-related challenges. Of the $150 million, IFC contributed $101.8 million itself and mobilized $22 million from BIO of Belgium, $15 million from SANAD Fund, and $11.3 million from Symbiotics, an impact investing market access platform. IFC ANNUAL REPORT 2021 33 STRATEGY IN ACTION CREATING OPPORTUNITIES FOR NEW PRIVATE SECTOR INVESTMENT For IFC, one of our most important These achievements were made possible due to the efforts of the more than 280 dedicated Upstream responses to the pandemic was to staff hired and onboarded virtually over the past 18 accelerate the implementation of our months. Equally important were the contributions of other staff from across the corporation — as well 3.0 strategy to create opportunities as essential collaboration with the World Bank. and markets that will attract capital Together they applied the diverse Upstream toolkit, investment at greater scale. A key which includes regulatory and policy change, stan- dard setting, client advice, project preparation and component of this strategy is the development, and transaction advice, in a range of continued and rapid expansion of our combinations and contexts. Upstream resourcing and work to Upstream is resource intensive. It requires innovation, unlock new investment opportunities. risk taking, and ever greater collaboration and coordi- nation across the World Bank Group. We expect that Our Upstream work is straightforward if challeng- some of our interventions will not work out. But those ing: We are laser-focused on finding imaginative and that do will be important and incremental additions to replicable solutions to some of the world’s toughest private sector development. Importantly, IFC’s Antic- development problems. We are developing a pipe- ipated Impact Measurement and Monitoring (AIMM) line of private sector opportunities and projects with system, which measures our development impact, a clear line of sight to investment, which can then shows that the scores for Upstream are about be supported by IFC’s and our partners’ financing, 18 percent higher than the average score for IFC risk-mitigation, and mobilization services to crystalize projects. (See more information on AIMM on page 43) these opportunities into impact. We are already seeing early signs of success with The expansion and formalization of IFC’s Upstream the conversion of Upstream projects into committed approach began in late 2019, and by June 2020, investments. Over the course of FY21, $2.4 billion of our pipeline of Upstream projects — the potential the long-term finance committed by IFC was enabled investment that we aim to enable over the next by previous Upstream work, of which $1.6 billion was five years — was an estimated $5 billion. In the last for IFC’s own account and $833 million was from year, the pipeline tripled — creating a potential for mobilization. $16.4 billion own account investment from over 300 separate initiatives. At the end of FY21, almost 50 percent of our pipeline was in IDA and FCS coun- tries and 20 percent was in LIC-IDA/FCS. The pipe- line also reflects IFC’s climate goals, with 29 percent having a climate component. 34 IFC ANNUAL REPORT 2021 In the coming years, our focus will be on continued innovation to building a robust and credible pipeline and disciplined execution to optimize conversion of that pipeline into investment: Examples of early suc- cesses from our Upstream pipeline include: KENYA Creating markets for affordable housing With roughly 60 percent of its urban households living in slums, Kenya has a large gap in affordable housing. The country urgently needs more private investment to fill it. A top government priority, housing became a key policy reform objective of 2019. The World Bank Group Joint Capital Market Program (J-CAP) helped design and operationalize the Kenya Mortgage Refinance Company (KMRC), a new entity that provides financial institutions with long-term funds so they can offer clients long-term mortgages and make loans more affordable. A $750 million World Bank Development Policy Operation in 2019 supported new mortgage refinance regulations to allow the emergence of KMRC as a regulated commercial entity. As a result, IFC was able to make an equity investment in KMRC along- side 20 local banks and financial cooperatives. A $250 million World Bank Kenya Affordable Housing Finance proj- ect is also providing KMRC with funding to refinance affordable mortgages, and KMRC is preparing its debut bond issuance in the capital markets, mobilizing private finance from institutional investors. KMRC expects to refinance 30,000 mortgages over the next five years. IFC ANNUAL REPORT 2021 35 STRATEGY IN ACTION CREATING OPPORTUNITIES FOR NEW PRIVATE SECTOR INVESTMENT (cont.) Investing in new sources of water Rapid urbanization is putting pressure on dwindling water resources in many countries — a situation that is worsening over time as drought and other effects of climate change restrict freshwater supply. This opens new opportunities for innovative solutions such as recycling municipal wastewater for reuse by industries and homes, which can create afford- able, reliable and sustainable new local sources of water. To help catalyze private sector investment in this space, IFC has developed, together with the World Bank and MIGA, a new initiative called Scaling ReWater. This Upstream engagement brings together transaction advice, standardized tender documents, balanced project docu- ments, and competitive financing products for municipal- ities across emerging markets to scale up investment in water recycling in a rapid, cost-competitive, and sus- tainable way. As a pilot, IFC is currently advising the city of Durban, in South Africa on the development of two greenfield wastewater treatment plants to be structured as public-private partnerships. 36 IFC ANNUAL REPORT 2021 Digitizing higher education The digital transformation of the higher education sector has become urgent in the context of the COVID-19 pandemic. Many universities in developing countries were unprepared for this sudden change and recognized that transforming their businesses is not a choice but a must. They now need to entirely re-think their business models to expand their reach in a commercially viable, sustainable way. IFC gathered global knowledge, experience, and expert opinions on digital transformation and then created the Digital for Tertiary Education Program (“D4TEP”), a global, replicable product to assist higher education insti- tutions in developing, implementing, and funding their dig- ital transformation strategies and roadmaps. Developed, piloted and launched all within FY21, this has already led to several Upstream engagements with multiple institutions across all IFC regions of operation, deepening IFC’s value proposition and catalyzing targeted investment in the sector. IFC ANNUAL REPORT 2021 37 STRATEGY IN ACTION ENABLING RECOVERY THROUGH RAPID DIGITAL TRANSFORMATION As the pandemic interrupted The pandemic led to record demand for IFC financing of efficient, reliable digital systems that ensure conventional ways of doing internet affordability and expanded access to online business and depressed economic services. For the first time in one fiscal year, we invested more than $1 billion in the technology, activity, it also led to a skyrocketing media and telecom sector. demand for online solutions. Solid digital infrastructure provides the Providing connectivity to enable everything from business continuity to schooling to social engagement foundation for today’s fast-emerging and more, these investments supported communities technology tools — and paves the and hospitals with critical digital infrastructure. New networks, towers, and data centers were needed and way for recovery. As we look to the built, along with other new technologies that required future, investments in this area will more extensive and sophisticated digital infrastructure and smarter operating models. A global sampling of be an increasing priority. our work includes the following: Brazil Kyrgyz Republic Mongolia Senegal $30M $3M $130M FINANCING PACKAGE loan to OData, a data loan to help ElCat LLC, loan to MCS Group, one involving a €65 million center operator, enabling the nation’s largest pri- of the country’s largest IFC loan and €45 million the use and productivity vate wholesale broad- business conglomerates commercial debt, includ- of digital services across band operator, increase and employers, operat- ing €30 million mobilized the economy fiber coverage in under- ing more than 20 sub- by IFC to support a newly- served areas sidiaries across several established subsidiary of sectors Helios Towers, a leading African telecom tower infrastructure company In addition to working with these large firms, IFC helps entrepreneurs establish and build high-growth tech companies — startups that bring innovate solutions to challenging issues, creating highly-skilled jobs and new products that can have impact beyond geographical boundaries. We support these entrepreneurs and their larger ecosystems by filling key gaps, such as insufficient access to early-stage capital and business know-how. We invest both in startups directly, and in commercially-oriented incubators, accelerators, seed funds, and similar vehicles that help emerging tech firms reach their potential. 38 IFC ANNUAL REPORT 2021 Taking online learning to the next level Tech innovators — and the energetic entrepreneurs who spark them — bring new solutions to development challenges. IFC’s early-stage venture capital investments help them grow. We back game-changers in sectors like educational technology, a fast-moving field rethinking the way learning is delivered. This support makes it possible to reach more students in more places than conventional classrooms, making education systems more resilient in difficult times. In 2016, IFC took a $8.5 million equity stake in Byju’s, an Indian online educa- tion platform founded five years earlier as an in-person training institute by former teacher Byju Raveendran. Byju’s offers unique creative content that is extensive, engaging, and immersive. Mapped to India’s K-12 curriculum, it provides supplemental guidance to public school students, especially in smaller cities. This helps improve their understanding of core concepts. Its special focus on math, science, and coding education helps students prepare for a technology-led future. The platform had just gone mobile, introducing a learning app for grades 4–12 that was downloaded by more than 4.5 million users in its first 10 months. The firm sought to deliver world-class learning to all by emphasizing context and visuals and personalizing content to each student’s unique learning style and pace. Growth has been explosive. Byju’s was valued at more than $1 billion in 2018. Today, it is far larger — valued at $16.5 billion and standing as the leading edu- cation technology company in the world. It now has 144 million cumulative downloads on its flagship learning app, more than 68 million of them in the last 12 months. Byju’s Future School, a one-on-one learning platform, takes the content global, launching this year in Brazil, Indonesia, and Mexico. To the founder, impact and business results go hand-in-hand. “For us, it’s not about making billions, but about impacting the way billions of students across the world learn,” Raveendran told Forbes India. Byju Raveendran Founder & CEO, BYJU’S IFC ANNUAL REPORT 2021 39 STRATEGY IN ACTION THOUGHT LEADERSHIP Driving progress on transparency to the marketplace, drawing in a wider range of investors, from retail investors to the largest impact investing institutional investors. IFC is more than an investor and adviser. We also help shape Shaping best practices the thinking on private sector for sustainable bonds IFC is the Chair of the Executive Committee of the development, bringing key players Green, Social and Sustainability-Linked Bond Princi- together around shared goals to set ples, the world’s most referenced framework for the standards, share knowledge, and issuance and evaluation of sustainable bonds bench- marked against international best practices. Hosted promote common approaches. by the International Capital Markets Association, the principles provide guidelines for transparency and dis- One key focus is impact investing — defined as invest- closure in using proceeds raised by sustainable bonds, ing with an intent to contribute to measurable envi- a vast asset class including the following: ronmental and social impact while generating finan- cial returns. It is an important, growing market, with Green bonds, enabling capital-raising and invest- • $2.3 trillion currently invested (of which $636 billion is ment for new and existing projects with environ- clearly measured for impact). It is also one that can mental benefits be a major force in helping low- and middle-income countries rebuild from the COVID-19 crisis, tackle Social bonds, raising funds for new and existing • climate change, and achieve the Sustainable projects with positive social outcomes in health, Development Goals. education, gender, affordable housing, food security, and other areas To mobilize more capital, impact investors must embrace rigorous standards for impact management, Sustainability bonds, raising financing for both • ensuring they select investments that live up to their green and social projects claims. This is why IFC helped launch the Operating Principles for Impact Management in 2019, which In June 2021 the executive committee also released set clear standards for investments to deliver positive principles for sustainability-linked bonds, a newer social and environmental impact alongside financial structure that creates incentives for bond issuers to returns. The Principles now have 133 signatories from achieve key environmental and social performance 33 different countries across six continents, managing targets across their businesses. approximately $403 billion for impact. Sustainable bond issuance reached a cumulative IFC has also worked with other impact investors and $1.7 trillion by the end of 2020, with more than the Global Impact Investing Network to bring together $600 billion issued that year alone. Referenced by an the two leading impact indicator sets — the Harmo- estimated 97 percent of all global sustainable bond nized Indicators for Private Sector Operations (HIPSO) issuances in 2020, the principles bring much-needed and IRIS+ — into a set of Joint Impact Indicators alignment and transparency to these increasingly that can provide a common basis for measuring and important instruments for tapping capital markets to reporting impact. The joint indicators for climate, gen- finance sustainable development outcomes. Further der, and jobs were published in March 2021, with 50 recognizing the financing gap required to meet the impact investors committing to using them. 2030 Paris Agreement goals, the Climate Finance Transi- tion Handbook was published in 2020 under IFC’s leader- Through the Impact Principles, the Joint Impact Indi- ship of the principles as guidelines for high carbon- cators, and other work to harmonize practices, IFC emitting sector issuers to credibly access sustainable is helping to create stronger standards and to bring bond financing to enable a transition to lower carbon strategies. 40 IFC ANNUAL REPORT 2021 Using Blended Concessional Finance to Invest in Challenging Markets Blended concessional finance holds unique potential to mobilize development finance and de-risk projects in the most challenging environments, including fragile and con- flict-affected situations where private sector resources are often scarce. Drawing on IFC’s two-decade long experience in blended finance, the report, Using Blended Concessional Finance to Invest in Challenging Markets, articulates a framework for using blended finance based on rigorous evaluation and the adoption, along with other DFIs, of the DFI Enhanced Principles for Blended Concessional Finance for Private Sector Projects. The report goes beyond the Principles and codifies the modalities, examining how to make blended concessional finance work. Looking at the different instru- ments, examining implementation issues, and providing guidance to practitioners on how to mobilize private investment where it is needed most are also explored. IFC ANNUAL REPORT 2021 41 CRITICAL FUNCTIONS Measuring Up Sustainability Accountability and Oversight 42 IFC ANNUAL REPORT 2021 Measuring Up estimates include direct and indirect jobs created and are derived from projects accounting for about 60 percent of IFC’s FY21 investment commitments.² For more explanation and examples, These latest estimates suggest that IFC’s please refer to the online IFC investments during FY21 will lead to a lower job creation effect than investments in previous years. annual report. This can be attributed to the global COVID-19 pandemic and economic crisis as the focus of ASSESSING EXPECTED DEVELOPMENT IMPACT investment partly shifted from creating new jobs to AND MEASURING RESULTS saving existing ones. More than 30 percent of the long-term investment volume was channeled into IFC launched a new impact rating system: the projects geared at helping clients maintain their Anticipated Impact Measurement and Monitoring businesses rather than grow them. Specifically, (AIMM) system in 2017.¹ Potential projects are rated the FIGE and RSE COVID-19 envelopes accounted ex-ante and selected based on their expected for 1.2 billion and 0.7 billion of IFC’s own account development outcomes. This approach enables us commitments, respectively. to set ambitious yet achievable targets, identify projects with the greatest potential for development IFC’s contribution to global job creation is impact, and optimize project design. particularly noteworthy in the poorest and most vulnerable countries. Roughly 29 percent of IFC’s To date, IFC has rated over 1,700 investment projects total contribution to job creation through projects for their expected development impact. Notable committed in FY21 is expected in IDA countries alone updates in the AIMM framework’s development for and about 11 percent will be created in FCS countries. FY21 include: The concessional finance that the IDA Private Sector Window (PSW) provides contributes substantially • In response to feedback from FY20, IFC continued to these effects: around 9 percent of IFC’s global job to expand the AIMM system’s capacity to measure creation contribution is accounted for by projects impact and better articulate the development that received IDA PSW funds.³ results for its Advisory Services (AS) portfolio. • IFC tested several approaches to assigning AIMM IFC Contribution to Climate Change: IFC and the scores for platform investments, which involve World Bank Group recognize climate change as an the clustering of investment projects to address a acute threat to global development that increases systemic development challenge, such as the FIGE instability and contributes to poverty, fragility, and and RSE programs, and the Global Health and Base migration. Climate action is also an investment of the Pyramid programs, where IFC developed opportunity for the private sector. IFC has been more streamlined rating approaches. in the climate business space since the 1980s, • IFC updated the way it assesses development gaps when it began supporting simple project finance and project intensities to recognize the unique of renewables, and has since diversified into green economic consequences arising from the COVID-19 buildings, green finance, climate-smart agribusiness, pandemic. This work, which overlaps with the and other sectors. In FY21, committed own account testing of platform ratings described above, also climate-related investment projects, totaling included further refinement of IFC’s development $4 billion, are expected to help our clients reduce impact assessments for debt restructurings and annual greenhouse gas emissions by 12 million tons secondary share purchases. of carbon dioxide equivalent. • IFC is strengthening our capacity to better monitor our impact in creating markets with IFC Contribution to SDGs: For the IFC 3.0 strategy, AIMM assessments. This multi-year effort involves the AIMM system provides a line of sight from IFC’s collecting data to facilitate the evaluation of mandate, through intermediate corporate objectives, market claims made by IFC projects. to the SDGs. It allows IFC to monitor results using project-level indicators, including the Harmonized Estimated Job Creation: Based on a conservative Indicators for Private Sector Operations (HIPSO), and estimate using IFC’s economic impact estimation aligns its reporting at the portfolio level to various framework, IFC expects to contribute to the creation SDGs. The AIMM framework also enables monitoring of 1.4 million to 1.6 million jobs globally over the and reporting of the contribution of market-creation lifetime of the projects it financed in FY21. These effects that support achievement of the SDGs. 1. Detailed introductions about the AIMM system can be found in FY18 and FY19 IFC annual reports: ifc.org/AnnualReport. 2. Employment estimates are computed for individual projects using IFC’s economic impact estimation framework. The framework comprises sector-specific models and a variety of assumptions across countries and sectors. For financial intermediaries, the estimate includes on-lending of IFC funds only. Client banks’ portfolios grow more than the IFC funding alone, partly because IFC’s contribution catalyzes additional funding and partly because the growth is contractually agreed with IFC. This additional expansion, which is hard to attribute precisely, could represent the creation of several million jobs. 3. About 19% of the volume of IFC’s long-term investments are committed in IDA countries, 7% in FCS countries, 20% in the Sub-Saharan Africa region, and about 5% in IDA PSW-supported projects. IFC ANNUAL REPORT 2021 43 IFC operations contribute to several Sustainable this drop-off was the emergence of the COVID-19 Development Goals (SDGs) through direct crisis. COVID-19 prompted IFC to invest heavily in investments and advisory services. Integral to IFC’s supporting existing clients’ operations and strongly mandate and aligned with the World Bank Group’s affected its ability to commit longer-term, capital- twin goals are SDGs 1 and 10: “No Poverty” and intensive projects typically found in transformational “Reduced Inequality.” At the strategic sector level, interventions with “Very Strong” market creation IFC promotes projects in infrastructure, agriculture, potential. As the crisis abates and Upstream financial inclusion, health, and education — aligned activities take hold, IFC expects the re-emergence of with SDGs 2, 3, 4, 6, 7, and 9. a more robust pipeline of market creation projects. Across sectors and regions, IFC seeks to promote Of the AIMM-scored projects committed in FY21, employment creation and economic growth, gender 203 (77 percent) received an AIMM rating of “Good” equality, cities development, environmental and compared to 74 percent in FY20. Strong commitment social sustainability, and climate-change adaptation performance for COVID-19 response projects and mitigation — aligned with SDGs 8, 5, 11, 12, and throughout FY21 likely contributed to this increase 13, respectively. Furthermore, IFC actively partners in the share of projects rated “Good”.⁶ The rising with private investors to mobilize new sources of share of “Good” projects also likely reflects improved finance — aligned with SDG 17. understanding of the AIMM framework among IFC staff, prompting improved project design. This past year, IFC, together with other Multilateral Development Banks (MDBs) and the International During FY21, a range of situations shaped the Monetary Fund, collaborated to produce a joint landscape in which IFC pursued its development report on the SDGs — Financing the Sustainable impact ambitions. Most notably, and as outlined Development Goals: The Contributions of the Multilateral above, the pandemic prompted IFC to invest heavily Development Banks.⁴ The report highlights efforts in helping its clients sustain operations. Some clients to support countries in achieving the SDGs, by played a key role in global health supply chains providing finance, technical assistance, policy while others, including some new clients, offered support, and knowledge, especially in the wake of opportunities for private investors to deploy capital the unprecedented COVID-19 pandemic. MDBs acted at a time of heightened uncertainty in debt and fast to tailor their financing to help address critical equity markets. In addition, IFC also made important needs, thereby developing a global response package contributions to attenuating the negative effects of $230 billion. from the COVID-19 pandemic. WHAT EX-ANTE AIMM SCORES SAY ABOUT IFC’S DEVELOPMENT IMPACT WHAT PORTFOLIO RESULTS SAY ABOUT At the start of FY21, IFC maintained the FY20 IFC’S IMPACT DELIVERY development impact targets for its projects: (1) an average ex-ante AIMM score of at least 50 across the Portfolio AIMM score for Investment Projects: portfolio of committed projects; and (2) at least 15 At the end of FY21, IFC had 884 active AIMM-rated percent of committed projects rated “Very Strong” investment projects in its portfolio.⁷ The average for market creation potential. This is the third year portfolio AIMM score was 45. In comparison, the in which IFC has defined in quantitative terms our average ex-ante AIMM score assigned to these development impact ambitions for new projects at same projects was 46, suggesting that at the the start of a fiscal year.⁵ portfolio level, the development outcomes IFC expected to generate have been mostly delivered In FY21, IFC committed 262 projects that were during project implementation. Between FY20 and AIMM-scored. The average AIMM score for projects FY21, the portfolio AIMM score average increased committed during FY21 was 53, versus 51 in FY20. from 44 to 45. Projects committed in FY20 that Of the 262 projects, only 14 were rated “Very Strong” entered the portfolio in FY21 contributed to this for market creation potential, corresponding to a slight increase given the carryover of their higher 5 percent share of all AIMM-scored projects, well ex-ante AIMM scores.⁸ below the 15 percent target and the 8 percent share achieved in FY20. A contributing factor for 4. Financing the Sustainable Development Goals: The Contributions of the Multilateral Development Banks, https://www.isdb.org/ financing-the-sustainable-development-goals-the-contributions-of-the-multilateral-development-banks. 5. IFC provides its Board with a strategy and business outlook every three years detailing the Corporation’s strategic direction. The FY21 corporate scorecard contains program targets for the current year (FY21) and two future years. Annual scorecard targets are revisited annually to confirm targets continue to enable staff to focus on prevailing priorities. The maintenance of a stable AIMM score target over the past three years reflects these considerations. 6. Projects under the FIGE and RSE COVID-19 response packages received a uniform AIMM score of 53 (Good). 7. Roughly half of IFC’s active, AIMM-related projects pre-date AIMM scoring. In 2020, IFC backfilled AIMM scores on this representative sample of IFC’s investment portfolio. 8. Committed projects that were assigned an ex-ante AIMM score during FY20 enter the monitoring portfolio the following fiscal year. Because early operating maturity has not been reached and monitoring has not started for these projects, their ex-ante AIMM scores carry over and become portfolio AIMM scores in FY21. 44 IFC ANNUAL REPORT 2021 It is too early to assess the effects of the uniform set of standards, which provides guidance COVID-19 pandemic on the development impact on the selection of impact metrics that would performance of IFC’s portfolio. In general, create a basis for accountability, comparability, and impact performance reflected the challenges consistency. This effort will facilitate a roadmap and opportunities faced by industries during the for meaningful impact performance comparison, COVID-19 pandemic. Other changes in portfolio appropriate benchmarking, and better decision- AIMM scores reflected country-specific conditions. making, which has so far been limited in the impact investing market. Ratings of Advisory Projects: Development effectiveness of advisory projects is assessed at WHAT IFC LEARNED FROM ITS RESEARCH, project completion. In FY21, 117 advisory projects ANALYTICS AND SELF-EVALUATION PROGRAM qualified for ex-post evaluation were completed during the period and were self-assessed for IFC uses a combination of research, data analytics, development-effectiveness ratings. Seventy-one and self-evaluations to fill knowledge gaps and (71) percent of the projects were rated mostly provide real-time solutions to clients and operational successful or better, above the IFC target of colleagues. These insights generate important 65 percent. lessons that inform new client engagements. In FY21, IFC expanded its research and analytical agenda While the FY21 overall success rates for the to strengthen the implementation of the IFC 3.0 advisory services portfolio have remained stable in strategy and support IFC operations in addressing comparison with FY20, it is too early to fully assess challenges arising from the COVID-19 pandemic. IFC the effect of the COVID-19 pandemic on advisory developed 28 separate COVID-specific analytical projects, as a large portion of them are still ongoing. pieces since the outbreak of the pandemic, including Several of these projects are being restructured to two surveys of its portfolio clients in financial take into account COVID-19 impacts. institutions and trade finance sectors. The analyses developed possible recovery scenarios for specific OPERATIONALIZING THE IMPACT PRINCIPLES sectors or economies, identified the roles that FOR IMPACT INVESTING selected sectors could play in supporting COVID-19 responses, and changed the ways IFC assesses In FY21, DFIs and the private sector impact projects under the AIMM framework. investment community took a significant step toward harmonizing approaches to monitor and In the last three years, IFC has also undertaken report on development impact. Clear impact metrics in-depth research and analytics, including 33 ongoing are essential to making the economic and social studies and 15 completed ones that cover most contributions of investments measurable, which sectors in which IFC operates. Some publications allow investors to improve their transparency, presented case studies of IFC engagements, while effectiveness, and accountability. These benefits others used sector deep-dives, country or regional significantly increase when investors’ impact metrics analyses, sector analysis, and empirical studies. IFC are adopted in common by different institutions, also conducted research with leading private sector thereby reducing the reporting burden on clients and players to analyze strategic priority themes such facilitating comparability and learning. as the digital economy, capital market deepening, housing finance, etc. These products explored Beyond the earlier mentioned Joint Impact solutions for creating private sector markets, Indicators (JII) (see page 40), the Harmonized complementing IFC’s sector knowledge. Indicators for Private Sector Operations (HIPSO) partnership continues to develop metrics at the Self-evaluations of mature or completed projects sector and sub-sector levels that could be leveraged provide another important link in IFC’s impact- by the signatories to the Operating Principles assessment framework. Even as IFC expanded its for Impact Management (OPIM) and the broader research and analytical products, the evaluation impact investing community. For example, the agenda was focused on performance evaluations HIPSO partnership has recently revised metrics for and rapid assessments. In all, IFC completed infrastructure services and financial intermediation. 13 evaluations in FY21. Outcomes from these The revision of metrics for information and evaluations helped IFC better understand the communications technology, agribusiness, and impact of our investments beyond individual health and education is in progress. projects and capture valuable lessons learned that inform industry strategies and operations. By leveraging the HIPSO and the JII indicators, IFC is leading the development of a position paper, in coordination with the OPIM signatories, on a IFC ANNUAL REPORT 2021 45 Sustainability STRENGTHENING OUR INTERNAL ESG RESOURCES AND CAPACITY In the last year, we have also completed and Sustainability is a critical component operationalized new institutional arrangements to of IFC’s operations and fundamental strengthen our ESG processes and approach. to good development impact. We help The Environmental and Social (E&S) Policy and Risk our clients do business in a sustainable department, established in FY20, reports directly to the Managing Director and is the custodian of the way, promoting sound Environmental, Sustainability Framework, serving as the second line Social, and Governance (ESG) of defense for and an independent regulator of IFC’s E&S risk management. The department has built practices, encouraging transparency out its dedicated Stakeholder Grievance Response and accountability, and enhancing team to work for early resolution of and prevention benefits to local communities and the of complaints, as well as solidified its risk, policy, and learning functions to strengthen IFC’s E&S risk environment. Strong ESG performance management efforts. correlates with clients’ long-term In FY21, the Gender and Economic Inclusion Group business performance and interests: joined the ESG Advice and Solutions department it also yields positive development to form the Sustainability and Gender Solutions department. This enables better collaboration cross- outcomes, which are critical as our cutting gender and ESG issues with the Investment, institution moves to invest more Advisory, and Upstream teams to implement the Sustainability Framework across all IFC activities. In in Fragile and Conflict-Affected FY21, the department continued to decentralize its Situations (FCS). more than 100 dedicated environmental and social specialists and corporate governance specialists with 70 percent of this staff now based in country offices, Our ESG approach is anchored in our Sustainability where they can best support our clients. Framework and Corporate Governance Methodology, which are the cornerstone of our strategic ESG AND COVID-19 commitment to sustainable development and an integral part of our approach to ESG management. Our Over the past year, we moved swiftly to support ESG approach acts as a catalyst for our sustainability our clients in managing and mitigating ESG risks investments, climate and gender work, green and heightened because of COVID-19. We continued sustainability bond issuance, and impact investing. to carry out our usual ESG support of pipeline and portfolio. In FY21, our ESG teams appraised 215 projects, including 42 projects that were classified as high risk, across IFC’s sectors and regions. IFC’s ESG knowledge management teams also worked to develop ESG resources to help clients through relief and recovery efforts in addition to 19 publications on broader ESG topics. CAPACITY BUILDING We prioritized building internal and external capacity to respond to growing ESG risks, such as labor and occupational health and safety, climate, involuntary resettlement, reprisals, and gender- based violence. We hosted 32 web-based trainings on addressing gender-based violence and developed 18 new knowledge products, training modules, and tip sheets over the past year. We also sought to systematically track reprisal allegations as part of enhanced E&S complaints response and, in collaboration with IDB-Invest, developed the first comprehensive private sector guidance on screening, prevention, and response to reprisals. We piloted a contextual risk framework to enhance due diligence and supervision. This framework takes a systemic approach to screen ESG risks at the project location that are outside of client control but that can negatively impact a project’s ability to meet our E&S requirements. 46 IFC ANNUAL REPORT 2021 In FY21, we worked with regulators and stock for financial intermediaries, strengthening E&S exchanges in emerging markets to support the complaints responsiveness, clarifying criteria for preparation of 20 codes, laws, and regulations supply chains, and mainstreaming contextual risk that incorporate sustainability. We leveraged assessment in due diligence and supervision. public-private partnerships and networks, such as the Sustainable Banking Network, Equator LEVERAGING TECHNOLOGY AND INNOVATION Principles Association, United Nations Sustainable Stock Exchange Initiative, and Women on Boards In FY21, we used innovative technology, such as and in Business Leadership network to expand flyover drones and 360° cameras, to conduct ESG our influence. For example, we supported the appraisals and monitor projects where on-site Sustainable Banking Network in developing nine visits were restricted due to COVID-19. We also Sustainable Finance policies and guidelines. piloted an ESG artificial intelligence tool, Machine Learning Environment Analyst (MALENA), which we use to enhance our operations. MALENA uses natural language processing, machine learning, and prediction analytics to help inform our ESG due Example: In collaboration with the government diligence. We also continued to test and calibrate of the Netherlands, IFC partnered with the our new Sustainability Rating Tool, a strategic Central Bank of Iraq, which is a member of the initiative that will provide a dynamic ESG rating to Sustainable Banking Network, to launch an improve our internal risk management processes and online integrated ESG scorecard for its banking operational efficiency. sector, the first-of-its-kind in the region. This tool will play a key role in improving ESG disclosure and transparency in Iraq’s banking sector. One of our assets is our ability to convene, which helps us create stronger ESG standards, frameworks, and practices. Although COVID-19 prevented us from gathering in person, in April 2021, we hosted our first-ever Virtual Community of Learning. The virtual format allowed us to expand our reach, bringing together nearly 600 participants — a record number — from more than 70 countries. Attendees, which included our clients, network of partners from the Equator Principles Association finance institutions, export credit agencies, development finance institutions, and other multilateral finance institutions, shared best practices and ways to innovate. As we help our clients rebuild from the pandemic, IFC’s ESG approach remains critical to a recovery that promotes sustainable and inclusive development outcomes, effectively manages ESG risks, and implements ESG solutions. ESG AND FCS As IFC expands its business to FCS contexts, addressing ESG challenges will be critical to finding bankable projects and supporting clients in managing risks. We are improving the implementation of our ESG approach through improvements to our own ESG systems, clarifications of our client requirements, and capacity building of our staff and clients. We are taking actions according to commitments as part of the external review of IFC and MIGA’s Environmental and Social Accountability, including the Compliance Advisor Ombudsman’s (CAO) Role and Effectiveness. These include improving our E&S systems and procedures, enhancing project-level grievance mechanisms, clarifying IFC’s application of E&S requirements IFC ANNUAL REPORT 2021 47 Accountability and IFC can take to strengthen E&S accountability; and iii) a potential approach to enabling remedial Oversight solutions for stakeholders negatively impacted by IFC-supported projects. CAO POLICY AND STRENGTHENING E&S We are accountable to our partners, ACCOUNTABILITY clients, and communities as we aim to In late June 2021, the Boards of IFC and MIGA achieve our development objectives approved a new Policy for the CAO, ensuring in an environmentally and socially people’s access to a predictable and transparent complaints process, with an increased focus on responsible manner. IFC has been outcomes for communities, IFC/MIGA clients, and working hard to deliver on a series other stakeholders. The CAO Policy responds to the recommendations of the External Review and of accountability and transparency was developed with input from global, regional, and reforms we committed to in the last local stakeholders through a public consultation. It puts greater emphasis on resolving complaints early few years, including in response to and proactively and includes timebound remedial an independent external review on management action plans developed in consultation IFC’s environmental and social (E&S) with complainants and clients. The CAO Policy also provides clear eligibility requirements for complaints accountability. Most notably, this related to FI clients and supply chains and includes past year included the development a provision for considering complaints under exceptional circumstances for projects where IFC of a new policy for the Compliance and MIGA have exited (for up to 15 months). The CAO Advisor Ombudsman (CAO) — IFC’s Policy became operational on July 1, 2021. independent accountability The CAO Policy complements additional efforts mechanism. The new CAO Policy underway to strengthen IFC’s overall approach to accountability E&S risk management, including provides more opportunities for IFC improving systems and procedures for E&S due and clients to resolve complaints early diligence and supervision; and strengthening grievance responsiveness both at the institutional and and proactively while protecting the project levels. A separate process is ongoing to study access, choice, and confidentiality of a potential approach to enabling remedial solutions complainants. for stakeholders negatively impacted by projects. OFFICE OF THE COMPLIANCE ADVISOR We have also taken several steps to improve OMBUDSMAN (CAO) transparency around our use of blended finance and our investments in financial intermediaries (FIs). People affected by adverse environmental and social We believe that continuous evolution toward more impacts of IFC projects may voice their concerns to transparency is one of the most important things CAO, the independent accountability mechanism we can do as a development institution to maintain for IFC. As of July 1, 2021, with the implementation the trust of our stakeholders and gain crucial of the new IFC/MIGA Independent Accountability feedback as we develop new solutions to the biggest Mechanism (CAO) Policy, CAO reports to the Boards development challenges. of IFC and MIGA, strengthening the Board’s role in the accountability process and enhancing CAO’s independence. ACCOUNTABILITY CAO is mandated to facilitate the resolution of INDEPENDENT EXTERNAL REVIEW complaints from people affected by IFC projects in a fair, objective, and constructive manner; enhance In August 2020, the IFC Board of Directors released environmental and social project outcomes; and a report of an independent External Review Panel foster public accountability and learning to improve on the External Review of IFC’s Environmental IFC performance and reduce the risk of harm to and Social (E&S) Social Accountability, including people and the environment. the Compliance Advisor Ombudsman (CAO) for public comments. The report included extensive CAO helps resolve issues between affected consultations with external stakeholders and people and IFC project operators using a neutral, provided recommendations to strengthen collaborative problem-solving approach through IFC’s accountability in the following areas: i) its dispute resolution function. CAO’s compliance development of a new IFC/MIGA Independent function carries out reviews of IFC’s compliance with Accountability Mechanism (CAO) Policy; ii) actions environmental and social policies, assesses related 48 IFC ANNUAL REPORT 2021 harm, and recommends remedial actions where INTEGRITY VICE PRESIDENCY appropriate. Through its advisory function, CAO provides advice with the purpose of improving IFC’s Reflecting the World Bank Group’s commitment systemic performance on environmental and social to fight and prevent corruption, the Integrity Vice sustainability. Presidency (INT) detects, deters, and prevents fraud and corruption in Bank Group-financed projects and In FY21, CAO’s caseload comprised 53 cases related against Bank Group staff and corporate vendors. to IFC and MIGA projects in 31 countries. Of these, As an independent unit within the institution, INT 5 were new eligible complaints and 1 case is a plays a fundamental role in supporting the Bank compliance review initiated by CAO. CAO closed 2 Group’s fiduciary responsibility over the development cases during the year. More information about CAO resources it manages, by investigating allegations is available at www.cao-ombudsman.org. and pursuing sanctions against outside firms and individuals, and discipline against Bank Group staff, INDEPENDENT EVALUATION GROUP found to have engaged in fraud, corruption, collusion, coercion, or obstruction. Following sanctioning The Independent Evaluation Group (IEG) is an decisions, the Integrity Compliance Office (ICO) independent unit that reports directly to the World engages with sanctioned firms and individuals in Bank Group’s Board of Directors. IEG’s mission is to working toward meeting their conditions for release strengthen World Bank Group institutions through from sanction. In addition, preventive efforts by INT evaluations that inform strategies and future work — this year helped to identify, monitor, and mitigate and lead to greater development effectiveness. integrity risks. IEG assesses the results of IFC operations and In FY21, the Bank Group sanctioned 57 firms and offers recommendations for improvement. IEG also individuals. Based on ICO determinations, the Bank contributes to internal learning by informing new Group also removed 30 entities from sanction and directions, policies and procedures, and country converted the debarments with conditional release and sector strategies. This year, IEG evaluated IFC’s of two entities to conditional non-debarments. The contributions to creating markets and mobilizing Bank Group recognized 92 cross-debarments from private capital under its new strategy — IFC 3.0. IEG other multilateral development banks (MDBs). Forty- recommended enhancing understanding of market- five (45) Bank Group debarments were eligible for creating opportunities, increasing access to markets recognition by other MDBs. for underserved groups, and regularly assessing IFC’s risk-taking capabilities to carry out activities in For more information and the World Bank economies that are structurally weak. Group Sanctions System Annual Report, visit www.worldbank.org/integrity. IEG’s annual reviews of World Bank Group results and performance and of other major reports are available To report suspected fraud or corruption in World Bank on IEG’s website at http://ieg.worldbankgroup.org. Group-financed projects, visit www.worldbank.org/ fraudandcorruption. OVERSIGHT GROUP INTERNAL AUDIT VICE PRESIDENCY Group Internal Audit (GIA) provides independent and objective risk-based assurance, insight, and advice to protect and enhance the value of the World Bank Group. GIA gives management and the Board of Directors reasonable assurance that processes for managing and controlling risks — as well as their overall governance — are adequately designed and functioning effectively. GIA reports to the President and is under the oversight of the Audit Committee. For more information on GIA, visit: www.worldbank.org/internalaudit. IFC ANNUAL REPORT 2021 49 LETTER TO THE BOARD OF GOVERNORS The Board of Directors of IFC has had this annual report prepared in accordance with the Corporation’s by-laws. The President of IFC and Chairman of the Board of Directors has submitted this report with the audited financial statements to the Board of Governors. INDEPENDENT AUDITOR’S LIMITED ASSURANCE IFC has requested EY to perform a limited assurance engagement on a selection of sustainable development information disclosed in the Annual Report. The nature, scope and conclusion of this engagement are described in EY’s limited assurance report, available in the online IFC annual report. 50 IFC ANNUAL REPORT 2021 STAY CONNECTED Web & Social Media Resources IFC’s website, www.ifc.org, provides comprehensive information on every aspect of our activities. It includes contact information for offices worldwide, news releases and feature stories, data on results measurement, disclosure documents for proposed investments, and key policies and guidelines. The online version of IFC’s 2021 Annual Report, www.ifc.org/annualreport, provides downloadable PDFs of all materials in this volume and translations as they become available. IFC ANNUAL REPORT 2021 51 IFC ONLINE CREDITS IFC website IFC Annual Report Team: Photography: ifc.org Steven Shalita Cover Annual Report Director, Jasmin Merdan/Getty ifc.org/AnnualReport IFC Communications & Outreach Page 3 Social Media Index Grant Ellis/World Bank ifc.org/SocialMediaIndex John Donnelly Senior Adviser, Page 5 Facebook IFC Communications Grant Ellis/World Bank facebook.com/IFCwbg & Outreach Page 9 Twitter Pierre Mejlak IFC photo twitter.com/IFC_org Acting Manager, Page 13 LinkedIn IFC External Relations IFC photo linkedin.com/company/ Jennine Meyer David Hills ifclinkedin/ Editor Pages 20–21 YouTube Rob Wright Dominic Chavez/IFC youtube.com/IFCvideocasts Writer; Design and Page 23 Instagram Production Courtesy of Cerba Lancet Africa instagram.com/IFC_org/ Vinit Tyagi Pages 24–25 Medium Online Coordinator IFC staff photos ifc-org.medium.com Aaron Rosenberg Page 29 SoundCloud Chief of Public Affairs Dominic Chavez/IFC soundcloud.com/IFC_org Brenna Lundstrom Page 30 Public Affairs Michael Hall/Getty Andrew Raven Page 33 Editorial Consultant Tom Saater/IFC Design Vendor: Page 35 Addison Sven Torfinn/Panos www.addison.com Pages 36–37 Printing: IFC photo Sandy Alexander www.sandyinc.com Page 39 Courtesy of Byju’s Translation: World Bank Group — Global Corporate Solutions — Translation and Interpretation Editorial Services: Clarity Global Strategic Communications https://clarityglobal.net/ 52 IFC ANNUAL REPORT 2021 ANNEX 2021 ANNUAL REPORT Annex The information in this annex will appear in our online report. 55 OUR WORK 56 What We Do 61 Our Industry Expertise 64 Country Stories 74 Global Awards 76 MEASURING UP 77 Assessing Expected Development Impact and Measuring Results 84 OUR PEOPLE & PRACTICES 85 Governance 86 Corporate Responsibility 90 Global Partnerships 93 Portfolio Management 94 Treasury Management 95 Managing Risks 98 Reporting under the Task Force on Climate-related Financial Disclosures 105 Financial Performance Summary 54 IFC ANNUAL REPORT 2021 OUR WORK IFC applies our financial resources, technical expertise, global experience, and innovative thinking to create markets and opportunities that help countries mobilize private solutions and finance to solve development challenges. IFC ANNUAL REPORT 2021 55 What We Do INVESTMENT In FY21, we made $23 billion in long-term investments in 313 projects to support the private sector in developing countries. This includes $10.8 billion mobilized from other investors. PRODUCT LINES Loans In FY21, we made commitments for • Project and corporate financing $10.8 billion in new • On-lending through intermediary institutions loans for our own • 73 local currencies account. Equity In FY21, equity investments • Direct equity investments accounted for • Private-equity funds about $1.2 billion • Profit-participating loans, convertible loans, and of commitments preferred shares we made for our own account. Trade and Commodity Finance In FY21, IFC had a commitment of • Guarantee of trade-related payment obligations of $6 billion in trade approved financial institutions finance more • Risk mitigation on a per-transaction basis for more than than half of which 123 banks across 44 countries. was committed in International Development Association (IDA)* countries and fragile and conflict-affected situations (FCS). Syndications In FY21, IFC syndicated a total • Mobilize our partners’ capital to forge new connections of $4.6 billion to that can help increase foreign investment in the world’s 83 partners through poorest countries. B loans, parallel loans, • Syndications accounted for 34 percent of the total credit insurance, Core Mobilization funds by IFC for our clients in FY21. local currency • At year-end, Syndications managed a total portfolio of syndications, green $15.6 billion on behalf of its investment partners. loan syndications, and the MCPP, which creates customized portfolios of emerging-market loans for investors. Risk Management and Structured Solutions • Derivatives products to help clients hedge their market risks (currency risks, interest rate, and commodity price, etc.) • Wide range of bespoke structured finance products. These include unfunded instruments covering either single credit exposures or portfolios of assets. Through these products, IFC can leverage its AAA rating to provide financing to end-borrowers by assuming all or a portion of their credit risk while utilizing other funding sources. • Other structured credit instruments such as securitizations, covered bonds, and DPRs that help clients access capital markets and benefit from credit enhancement from predictable cash flows of underlying portfolios. *This refers to list of countries eligible for financing from IDA under the IDA-17 cycle. 56 IFC ANNUAL REPORT 2021 Blended Concessional Finance In FY21, we committed more than $717 million • Concessional funds combined with our own financing of concessional donor • Mobilizing investment in areas of strategic importance funds, catalyzing to IFC including climate and gender $2.1 million in • Helps to de-risk and address market failures in investments for transactions IFC’s own account. ADVISORY advisory, extending to Upstream advisory to help create new investment opportunities, and Providing advice is a critical part of the IFC 3.0 culminating in firm-level advisory in support of new strategy to create markets and mobilize private IFC and private sector investment. capital. Through our advisory programs, we • We work with global experts to generate ideas work with clients, including companies, financial and analyses to address the most urgent challenges institutions, industries, and governments, to in private sector development. We foster peer-to- transform ideas into increased private sector peer learning at a global scale through our networks investment, green growth, inclusive job creation, convening policymakers and influencers, which we and bankable projects. We help to establish the effectively leveraged to help support our clients necessary conditions that will attract capital and during the pandemic. sustainable investments and mobilize private capital through our public-private partnership Particularly in countries beset by extreme poverty, (PPP) transaction advisory work, which enables conflict, and fragility, we work with clients to the private sector to grow. We work in a hands-on improve their environmental, social, and governance manner with IFC investment clients to improve practices, including those related to gender. We help their operations and enhance development impact developing economies realize the economic potential on local supply chains and communities. of clean energy and green building. We help lagging private sectors transform into the digital age. And Our advisory work is informed by the joint IFC and we help potential investment clients improve their World Bank Country Private Sector Diagnostics; the operational performance and management practices World Bank Group’s multi-year Country Partnership to attract the financing they need. Frameworks; and IFC’s Country Strategies and Sector Deep Dives. The economic impact of COVID-19 on developing economies generated unprecedented demand Through IFC Advisory Services: for IFC Advisory Services in FY21. Project teams responded rapidly to urgent demand from clients • We help companies attract and retain private for tactics and strategies to cope with the fallout investors and partners, enter new markets, and from the pandemic. We are committed to helping increase their impact. We provide tailored market our clients and governments, and more broadly, the insights as well as technical advice on how to private and financial sectors of our client countries, improve companies’ operational performance emerge from the crisis stronger. We are assisting and sustainability. businesses to weather the crisis and advising • We help industries and industry sectors adopt governments to make the necessary reforms to good practices and standards to increase enable their private sectors to retain investment, competitiveness, productivity, and sustainability to preserve jobs, rebuild markets, and enable long- weather the impacts of COVID-19. term private sector investment opportunities. • We help governments structure PPPs to improve people’s access to high-quality infrastructure In FY21, our advisory portfolio stood at $1.4 billion, and basic services. We also advise on improving encompassing just over 800 advisory projects in the business environment through reforms more than 100 countries. Our PPP transaction that promote investment, spur growth, and advisory work mobilized $3.2 billion of private create jobs — while providing support for the capital, which directly contributes to IFC Long Term implementation of these reforms. Finance. Fifty-four (54) percent of IFC’s advisory • We work in collaboration with the World Bank program was in IDA countries, 21 percent was in to provide Upstream policy advice, which aims to FCS areas, and 24 percent on climate. Forty-two develop activities that help create markets and (42) percent included efforts to close economic gaps support future transactions in multiple industries, between men and women, such as jobs, finance, especially in IDA countries and Fragile and and markets. Thirty (30) percent of our Advisory Conflict-Affected Situations. project support Upstream interventions. Our • We play a key role in a seamless continuum of advisory staff members remain close to clients, with activity beginning with enabling environment almost 80 percent based in the field. *This refers to list of countries eligible for financing from IDA under the IDA-17 cycle. IFC ANNUAL REPORT 2021 57 HOW WE WORK WITH COMPANIES attractive destinations for infrastructure investments and help close the infrastructure Agribusiness: We help companies improve gaps. We work with subnational governments productivity and sustainability by focusing on to strengthen institutions and regulations; operational efficiency, food safety and standards, improve critical infrastructure and environmental adoption of technology to the agribusiness value sustainability; foster skills and innovation; expand chain, good soil and water management, and access to finance; and build capacity to manage tax professionalization of smallholder farmer supply and royalty payments to improve community welfare chains, while applying climate-smart and gender- and local content. We also work closely with private smart practices. sector clients to acquire a social license to operate in tough environments by increasing benefits to local Corporate Finance Services: We support clients to communities; mitigating social risks; and addressing identify and enter new markets and structure entry obstacles to gender equality and inclusion in the strategies. We help companies attract international workplace, across the supply chain. investors and bring in new skills, expertise, and capital. We support the structuring of complex Green Buildings: We offer tools and training to projects and offer advice on the design and execution help companies construct buildings that use energy, of partnerships, joint ventures, and acquisitions. water, and materials more efficiently. We also help governments establish related policy frameworks and Disruptive Technologies: We work across the work with banks to launch green-finance products. entrepreneurial and venture capital ecosystem supporting accelerators, seed funds, and new fund Health: We support healthcare providers in managers in frontier geographies. We connect high- improving the quality of healthcare outcomes through impact proven tech solutions globally with corporate deploying the new IFC IQ-Healthcare assessment customers to de-risk tech adoption, increase capital tool and accompanying advisory services. We also flow to women entrepreneurs and promote adoption run a community of practice to support Women’s of digital training platforms for improving digital Leadership in Healthcare, focusing on the unique skills for employment. challenges to women leaders in the sector. Education: Through IFC’s new initiative, Vitae, we Manufacturing: We work with our clients in the support higher education institutions in improving manufacturing sector to develop and finance their employability outcomes for their graduates, thereby decarbonization strategies, as well as improve the minimizing the skills gap for the changing job productivity of their direct operations and supply realities of the 21st century. chains. This includes bringing a gender-smart lens to companies’ employment challenges and supporting Environment, Social & Governance (ESG): We the deployment of supply chain finance tied to provide integrated ESG advice to help companies improved sustainability performance. improve access to capital, achieve long-term success and implement crisis management and pandemic Small and Medium Enterprises (SMEs): We help response, by adopting corporate governance SMEs strengthen their skills and performance, structures, in line with the IFC Corporate Governance improving their ability to participate in the supply Methodology, as well as environmental and social and distribution networks of larger firms. We advise risk management systems in line with the IFC companies and governments on how to improve Performance Standards. Our guidance addresses working conditions and boost the competitiveness holistically the management of potential or actual of the textile sector’s supply chain. changes to the environment, including pollution, biodiversity impacts, carbon emissions, climate Tourism: We help businesses modernize their tourism change, and natural resource use. It also considers offerings and maximize the potential of their natural potential or actual changes on surrounding and cultural assets. Tourism has been one of the communities and workers, including the incidence hardest hit business sectors during COVID-19. We of gender-based violence. And it seeks to improve work with clients to assess the impact and devise governance structures and processes, such as strategies to restore their tourism sectors as quickly board functioning, gender diversity in corporate as possible. leadership, ethical conduct, controls, disclosure, and transparency. We build the capacity of industry HOW WE WORK WITH FINANCIAL associations and ESG service providers to influence INTERMEDIARIES (FIs) AND FUNDS ESG practices market-wide. Financial Institutions: We help clients strengthen Gender Equality and Economic Inclusion: We risk management and diversify product offerings work with companies to enhance the recruitment, to key priority areas such as SME finance, gender, retention, and promotion of women and other housing finance, and renewable energy. Through underserved groups. We also help companies knowledge sharing of best SME-banking practices increase women’s access to financial services, and solutions, we help build financial institutions’ technology, information, and markets. capacity to expand access to credit; expand their financial and non-financial services, including to Global Infrastructure: We support private and women-led/owned businesses; support sustainable sub-sovereign public sector clients to become supply chains; and catalyze investment opportunities 58 IFC ANNUAL REPORT 2021 in emerging- and developing-market economies. credit information, use of moveable assets to secure IFC supports financial institutions in defining and lending, and debt resolution. We work closely with the implementing digitization strategy roadmaps and World Bank and leverage its expertise alongside IFC accelerating their digital transformation. investment resources to jointly develop local capital markets in selected focus countries. Fund Managers: We help develop the private equity industry in frontier markets and provide Enabling Investment Climate: We help improve non-investment-related advice to fund managers. the business environment through economy-wide, We help increase ESG investment into emerging and increasingly, more sector-specific reforms that markets by providing asset managers with ESG data address regulatory barriers and promote investment, and artificial intelligence-powered analytics. spur growth through increased competitiveness and access to markets, and create jobs. This work serves HOW WE WORK WITH GOVERNMENTS as an entry point for IFC’s Upstream agenda. We work closely with the World Bank to leverage their IFC’s work with governments, the World Bank, expertise for private sector development. and other partners focuses on implementing recommendations highlighted in our Country Private ESG Landscape Initiative: We help governments, Sector Diagnostics and reforms prioritized in our private companies, and stakeholders, assess, Country Strategies to increase the private sector’s role and mitigate risks and cumulative impacts at a in development. Specific areas of emphasis include: multi-project level, across specific geographic areas (landscapes). Landscape initiatives enable Cities Initiative: We help local governments, governments to consider E&S impacts in broader municipalities, and provinces prioritize and develop sectoral planning, achieve significant efficiencies sustainable, resilient infrastructure services for with companies implementing joint assessments and their citizens. management strategies and address environmental and social bottlenecks upstream of investment and Financial Sector: We work with governments and project development. the private sector to promote universal access to finance, build resilient, transparent, and smooth- Public-Private Partnerships: We help governments functioning financial systems and capital markets. design and implement PPPs that are tailored to local This includes supporting governments to establish needs, help solve infrastructure bottlenecks, and the key building blocks, both regulations and achieve national development goals by mobilizing institutions, to increase access to finance, such as private technical and managerial expertise and capital. Critical Advisory support immediate and long-term consequences of COVID-19, private sector companies often need during COVID-19 support to ensure their recovery and post- pandemic survival. In September 2020, IFC joined • Supporting PPE manufacturing in developing forces in Conakry, Guinea with the Supplier countries: Production of face masks and other and Partnership Marketplace digital platform, personal protective equipment (PPE) helps known by its French acronym, BSTP, to launch developing countries supply their healthcare a COVID-19 private sector response. Aimed at providers with the equipment they need to helping small firms that drew spillover business care for COVID-19 patients and creates the from Guinea’s critical mining sector, the response potential for new export markets. IFC’s Global plan includes a financial assistance fund for SMEs PPE Advisory Program, launched in 2021, facing reduced cash flow and financial difficulties. provides hands-on support to manufacturers It also provides a capacity building program in emerging markets (Ethiopia, Jordan, Kenya, that offers virtual training in digital marketing, Mauritius, Nigeria, Sri Lanka, and Vietnam) that and technical support in the preparation and are pivoting to produce PPE. IFC offers technical implementation of recovery plans. advice on issues, such as how to repurpose • Seizing market opportunities that have existing production lines to PPE manufacturing; emerged during the pandemic: COVID-19 sourcing raw materials; and ensuring testing created a global market opportunity around and quality. With IFC’s advice, some clients have technical textiles, including medical textiles and been able to meet international standards in PPE personal protective equipment. IFC’s Textile manufacturing, obtain relevant certifications, Value Chain initiative in the Arab Republic and reduce production costs through improved of Egypt supports the General Authority for product design. In addition, IFC is partnering with Investment and Free Zones (GAFI) in attracting global standards organizations such as ASTM potential new investors and foreign direct International and British Standards Institute investment in the technical textiles sector through to develop a Global Benchmarking Guide on a targeted and proactive investment promotion PPE standards as well as a modular training approach. IFC is working with the Ministry of program on PPE technical standards for medical Trade and Industry to integrate local firms into laboratories in India, Jordan, and Vietnam. the domestic and regional technical textiles value • Helping the private sector weather the chain by designing and implementing a pilot effects of COVID-19: Faced with both the supplier development program. IFC ANNUAL REPORT 2021 59 IFC ASSET MANAGEMENT that provide capital to renewable energy projects and companies that develop resource efficient, COMPANY low-carbon products and services across the global emerging markets. As of June 30, 2021, the fund had IFC Asset Management Company (AMC) serves made 22 commitments totaling $386 million. as a platform through which IFC mobilizes equity capital from third-party investors to invest side-by- IFC Global Infrastructure Fund: The $1.2 billion IFC side with IFC in investments in emerging markets. Global Infrastructure Fund was launched in 2013 and Created in 2009, AMC provides investors with manages equity and equity-related investments in unique access to IFC’s emerging markets investment the infrastructure sector in emerging markets. As pipeline while also expanding the supply of long- of June 30, 2021, the fund had made 22 investment term capital to these markets. AMC enhances IFC’s commitments totaling $702 million. development impact and generates profits for investors by leveraging IFC’s global platform and China-Mexico Fund: Launched in 2014, the investment standards. $1.2 billion China-Mexico Fund is a country-specific fund that manages equity and equity-like investments Equity forms the cornerstone of the capital in Mexico. As of June 30, 2021, the fund had made structure. This was true before COVID-19, but in the three investment commitments totaling $320 million. current environment, equity is especially important. IFC and AMC will continue to explore ways to IFC Financial Institutions Growth Fund: The mobilize third party capital so as to provide investors $505 million IFC Financial Institutions Growth Fund with opportunities to invest alongside IFC and to is a follow-on fund to the IFC Capitalization Fund support the recovery phase from the crisis through and makes equity and equity-related investments investments with impact. in financial institutions in emerging markets. As of June 30, 2021, the fund had made 12 investment As of June 30, 2021, AMC had raised approximately commitments totaling $258 million. $10.1 billion, including about $2.3 billion from IFC. It manages 11 investment funds covering equity, debt, IFC Global Emerging Markets Fund of Funds: and fund-of-fund products on behalf of a wide Launched in 2015, the $800 million IFC Global variety of institutional investors, including sovereign Emerging Markets Fund of Funds manages wealth funds, pension funds, and development- investments in private equity funds that are finance institutions. In FY21, AMC funds committed focused on growth companies in various sectors $325 million to 12 investee companies and exited across emerging and frontier markets in addition 15 investments with a combined cost basis of to co-investments in such companies. As of $462 million. June 30, 2021, the fund had made 30 investment commitments totaling $756 million. AMC FUNDS IFC Middle East and North Africa Fund: IFC Capitalization Fund: The $3 billion IFC Launched in 2015, the $162 million IFC Middle East Capitalization Fund consists of two sub funds — an and North Africa Fund makes equity and equity- equity fund of $1.3 billion and a subordinated debt related investments in the MENA region. As of fund of $1.7 billion. Launched in 2009, the fund June 30, 2021, the fund had made five investment helped strengthen systemic banks in emerging commitments totaling $78 million. markets, bolstering their ability to cope with financial and economic downturns. As of June 30, Women Entrepreneurs Debt Fund: The $115 million 2021, the fund had made 41 investment commitments Women Entrepreneurs Debt Fund, launched in totaling $2.8 billion. 2016, provides senior loans to commercial banks for on-lending to women-owned small and medium IFC African, Latin American, and Caribbean enterprises in emerging markets. This is a component Fund: The $1 billion IFC African, Latin American, and of the Women Entrepreneurs Opportunity Facility, a Caribbean Fund was launched in 2010. The fund partnership established in March 2014 between IFC manages equity and equity-related investments and the Goldman Sachs 10,000 Women initiative, across a range of sectors in Sub-Saharan Africa which as of the end of 2021 will have deployed and in Latin America and the Caribbean. As of $2 billion to financial institutions across emerging June 30, 2021, the fund had made 39 investment markets for financing women-owned/led SMEs. commitments totaling $879 million. IFC Emerging Asia Fund: The $693 million IFC Africa Capitalization Fund: The $182 million Africa Emerging Asia Fund, launched in 2016, makes equity Capitalization Fund was launched in 2010 to invest and equity-like investments across all sectors in in systemic commercial-banking institutions in emerging markets in Asia. As of June 30, 2021, the Africa. As of June 30, 2021, the fund had made eight fund had made 17 investment commitments of investment commitments totaling $130 million. $375 million. IFC Catalyst Fund: The $418 million IFC Catalyst Fund was launched in 2012 and manages investments in private equity funds, platforms and a co-investment 60 IFC ANNUAL REPORT 2021 Our Industry Expertise IFC leverages our global industry knowledge, acquired over six decades, to tackle the biggest development challenges of our era — including COVID-19, unemployment, climate change, and food and water security. AGRIBUSINESS AND • Promote sustainable, inclusive, and efficient food systems In FY21, our FORESTRY through the private sector via investments, advisory new long-term services, and partnerships to create development impact commitments for our own account • Focus on helping farmers reduce the impact of their in agribusiness and activities on the climate and build resilience against forestry totaled climate change about $1.0 billion. • Invest across the agribusiness supply chain — from farm to retail — to boost production, increase liquidity, improve logistics and distribution, and expand access to credit for small farmers DISRUPTIVE • Invests in and supports startups that offer innovative In FY21, new TECHNOLOGIES AND technologies or business models commitments for FUNDS (CDF) CDF own account • Invests in and co-invests with seed funds, venture capital, totaled $546 million, and growth equity funds with a total of • Focus on healthcare, education, agriculture, e-commerce, $12 million mobilized, logistics, mobility, climate technology, and other net of $161 million innovative sandboxes in joint ventures and $12 million IFC is one of the world’s largest investors in emerging mobilized with IFC’s markets funds, with a portfolio of $7.9 billion in total mainstream sectors. commitments in 384 growth equity, venture capital, and seed/accelerator funds* and approximately $1 billion in direct and co-investments. FINANCIAL • Investment and advisory services to develop financial In FY21, our INSTITUTIONS sector in emerging markets new long-term commitments for • Use innovative financial products and mobilization our own account in • Focus on medium and small enterprises and supporting financial institutions local capital markets totaled about • Operates through financial intermediaries to help them $5.9 billion. become more involved in priority sectors and in fragile and conflict-affected states HEALTH AND Health In FY21, our EDUCATION new long-term • Investment and advisory services to strengthen healthcare commitments for systems and expand production and availability of healthcare our own account in supplies, vaccines, and therapeutics in emerging markets health and education • Focus on innovative technologies, advancing quality care, totaled about and improving access to essential medical products and $1.3 billion. healthcare services • Support collaboration between the public and private sectors to improve healthcare access and quality Education • Complement public sector’s work by investing in private tertiary education and technology-based solutions • Create more opportunities for people in rapidly changing economies IFC is the world’s largest multilateral investor in private healthcare and education. *Does not include AMC and Sector funds. IFC ANNUAL REPORT 2021 61 INFRASTRUCTURE IFC offers long-term financing and industry-leading expertise to develop infrastructure projects that provide essential services in partnership with the private sector. Energy In FY21, our new long-term • Finance electricity generation, transmission, and commitments for distribution projects across a range of technologies our own account in • Leading financier of low-cost renewable energy: energy totaled about hydropower, wind, and solar $544 million. Environmental and Municipal Infrastructure In FY21, our new long-term • Expand access to clean water and improved sanitation commitments for • Ensure municipal authorities provide reliable, sustainable our own account and affordable services in Environmental • Financing, advisory services, and project development and Municipal support for municipal and regional governments and Infrastructure totaled private companies about $266 million. Cities • Strategic partnerships with cities around the world to find solutions to urban problems • Focus on infrastructure • Mobilize commercial financing for priority projects, connects cities with capital markets • Leverages World Bank and private sector expertise Mining • Finance projects including construction, production, and expansion • Impact investing for sustainable economic growth • Mitigate environmental and social risk, advice on community engagement, and implementing shared-use infrastructure Telecommunications, Media & Technology In FY21, our new long-term • Finance digital infrastructure: broadband networks, commitments for telecommunications towers, and data centers our own account in • Support mobile network operators telecommunications, • Offer broad range of products — including loans, equity, media, and mobilization, and project finance technology totaled about $601 million. Transportation In FY21, our new long-term • Investment and advisory services modernize port, commitments for airports, roads, railways, and other transportation our own account infrastructure projects in transportation • Reduce transportation costs, relieve bottlenecks, facilitate totaled about international trade, mitigate climate effects, and create $355 million. jobs through efficiency upgrades and modernization Sustainable Infrastructure Advisory • Advisory services to help companies increase benefits to the communities where they operate, including through supply chains and royalty payments 62 IFC ANNUAL REPORT 2021 MANUFACTURING • Provide investment and advisory services to improve In FY21, our production scale and complexity new long-term commitments for • Focus on job creation and sustainability through our own account manufacturing in manufacturing • Introduce more value-added manufactured products and totaled about advanced industrial-process technologies $833 million. • Promote best practice standards TOURISM, RETAIL, AND • Invest in business-enabling infrastructure: business In FY21, our PROPERTY hotels, warehousing, and commercial property and new long-term affordable housing commitments for our own account in • Work with our retail and hotel clients to create jobs, tourism, retail, and increase tax revenues, improve business and trading property totaled conditions along their value chains, and raise labor about $992 million. standards IFC ANNUAL REPORT 2021 63 COUNTRY STORIES Seven stories highlighting some of this year’s most impactful work in countries across the globe. 64 IFC ANNUAL REPORT 2021 66 Sri Lanka ADAPTING A RIDE-HAILING PLATFORM TO SAFELY DELIVER COVID-19 NECESSITIES 67 Nigeria LEVERAGING TECH TO KEEP SMALL RETAILERS IN BUSINESS DURING A PANDEMIC LOCKDOWN 68 Ukraine BECOMING A STANDARD-SETTING BANK FOR GREEN FINANCE 69 Brazil INVESTING IN AN ECO-FRIENDLY ALTERNATIVE TO COTTON AND SYNTHETIC FIBERS 70 Asia COMBATING MARINE PLASTIC POLLUTION THROUGH IFC’S FIRST “BLUE LOAN” 71 Global CREATING A WIN-WIN FOR ALL THROUGH LONGER- LASTING PRODUCE 72 Sub-Saharan Africa RAMPING UP DISEASE TESTING IN AFRICA IFC ANNUAL REPORT 2021 65 SRI LANKA Adapting a ride-hailing platform to safely deliver COVID-19 necessities The pandemic prompted several waves of shut downs Since the beginning of the pandemic, PickMe’s fleet of and strict curfews in Sri Lanka, leaving just about every- women drivers has doubled as more and more women one scrambling to find ways to safely receive food and seek opportunities to cover for lost or reduced wages other essentials. because of COVID-19. Lasanda Deepthi, PickMe’s first woman driver, depends on the income she earns to PickMe, Sri Lanka’s first ride-hailing smartphone app, support her family. “Earning through PickMe is a huge responded to people’s needs by transitioning virtually deal, and I feel the difference,” she said. overnight into a logistics company specializing in the delivery of necessities. At any time of day, the com- PickMe, founded in 2015, is the first start-up IFC has pany delivered everything from cooking gas cylinders backed in Sri Lanka. A $2.5 million IFC investment has to grocery packs. During the first wave of COVID-19 helped the company expand and increase access to in Sri Lanka, it even set up an emergency hotline to affordable and efficient transportation. In June 2020, IFC assist medical staff who needed to get to hospitals. The injected another $2.4 million to support PickMe in adjust- company’s business model and smart use of technology ing their business operations during the pandemic. allowed it to quickly expand from serving not only New research suggests that women, both as riders and Colombo, Sri Lanka’s commercial capital, but several drivers, are critical to the future growth of ride-hailing other regions across the country. platforms. The first-ever study on women’s roles in Sri PickMe’s ability to adapt went beyond meeting basic Lanka’s ride-hailing industry concluded that annual needs: it protected jobs during a time of economic revenues for ride-hailing in Sri Lanka could increase uncertainty. by more than 25 percent if gaps between men and women’s ridership were closed. The 2020 study was Roy Kevin Alosiyus worried about losing his job as a conducted by IFC, PickMe, the Australian Department PickMe driver until he heard that he could work for the of Foreign Affairs and Trade, and Kantar Public. company in a new capacity. “Within a few days, I was informed by the head office that PickMe was looking “We realized the impact that safe transport has on for driver partners for the emergency delivery fleet to women’s empowerment and financial independence. take essential goods to households,” he said. Our company and our investments in technology enable women passengers to make safe trips while Whereas many workers have been impacted by providing flexible and lucrative employment for women COVID-19, women, particularly in emerging economies, drivers,” said Jiffry Zulfer, CEO of PickMe. have struggled to retain jobs while assuming greater caretaking responsibilities for children, the elderly, and sick family members. PickMe enabled Sri Lankan wom- en to remain gainfully employed. 66 IFC ANNUAL REPORT 2021 NIGERIA Leveraging tech to keep small retailers in business during a pandemic lockdown Lockdowns and an increasing number of COVID-19 my location,” she said. “They would supply me at least cases made it challenging for Nigeria’s small retailers once a week, and sometimes two or three times in a and distributors to get essential supplies, despite high week. There was no need for me to go to the market, demand. Many store owners could not travel to the and their prices are good.” markets that provided their stock. To add to the com- IFC and the Women Entrepreneurs Finance Initiative plexity, many of the markets they relied on were closed. (We-Fi), which supports women entrepreneurs in TradeDepot, a Nigerian company founded to simplify emerging markets, have invested in TradeDepot. and digitize micro retail distribution, used its digital We-Fi financing is intended to help the company solution to swiftly bridge the supply chain gap. The build stronger women-led small and medium enter- company partnered with the government of Lagos prise retailer and distributor networks. State to distribute essential products like food and TradeDepot supplies tens of thousands of small-scale detergent to designated markets during the nationwide retailers in Ghana, Nigeria, and South Africa with lockdown. Instead of having to navigate a fragmented hundreds of products. About 80 percent of the infor- network of distributors and wholesalers, retailers and mal retailers on its platform are women. The company distributors were able to use their phones to connect plans on expanding to about nine countries and 21 cities directly to leading consumer goods companies through across Africa by 2023. TradeDepot’s ShopTopUp platform. “We played the role of an anchor, helping over 40,000 micro retailers to stay in business during the lockdown “We played the role of while ensuring that consumers have access to the goods they need,” said Onyekachi Izukanne, co-founder an anchor, helping over and CEO of TradeDepot. 40,000 micro retailers to Helping neighborhood stores stay in business is vital to the economic well-being of Nigeria’s urban and rural stay in business during areas. About 90 percent of Nigeria’s retail sector is in- formal: micro- and small-scale retailers depend on the the lockdown while daily wages from this work. ensuring that consumers For Blessing Chibueze, one of millions of women in Ni- have access to the goods geria who run small retail businesses to help provide for their families, TradeDepot offered a lifeline. “They made they need.” it much easier for me to stock my store without leaving IFC ANNUAL REPORT 2021 67 UKRAINE Under IFC’s Global Trade Finance Program, Ukrgasbank has facilitated close to $135 million of cross-border trade-finance transactions. IFC, in part- nership with the Swiss State Secretariat for Economic Affairs, helped the bank increase its small and medi- um enterprise loan portfolio by two and a half times, establishing Ukrgasbank as one of Ukraine’s leading banks serving that sector. Becoming a standard- To further support Ukrgasbank’s mission to finance green energy, IFC invested €30 million (approximate- setting bank for green ly $36 million), with an equity-conversion option, in Ukrgasbank in 2021. The loan’s proceeds are being finance used to finance eligible sustainable energy projects in Ukraine. The financing aims to help Ukraine increase the share of green energy in the energy mix and to en- hance end-use energy efficiency in different industries. More than five years ago, Ukrgasbank, Ukraine’s fourth-largest bank, embarked on an ambitious journey IFC’s support is expected to facilitate Ukrgasbank’s to differentiate itself from its competitors. This inward eventual privatization. This would be the first privat- look aligned with the Ukrainian government’s call for ization of a large state-owned bank in Ukraine — and the privatization of state-owned banks, part of a larger an example for future privatizations in the country’s reform strategy to accelerate economic growth and banking sector. For this reason, IFC has also been reduce the state’s stake in the country’s banking sector. working with the bank to improve its corporate governance: strengthening its board functioning, To sharpen its competitive edge, Ukrgasbank turned introducing structured strategy-setting and oversight, green. improving decision-making processes, enhancing “Green banking offered us a unique opportunity to be investor and stakeholder disclosures, introducing a pioneer in a market that was largely undeveloped, stronger controls and risk management to align the that lacked green finance expertise,” said Andrii Kravets, bank’s practices with private sector standards, and Ukrgasbank’s board chairman. integrating environmental and social risk governance into its risk management system. In 2016, IFC and Ukrgasbank partnered to develop the bank’s forward-thinking climate strategy — an initial Since 2016, Ukrgasbank has disbursed more than step in what would become a long-lasting partnership. 650 loans for mid- to large-scale climate projects, Since then, IFC has provided a range of advisory services providing $1.2 billion in green loans. The projects that to help Ukrgasbank become Ukraine’s first climate- Ukrgasbank is financing are expected to prevent finance bank. about 1.4 million tons of carbon dioxide emissions per year. After IFC began working with Ukrgasbank on IFC assisted Ukrgasbank in developing policies and its climate portfolio in 2015, a few other Ukranian procedures for green loans, identified target markets banks followed the trend and launched their own for green finance, and supported credit managers green programs. in project evaluation. This work was done as part of IFC’s Sustainable Energy Finance Program in Ukraine, implemented in partnership with the Austrian Federal Ministry of Finance and the Netherlands Ministry of Economic Affairs and Climate Policy. 68 IFC ANNUAL REPORT 2021 BRAZIL Investing in an eco-friendly alternative to cotton and synthetic fibers Whether used for making sweaters or hygiene products, wood-based textile fibers have the advantage of being biode- gradable, with a lower greenhouse gas footprint than synthetic fibers. Their production, which uses dissolving wood pulp, requires less water than cotton, and because they do not shed microplastics into water, they can later be recycled. IFC and IDB Invest co-led a $1.1 billion financing package to LD Celulose S.A., a joint venture between Lenzing AG and Duratex S.A., to build one of the largest dissolving wood pulp plants in the world, in Minas Gerais State, Brazil. The Finnvera, the export credit agency, and seven commercial banks participated in the financing. The project supports the construction of a greenfield dissolving wood pulp plant with the capacity to produce 500,000 tons per annum, the installation of a 144-megawatt cogeneration plant, and the sustainable management of 70,000 hectares of eucalyptus plantations. The first batch of dissolving wood pulp is expected to be produced in the first quarter of 2022. Brazil is among the most competitive pulp producing countries in the world. This transaction will strengthen the competitive- ness of the pulp industry in Brazil through the construction of one of the most energy and cost-efficient mills in the world, with the plant feeding 40 percent of excess bioelectricity gen- erated on site as green energy into the public grid. The project will also increase diversification within the pulp sector, as most of the existing production capacity in Brazil is directed toward paper grade pulp. This transaction will increase dissolving wood pulp production in the country, as there are currently only two dissolving wood pulp producers in operation and one other mill under construction. At a time of high unemployment and low investment activ- ity in Brazil, the project is one of the largest transactions in the country and in Latin America. LD Celulose will hire 8,000 workers during construction and 1,000 workers once opera- tional. This will create a pipeline of robust investments that can accelerate the Brazilian economy’s recovery from COVID-19. The financing will increase sustainability standards for Bra- zil’s pulp industry and the plantation forestry sectors through LD Celulose’s adoption of IFC’s Environmental and Social Performance Standards. IFC played a key role implementing measures to preserve water quality in the Araguari River, strengthening LD Celulose’s social capabilities, and ensuring that adequate human resources policies and procedures are in place to mitigate risks associated with the influx of a large workforce during construction. This landmark transaction has high recognition, winning several well-renowned awards, including “Loan of the Year: Latin America” and “Infrastructure Financing of the Year: Brazil” by LatinFinance. IFC ANNUAL REPORT 2021 69 ASIA Combating marine plastic pollution through IFC’s first “blue loan” Each year more than 8 million tons of plastic enters This drives improvements in waste collection systems, the world’s oceans, threatening life under water and meaning less waste and cleaner oceans,” said Yasho- industries like tourism that depend on clean water for vardhan Lohia, Indorama’s Chief Sustainability Officer. swimming and other recreational activities. A blue loan is an innovative instrument whereby the Marine pollution is a dangerous, rising trend — one that funds raised are certified and tracked exclusively for poses many risks. Polyethylene terephthalate (PET), projects that support a blue economy, such as for whether used in plastic bottles, containers or otherwise, the sustainable use of ocean resources for econom- is the biggest contributor to marine littering and pol- ic growth, improved livelihoods and jobs, and ocean lution. During the pandemic, littering has increased as ecosystem health. This marks IFC’s first blue loan exclu- one-time use plastic gear is being encouraged for public sively focused on addressing marine plastic pollution. health safety. IFC’s blue loan to Indorama complements our ongoing The private sector can provide solutions to address work on a circular economy for plastics and enhanced marine plastic pollution. One important step is to scale waste management in Asia. It demonstrates that recy- up commercial recycling, allowing plastic bottles to be cling can be an effective intervention to address plastic reused on land, not discarded into the sea. waste — one that also supports sustainability. IFC, the Asian Development Bank, and German devel- opment finance institution DEG together provided a $300 million “blue loan” to Indorama Ventures Limited (IVL), a leading global manufacturer and recycler of 80% PET resin. The loan will support Indorama in increasing its annual PET recycling capacity to 50 billion bottles OF GLOBAL by 2025 in Brazil, India, Indonesia, Philippines, and Thailand — the five countries most affected by marine PLASTIC WASTE pollution. After achieving its target, the project will COMES FROM reduce the company’s carbon footprint equivalent to almost 3 million barrels of crude and 1.65 million tons of ASIA. CO2 emission avoidance each year. “Our company, IVL, is building the recycling infra- structure needed to divert waste from the marine environment. By recycling post-consumer PET bottles into new bottles, we give waste an economic value. 70 IFC ANNUAL REPORT 2021 GLOBAL Creating a win-win for all through longer-lasting produce Perishable fruits and vegetables produced by farmers in Apeel is installing additional treatment equipment to developing countries often spoil, even before they can coat citrus fruit and asparagus in Mexico, avocados and be harvested, sold, and consumed. asparagus in Peru, and pineapples in Costa Rica. The company plans a global rollout in Chile, Kenya, South Frequently lacking access to modern cold storage Africa, and Uganda, where cold storage facilities are technology, many farmers thus face limited income limited. In addition to increasing farmer incomes, it also opportunities in a world where a third of all food is cur- brings climate benefits: by reducing food losses, Apeel rently lost or wasted, despite growing global demand. generates reduced or avoided greenhouse gas emis- Apeel Sciences has a solution. The U.S.-based agricul- sions from the longer agricultural storage of fresh fruits tural technology firm has developed an inexpensive, and vegetables. sprayed-on natural coating derived from plants that In time, using Apeel’s technology, local producers can doubles the shelf life of produce, opening doors to new, enter global markets as their produce will stay intact higher-value markets. This gives farmers more time to until it reaches the end customer. Apeel-treated fruits find buyers, and helps them enter new, better-paying and vegetables from other countries are already sold in supply chains that were previously out of reach —  leading grocery store chains in Europe and the U.S., a selling food that would otherwise go to waste. strong retail presence expected to grow in the coming The World Bank Group estimates that agricultural years. Farmers of all sizes benefit from working with production must expand by approximately 70 percent Apeel, which over time will help more and more small- by 2050 to meet the food requirements of a planet holders access export markets. with 10 billion people. This makes the time right for “Apeel has huge potential to turn subsistence farmers in game-changing solutions like Apeel’s natural coating Africa into commercial farmers,” Christina Owen of the product. Bill & Melinda Gates Foundation, which helped Apeel IFC is responding by combining investment and advice launch with a $100,000 grant in 2012, told Bloomberg to help the firm address higher demand for food in an Business Week. “That means more money in pockets, environmentally sustainable, socially inclusive way. and more food in bellies.” This year, IFC took part in a $30 million venture-capital investment round in Apeel to expand its produce- coating systems into more markets, including Latin America and Sub-Saharan Africa. IFC and two other investors took part in the second close of the Series D round, which totaled $280 million. IFC ANNUAL REPORT 2021 71 AFRICA Ramping up disease testing in Africa In most wealthy countries, getting a COVID-19 test is The tests are also expected to be an important source routine. of data for public health officials, allowing them to better gauge the scale of the COVID-19 pandemic in But in many parts of Africa, these diagnostics, one of Africa. Officially, 6.7 million Africans had contracted the first lines of defense against the novel coronavirus, COVID-19 and the disease had killed 172,000 people as remain hard to come by. As of August 2021, the conti- of August 2021. But researchers, including those at the nent, home to 1.1 billion people, had conducted about United States’ University of Washington, suspect the 47 million COVID-19 tests; the United States alone actual numbers are far higher. administered nearly 10 times that figure. The paucity of tests has left patients in the lurch and public health Along with COVID-19 tests, Cerba Lancet Africa, which officials trying to fight the pandemic blindfolded. already serves 2.5 million patients a year, is expected to ramp up testing for non-communicable diseases. That To help change that, IFC spearheaded a €15 million is considered important in Sub-Saharan Africa where financing package earlier this year for Cerba Lancet these types of ailments, which include cancer, diabetes Africa, which runs medical laboratories in 12 Sub- and hypertension, accounted for more than 35 percent Saharan African states. The financing, mobilized in part- of all deaths in 2019. nership with France’s Proparco, will help Cerba Lancet Africa upgrade its labs in places like Ghana, Kenya and “A lot of the people you see walking around have East Africa, Mozambique, Nigeria, and Rwanda, and never had any kind of routine medical checkup,” said branch out to new countries. That growth will provide Nontlantla Ngwenya, Chief Operating Officer at Cerba many Africans with access to fast, accurate tests for Lancet Africa. COVID-19 and many other diseases for which access “Our fundamental role at Cerba Lancet Africa is to close to testing has been a challenge. that gap by ensuring laboratory testing is accessible to “Access to diagnostics is a vital part of the COVID-19 a majority of people in the African continent. This will response,” said Stéphane Carré, CEO of Cerba Lancet ensure patients are treated correctly and early.” Africa. “Accurate diagnostics is essential to providing patients with high-quality care and ensuring they receive the right treatment.” 72 IFC ANNUAL REPORT 2021 The financing for Cerba Lancet Africa is part of a big- ger push by IFC to help Africa improve medical care over the long term, considered crucial on a continent where many healthcare systems are fragile. Since March 2020, IFC has provided more than $777 million to private healthcare companies in Sub- Saharan Africa. Aside from diagnostic testing, IFC has helped to expand vaccine production, provide clinics with modern medical equipment, and foster innova- tion in the healthcare sector. IFC’s work underscores the importance of the private sector in improving healthcare in Africa, which is struggling with the fallout of COVID-19, said Olaf Schmidt, IFC’s Manager for Real Estate, Hotel & Retail, Health & Education and Manufacturing Invest- ments in Africa. “By tapping into the expertise and financial strength of private companies, countries can dramatically improve the health and wellness of their people,” he added. IFC ANNUAL REPORT 2021 73 2021 Each year, IFC and its clients receive many awards, highlighting achievement in a broad range of areas. AWARDS Global Supranational, Sovereign and Agency (SSA) Bond Issuers Deal of the Year FOR IFC For 3 billion 5-year Swedish krone (SEK) Social Bond 18th mtn-i MTN Awards Multilateral Agency of the Year Local Currency Deal of the Year Award/Asia Pacific For 3 billion 5-year Swedish krone (SEK) For IFC Social Bond The Asset Triple A Asia Infrastructure 18th mtn-i MTN Awards Awards Deal of the Year Impact Report of the Year For IFC Australian dollars (AUD) 200m For IFC’s FY20 Green Bond 1.50% 2035 Kangaroo Social Bond Impact Report mtn-i, Asia Pacific Awards Environmental Finance Bond Awards 2021 Best Annual Report (Gold) Best Investor Relations For IFC’s Annual Report For impressive proactive Debt Capital International Stevie Awards Markets Investor Relations operation, leading in market best practices Best Annual Report —  CMD Portal (Collaborative Market Data) International Development and Finance Institution (Gold) Socially Responsible Investing (SRI) For IFC’s Annual Report Deal of the Year ARC Awards For 3 billion 5-year Swedish krone (SEK) Social Bond Best Use of Print (Gold) and Best 18th mtn-i MTN Awards Copy Style or Tone of Voice (Gold) For IFC’s Annual Report Corporate Content Awards, North America 74 IFC ANNUAL REPORT 2021 Asahan I Hydro Electric Power Plant Awards AWARDS TO IFC CLIENTS Entrepreneur of the Year — Business Transformation To IFC client Byju’s Founder Byju Raveendran EY Renewable Energy Deal of the Year — Hydro For IFC’s role as Mandated Lead Arranger and Lender for the Asahan I Hydro Electric Power Plant, Indonesia The Asset Triple A Asia Infrastructure Awards Asia Pacific Transport Investor of the Year To I Squared Capital for its investment in IFC investee Cube Highways, India Private Equity International and Infrastructure Investor Power Deal of the Year Asahan I Hydro Electric Power Plant To IFC for its role as the Lead Arranger and Lender for the Mazar-i-Sharif Power Plant, Afghanistan The Asset Triple A Asia Infrastructure Awards Best Utilities Project (Gold) To IFC client Beo Cista Energija Partnership’s Bulletin Achievement in Liquidity Risk Management Award To Vietnam Prosperity Joint-stock Commercial Bank (VPBank), financed by IFC The Asian Banker IFC ANNUAL REPORT 2021 75 MEASURING UP Measuring the results of IFC’s work —  and evaluating our effectiveness —  is fundamental to our approach to development. 76 IFC ANNUAL REPORT 2021 ASSESSING EXPECTED DEVELOPMENT IMPACT volume was channeled into projects geared at AND MEASURING RESULTS helping clients maintain their businesses rather than grow them. Specifically, the FIGE and RSE COVID-19 IFC launched a new impact rating system: the envelopes accounted for 1.2 billion and 0.7 billion of Anticipated Impact Measurement and Monitoring IFC’s own account commitments, respectively. (AIMM) system in 2017.¹ Potential projects are rated ex-ante and selected based on their expected IFC’s contribution to global job creation is development outcomes. This approach enables us particularly noteworthy in the poorest and most to set ambitious yet achievable targets, identify vulnerable countries. Roughly 29 percent of IFC’s projects with the greatest potential for development total contribution to job creation through projects impact, and optimize project design. committed in FY21 is expected in IDA countries alone and about 11 percent will be created in FCS countries. To date, IFC has rated over 1,700 investment projects The concessional finance that the IDA Private Sector for their expected development impact. Notable Window (PSW) provides contributes substantially updates in the AIMM framework’s development for to these effects: around 9 percent of IFC’s global job FY21 include: creation contribution is accounted for by projects that • Building on feedback from FY20, IFC continued to received IDA PSW funds.³ expand the AIMM system’s capacity to measure impact and better articulate the development IFC Contribution to Climate change: IFC and the results for its Advisory Services (AS) portfolio in FY21. World Bank Group recognize climate change as an • IFC tested several approaches to assigning AIMM acute threat to global development that increases scores for platform investments, which involve instability and contributes to poverty, fragility, and the clustering of investment projects to address a migration. Climate action is also an investment systemic development challenge, such as the FIGE opportunity for the private sector. IFC has been and RSE programs, and the Global Health and Base in the climate business space since the 1980s, of the Pyramid programs, where IFC developed when it began supporting simple project finance more streamlined rating approaches. of renewables, and has since diversified into green • IFC updated the way it assesses development gaps buildings, green finance, climate-smart agribusiness, and project intensities to recognize the unique and other sectors. In FY21, committed own account economic consequences arising from the COVID-19 climate-related investment projects, totaling pandemic. This work, which overlaps with the $4 billion, are expected to help our clients reduce testing of platform ratings described above, also annual greenhouse gas emissions by 12 million tons included further refinement of IFC’s development of carbon dioxide equivalent. impact assessments for debt restructurings and secondary share purchases. IFC Contribution to SDGs: For the IFC 3.0 strategy, • IFC is strengthening our capacity to better the AIMM system provides a line of sight from IFC’s monitor our impact in creating markets with mandate, through intermediate corporate objectives, AIMM assessments. This multi-year effort involved to the SDGs. It allows IFC to monitor results using collecting data to facilitate the evaluation of project-level indicators, including the Harmonized market claims made by IFC projects. Indicators for Private Sector Operations (HIPSO), and aligns its reporting at the portfolio level to various Estimated Job Creation: Based on a conservative SDGs. The AIMM framework also enables monitoring estimate using IFC’s economic impact estimation and reporting of the contribution of market-creation framework, IFC expects to contribute to the creation effects that support achievement of the SDGs. of 1.4 million to 1.6 million jobs globally over the lifetime of the projects it financed in FY21. These IFC operations contribute to several Sustainable estimates include direct and indirect jobs created Development Goals (SDGs) through direct and are derived from projects accounting for about investments and advisory services. Integral to IFC’s 60 percent of IFC’s FY21 investment commitments.² mandate and aligned with the World Bank Group’s twin goals are SDGs 1 and 10: “No Poverty” and These latest estimates suggest that IFC’s investments “Reduced Inequality.” At the strategic sector level, during FY21 will lead to a lower job creation effect IFC promotes projects in infrastructure, agriculture, than investments in previous years. This can be financial inclusion, health, and education — aligned attributed to the global COVID-19 pandemic and with SDGs 2, 3, 4, 6, 7, and 9. For example, IFC economic crisis as the focus of investment partly has been working with Kaebauk Investimentu no shifted from creating new jobs to saving existing ones. Finansas, S.A. in Timor-Leste on a holistic farming- More than 30 percent of the long-term investment to-financing approach that addresses financing gaps 1. Detailed introductions about the AIMM system can be found in FY18 and FY19 IFC annual reports: ifc.org/AnnualReport 2. Employment estimates are computed for individual projects using IFC’s economic impact estimation framework. The framework comprises sector-specific models and a variety of assumptions across countries and sectors. For financial intermediaries, the estimate includes on-lending of IFC funds only. Client banks’ portfolios grow more than the IFC funding alone, partly because IFC’s contribution catalyzes additional funding and partly because the growth is contractually agreed with IFC. This additional expansion, which is hard to attribute precisely, could represent the creation of several million jobs. 3. About 19% of the volume of IFC’s long-term investments are committed in IDA countries, 7% in FCS countries, 20% in the Sub-Saharan Africa region, and about 5% in IDA PSW-supported projects. IFC ANNUAL REPORT 2021 77 in this critical sector. The project aims to improve In FY21, IFC committed 262 projects that were AIMM- productivity in agribusiness by developing a sufficient scored compared to 216⁶ projects in FY20. The average flow of bankable agribusiness financing opportunities. AIMM score for projects committed during FY21 was 53, versus 51 in FY20. Of the 262 projects, only 14 were Across sectors and regions, IFC seeks to promote rated “Very Strong” for market creation potential, employment creation and economic growth, gender corresponding to a 5 percent share of all AIMM- equality, cities development, environmental and scored projects, well below the 15 percent target and social sustainability, and climate-change adaptation the 8 percent share achieved in FY20. A contributing and mitigation — aligned with SDGs 8, 5, 11, 12, and factor for this drop-off was the emergence of the 13, respectively. IFC played an important role in COVID-19 crisis. COVID-19 prompted IFC to invest sustaining livelihoods and preserving the private heavily in supporting existing clients’ operations sector’s capacity to support the economic recovery and strongly affected its ability to commit longer- from COVID-19. Furthermore, IFC actively partners term, capital-intensive projects typically found in with private investors to mobilize new sources of transformational interventions with “Very Strong” finance — aligned with SDG 17. market creation potential. To “sustain” markets, IFC is offering loans to companies in need, and if necessary, This past year, IFC, together with other Multilateral will make equity investments. For example, IFC Development Banks (MDBs) and the International expects the RSE facility to provide $2 billion to support Monetary Fund, collaborated to produce a joint report existing clients in the infrastructure, manufacturing, on the SDGs — Financing the Sustainable Development agriculture, and services industries vulnerable to the Goals: The Contributions of the Multilateral Development pandemic, as well as companies in the healthcare Banks.⁴ The report highlights efforts to support sector that are seeing an increase in demand. As the countries in achieving the SDGs, by providing finance, crisis abates and Upstream activities take hold, IFC technical assistance, policy support, and knowledge, expects the re-emergence of a more robust pipeline especially in the wake of the unprecedented COVID-19 of market creation projects. pandemic. MDBs acted fast to tailor their financing to help address critical needs, thereby developing a Of the AIMM-scored projects committed in FY21, global response package of $230 billion. 203 (77 percent) received an AIMM rating of “Good” compared to 74 percent in FY20. Strong commitment WHAT EX-ANTE AIMM SCORES SAY ABOUT IFC’S performance for COVID-19 response projects DEVELOPMENT IMPACT throughout FY21 likely contributed to this increase in the share of projects rated “Good”.⁷ The rising At the start of FY21, IFC maintained the FY20 share of “Good” projects also likely reflects improved development impact targets for its projects: (1) an understanding of the AIMM framework among IFC average ex-ante AIMM score of at least 50 across staff, prompting improved project design. the portfolio of committed projects; and (2) at least 15 percent of committed projects rated “Very Strong” The tables below summarize key outcomes from the for market creation potential. This is the third year second year of implementing the AIMM system on in which IFC has defined in quantitative terms our an ex-ante basis. development impact ambitions for new projects at the start of a fiscal year.⁵ Average AIMM Scores for Committed Projects in IDA/FCS Countries and for Blended Finance AVERAGE AIMM SCORE DESCRIPTION FY21 FY20 Committed projects in FCS countries 64 55 Committed projects in FCS/LIC/IDA17 countries 59 57 Committed projects in IDA countries 56 54 Committed projects using blended finance 58 55 4. Financing the Sustainable Development Goals: The Contributions of the Multilateral Development Banks, https://www.isdb.org/ financing-the-sustainable-development-goals-the-contributions-of-the-multilateral-development-banks. 5. IFC provides its Board with a strategy and business outlook every three years detailing the Corporation’s strategic direction. The FY21 corporate scorecard contains program targets for the current year (FY21) and two future years. Annual scorecard targets are revisited annually to confirm targets continue to enable staff to focus on prevailing priorities. The maintenance of a stable AIMM score target over the past three years reflects these considerations. 6. The FY20 Annual Report cited 215 projects. The difference is due to a post-publication correction to the number of projects committed and rated. 7. Projects under the FIGE and RSE COVID-19 response packages received a uniform AIMM score of 53 (Good). 78 IFC ANNUAL REPORT 2021 Committed Projects: Ex-Ante AIMM Score by Region FY21 FY20 RATED RATED NUMBER OF AIMM VERY NUMBER OF AIMM VERY PROJECTS SCORE STRONG PROJECTS SCORE STRONG BY REGION SCORED AVERAGE MARKET SCORED AVERAGE MARKET Sub-Saharan Africa 55 54 3 5% 51 54 6 12% Latin America and the Caribbean 56 53 2 4% 37 46 0 0% East Asia and the Pacific 43 54 2 5% 36 52 2 6% Middle East and North Africa 18 54 2 11% 17 54 2 12% Europe and Central Asia 39 51 3 8% 32 44 3 9% South Asia 38 53 1 3% 33 53 3 9% Global 13 52 1 8% 10 54 2 20% IFC 262 53 14 5% 216 8 51 18 8% Committed Projects: Ex-Ante AIMM Score by Industry FY21 FY20 NUMBER RATED RATED OF AIMM VERY NUMBER OF AIMM VERY PROJECTS SCORE STRONG PROJECTS SCORE STRONG BY INDUSTRY SCORED AVERAGE MARKET SCORED AVERAGE MARKET Manufacturing, Agribusiness and Services 94 52 1 1% 71 51 3 4% Financial Institutions Group 101 54 3 3% 85 50 7 8% Infrastructure and Natural Resources 40 55 5 13% 39 53 7 18% Disruptive Technologies and Venture Capital 45 53 5 11% 30 48 2 7% IFC 9 280 53 14 5% 225 10 51 19 8% During FY21, a range of situations shaped the private equity and private credit activities across landscape in which IFC pursued its development Africa remain limited, with both markets remaining impact ambitions. Most notably, and as outlined highly under-developed. IFC is promoting above, the pandemic prompted IFC to invest heavily development of these markets by supporting funds in helping its clients sustain operations. Some clients such as Ascent Fund II (providing private equity played a key role in global health supply chains capital and value creation to SME companies in while others, including some new clients, offered East Africa), Adiwale I (anchoring a first-time fund opportunities for private investors to deploy capital at manager targeting SMEs launch in West Africa), a time of heightened uncertainty in debt and equity and Vantage IV (supporting one of the only private markets. Several projects exemplify the prevailing credit funds operating across Africa). impact rating circumstances that IFC faced in FY21: • In South Asia, IFC is working with Biological E Limited (BioE), one of India’s top vaccine • In Africa, COVID-19 has further tightened the manufacturers, with a $30 million loan to support ability of the private sector to access financing for the company’s expansion of low-priced, generic growth. The COVID-19 pandemic has challenged vaccines for routine immunization of children and businesses and increased their demand for capital. the production of new vaccines, including future Yet at the same time, difficult economic conditions COVID-19 vaccines. IFC expects this to increase and amplified challenges have seen banks pull back the availability of affordable, quality vaccines from lending. IFC has been able to alleviate this globally and promote greater stability in healthcare shortfall by supporting alternate finance options provision by providing needed supplies. such as private equity and private credit. However, 8. As noted above, the FY20 Annual Report cited 215 projects. The difference is due to a post-publication correction in the number of projects committed and rated. 9. The industry totals for FY20 and FY21 do not match regional totals because of joint ventures between industries. Each industry is allocated a full project count for each joint venture in which it participates. 10. Figure differs from FY20 Annual Report due to a post-publication correction in the number of projects committed and rated. IFC ANNUAL REPORT 2021 79 • In East Asia, IFC made its first direct debt • Projects under the Global Health Platform and Base investment into a renewable energy (RE) project in of the Pyramid facility supported the scaling of Vietnam. The proceeds will fund the construction vaccines, medical supplies, and financial support to of two wind power projects with a total capacity microenterprises. To facilitate the rapid deployment of 54.2 megawatts (MW). The project will increase of these programs, IFC developed more streamlined RE capacity and help support the achievement impact rating approaches. of Vietnam’s targets under the Paris Agreement • Finally, IFC undertook selective secondary share through the critically important decarbonization repurchases and refinanced the debt of clients faced of its power sector. The project is also expected to with potentially disruptive financing shortfalls due to contribute to market competitiveness by expanding the pandemic. private sector investment in the sector and demonstrating the role of wind power in Vietnam’s WHAT PORTFOLIO RESULTS SAY ABOUT IFC’S electricity generation mix. IMPACT DELIVERY In addition, IFC made important contributions to Portfolio AIMM score for Investment Projects: At attenuating the negative effects from the COVID-19 the end of FY21, IFC had 884 active AIMM-rated pandemic. These contributions were reflected in the investment projects in its portfolio.¹¹ The average AIMM rating treatment of several programs: portfolio AIMM score was 45. In comparison, the average ex-ante AIMM score assigned to these same • Projects under IFC’s FIGE and RSE contributed to projects was 46, suggesting that at the portfolio reducing the pandemic’s negative effects on key level, the development outcomes IFC expected to stakeholders and market resilience. The challenges generate have been mostly delivered during project these projects addressed varied, ranging from implementation. Between FY20 and FY21, the helping existing clients in need sustain their payrolls, portfolio AIMM score average increased from 44 to 45. to covering payment risks of financial institutions Projects committed in FY20 that entered the portfolio so they can provide trade financing to companies in FY21 contributed to this slight increase given the that import and export goods, to funding emerging carryover of their higher ex-ante AIMM scores.¹² market banks that extend credit to help businesses shore up their working capital needs. Investment Services Portfolio AIMM Score by Region FY21 FY20 RATED RATED AIMM SCORE VERY STRONG AIMM SCORE VERY STRONG BY REGION AVERAGE MARKET AVERAGE MARKET Sub-Saharan Africa 49 15% 47 16% Latin America and the Caribbean 39 7% 37 8% East Asia and the Pacific 46 7% 47 11% Middle East and North Africa 45 19% 44 21% Europe and Central Asia 42 9% 39 7% South Asia 48 7% 47 7% Global 48 15% 43 10% IFC 45 10% 44 11% Investment Services Portfolio AIMM Score by Industry FY21 FY20 RATED RATED AIMM SCORE VERY STRONG AIMM SCORE VERY STRONG BY INDUSTRY AVERAGE MARKET AVERAGE MARKET Manufacturing, Agribusiness and Services 43 3% 41 3% Financial Institutions Group 45 9% 44 9% Infrastructure and Natural Resources 51 23% 49 23% Disruptive Technologies and Venture Capital 46 15% 45 18% IFC 45 10% 44 11% 11. Roughly half of IFC’s active, AIMM-rated projects pre-date AIMM scoring. In 2020, IFC backfilled AIMM scores on this representative sample of IFC’s investment portfolio. 12. Committed projects that were assigned an ex-ante AIMM score during FY20 enter the monitoring portfolio the following fiscal year. Because early operating maturity has not been reached and monitoring has not started for these projects, their ex-ante AIMM scores carry over and become portfolio AIMM scores in FY21. 80 IFC ANNUAL REPORT 2021 It is too early to assess the effects of the • CSquared Holdings — This project entails the COVID-19 pandemic on the development impact development and operation of wholesale-only, performance of IFC’s portfolio. Most projects carrier neutral and open-access fiber networks where clients claimed to be moderately or heavily in metropolitan areas of Uganda, Ghana, and affected by the pandemic showed modest changes Liberia. Despite the oligopolistic market structure, in AIMM scores. Part of this may be explained by there is evidence that the broadband service temporal factors, where the pandemic’s effect on coverage and affordability have improved during client performance may not be fully reflected in project implementation. The company’s business reporting data. The resilience may also be explained model also appears to have been replicated in by the absence of data provided by clients undergoing other countries. particularly acute hardships; in such cases, IFC’s • Altum Capital — This IFC client provides senior practice was to maintain ratings at their current loans to mid-size SOFOMs (financial entities) in levels until assessment data becomes available. The Mexico that mostly lend to microenterprises, small full effect of the pandemic on IFC’s development enterprises, and individuals. The project surpassed impact performance may not be fully reflected until its targets of volume and number of SME loans next year. disbursed ahead of schedule in FY21. The volume and number of cumulative microfinance loans Although no broad conclusions can be drawn disbursed is on-track and is likely to achieve its from the data thus far, there were a few target before 2022. instances where impact ratings captured some of the challenges and opportunities IFC Ratings of Advisory Projects: Development clients faced during the COVID-19 pandemic. effectiveness of advisory projects is assessed at For example, projects in consumer-driven sectors, project completion. In FY21, 117 advisory projects such as higher education and tourism, saw declining qualified for ex-post evaluation were completed portfolio AIMM scores, likely due to mobility during the period and were self-assessed for constraints and shifting consumption patterns. development-effectiveness ratings. Seventy-one Projects with financial intermediaries, including (71) percent of the projects were rated mostly those involving non-bank financial institutions, successful or better, above the IFC target of also showed weakening performance, likely due 65 percent. to reduced operations, and challenges to credit origination and disbursement. In contrast, while While the FY21 overall success rates for the the sample sizes are modest, projects in sectors advisory services portfolio have remained stable in such as digital infrastructure (including mobile comparison with FY20, it is too early to fully assess and broadband networks) and integrated health the effect of the COVID-19 pandemic on advisory services generally saw higher or no change in projects, as a large portion of them are still ongoing. portfolio AIMM scores. Several of these projects are being restructured to take into account COVID-19 impacts. Other changes in portfolio AIMM scores reflected country-specific conditions that had a bearing on impact performance. For example, Myanmar’s political crisis contributed to broad declines in portfolio AIMM scores across nearly all sectors. In Turkey, portfolio AIMM scores for projects in the financial sector started to decline as recent volatility of the lira and its effect on banking sector performance began to take hold. Impact performance for some specific projects also reflected notably strong performance despite the pandemic and economic headwinds. Several stand-out cases from this year’s portfolio monitoring review include: • DNP Water — This is an IFC investment to support the implementation of privatization efforts in the Vietnamese water sector. After reaching operational maturity in FY21, the company, as one of the first private sector companies aiming to own and operate a portfolio of mainly urban water treatment and supply facilities in Vietnam, surpassed its water treatment target ahead of schedule. IFC ANNUAL REPORT 2021 81 Advisory Services Development Effectiveness Score by Region 13 FY21 FY20 Sub-Saharan Africa 55% 66% South Asia 65% 86% Middle East and North Africa 79% 88% Latin America and the Caribbean 82% 75% Europe and Central Asia 84% 75% East Asia and the Pacific 76% 70% Global¹⁴ 100% 67% IFC 71% 73% Advisory Services Development Effectiveness Score 15 by Business Area FY21 FY20 Financial Institutions Group 69% 79% Manufacturing Agribusiness and Services 64% 67% Infrastructure and Natural Resources 0% 57% Disruptive Technologies and Funds 100% 100% Transaction Advisory 71% 69% Other Advisory, including Environment Social and Governance 91% 63% Creating Markets Regional Advisory 69% 77% IFC 71% 73% OPERATIONALIZING THE IMPACT PRINCIPLES Operating Principles for Impact Management (OPIM) FOR IMPACT INVESTING and the broader impact investing community. For example, the HIPSO partnership has recently In FY21, DFIs and the private sector impact revised metrics for infrastructure services and investment community took a significant step financial intermediation. The revision of metrics toward harmonizing approaches to monitor and for information and communications technology, report on development impact. Clear impact metrics agribusiness, health and education is in progress. are essential to making the economic and social contributions of investments measurable, which By leveraging the HIPSO and the JII indicators, IFC allow investors to improve their transparency, is leading the development of a position paper, effectiveness, and accountability. These benefits in coordination with the OPIM signatories, on a significantly increase when investors’ impact metrics uniform set of standards, which provides guidance are adopted in common by different institutions, on the selection of impact metrics that would thereby reducing the reporting burden on clients create a basis for accountability, comparability, and and facilitating comparability and learning. consistency. This effort will facilitate a roadmap for meaningful impact performance comparison, Beyond the earlier mentioned Joint Impact Indicators appropriate benchmarking, and better decision- (JII), the Harmonized Indicators for Private Sector making, which has so far been limited in the impact Operations (HIPSO) partnership continues to investing market. develop metrics at the sector and sub-sector levels that could be leveraged by the signatories to the 13. DE Score is calculated as the percentage of projects rated mostly successful or better in total number of advisory projects rated in ex-post evaluation for a fiscal year. 14. The FY19, FY20, and FY21 DE Scores for Global are based on less than five rated projects. 15. The FY20 and FY21 DE for Disruptive Technologies and Funds are based on less than 5 rated projects. The FY21 DE for Infrastructure & Natural Resources is based on one rated project. 82 IFC ANNUAL REPORT 2021 WHAT IFC LEARNED FROM ITS RESEARCH, Self-valuations of mature or completed projects ANALYTICS, AND SELF-EVALUATION PROGRAM provide another important link in IFC’s impact- assessment framework. Even as IFC expanded its IFC uses a combination of research, data analytics, research and analytical products, the evaluation and self-evaluations to fill knowledge gaps and agenda was focused on performance evaluations provide real-time solutions to clients and operational and rapid assessments. In all, IFC completed colleagues. These insights generate important 13 evaluations in FY21. Outcomes from these lessons that inform new client engagements. In FY21, evaluations helped IFC better understand the impact IFC expanded its research and analytical agenda of our investments beyond individual projects and to strengthen the implementation of the IFC 3.0 capture valuable lessons learned that inform industry strategy and support IFC operations in addressing strategies and operations. challenges arising from the COVID-19 pandemic. Key findings of selected evaluations include IFC developed 28 separate COVID-specific analytical the following: pieces since the outbreak of the pandemic, including two surveys of its portfolio clients in financial • LAPO Agent Banking in Nigeria — Increased Reach, Client Diversity institutions and trade finance sectors. The analyses IFC conducted an assessment of an Advisory Service developed possible recovery scenarios for specific project supporting Nigeria’s Lift Above Poverty sectors or economies, identified the roles that Organization (LAPO). The project aimed to increase selected sectors could play in supporting COVID-19 access to financial services in Nigeria through the responses and changed the ways IFC assesses development of an agent banking network. Even projects under the AIMM framework. though the network has not achieved the scale initially envisioned, LAPO built a network of 1,700 In the last three years, IFC has also undertaken agents and mobilized more than $3 million in savings in-depth research and analytics, including 33 ongoing over the three years of the project. studies and 15 completed ones that cover most sectors in which IFC operates. Some publications By surveying a sample of adults living near newly presented case studies of IFC engagements, while onboarded agents, the assessment found a others used sector deep-dives, country or regional significant increase (+24 percentage points) in the analyses, sector analysis, and empirical studies. IFC number of LAPO clients using transaction accounts also conducted research with leading private sector in these areas. Agents were particularly successful players to analyze strategic priority themes such in attracting new clients in previously underserved as the digital economy, capital market deepening, areas with few financial access points such as bank housing finance, etc. These products explored branches and agents. Customers in these areas solutions for creating private sector markets, were found to be more likely to be poor, illiterate, complementing IFC’s sector knowledge. and lack previous banking experience. Overall, the assessment confirmed the agent network as a Notable examples of such work are detailed below: pillar of LAPO’s growth and transformation beyond its foundational microlending business, and its • The Google-IFC e-Conomy Africa 2020 report sheds contribution to financial inclusion in Nigeria. light on the size of Africa’s digital economy. The report finds that Africa’s digital economy has the • Assessment of IFC’s Power Distribution Investments in Moldova, Uganda, and Georgia potential to reach $180 billion by 2025, accounting The assessment of selected IFC investments in for 5.2 percent of the continent’s gross domestic power distribution in these countries demonstrated product. Driving this growth is a combination the positive impacts on tax revenues, gross of increased access to faster and better-quality domestic product (GDP), and employment in all internet, a rapidly expanding urban population, three countries. Microeconomic analysis findings a growing tech talent pool, a vibrant startup indicate operational efficiency improvements and ecosystem, and a steady improvement in the CO ₂ emissions reduction in all three countries, regulatory framework of the digital economy. because of reduced technical losses. In these The findings from this report are being used to countries, the reduction of losses ranged benchmark the size of the digital economy across between 50 percent and 90 percent during the IFC’s countries of operations. studied period. The study also showed that the • At the outset of the COVID-19 crisis, IFC conducted successful privatization of a distribution company a survey to assess the impact of the crisis on its can transfer valuable knowledge to other portfolio clients with lending operations focusing companies in the sector. Strong and transparent on operations, strategic direction, funding, and regulatory framework, transparent tariff-setting lending. The survey found that even though there methodology, effective utility data collection, was no evidence of a liquidity problem in the early Development Finance institution (DFI) involvement days of the crisis, credit risks were simmering under and investors with distribution business expertise the mask of government mandated moratoriums. in the region are identified as the key factors of Digital technologies were also found to be critical success in the sector. for the resilience of financial institutions prompting many to increase their investments in this area. The results were disseminated in various ways including an interactive dashboard, presentations, survey report, and a special blog. IFC ANNUAL REPORT 2021 83 OUR PEOPLE & PRACTICES IFC’s corporate culture reflects our commitment to alleviating poverty and creating opportunity for the most vulnerable people in the developing world. 84 IFC ANNUAL REPORT 2021 Governance OUR BOARD Each of our member countries appoints one OUR PLACE IN THE WORLD BANK GROUP governor and one alternate. Corporate powers are vested in the Board of Governors, which delegates The World Bank Group is a vital source of financial most powers to a board of 25 directors. Voting power and technical assistance to developing countries. IFC on issues brought before them is weighted according is one of five members of the Bank Group, although to the share capital each director represents. IFC is a separate legal entity with separate articles of agreement, share capital, financial structure, The directors meet regularly at the World Bank management, and staff. Group headquarters in Washington, D.C., where they review and decide on investments and provide Membership in IFC is open only to member overall strategic guidance to IFC management. countries of the World Bank. As of June 30, 2021, The President of the World Bank Group is also IFC’s paid-in capital of about $20.8 billion was held President of IFC. by 185 member countries. These countries guide IFC’s programs and activities. EXECUTIVE COMPENSATION Since our founding in 1956, we have committed more The salary of the President of the World Bank than $287 billion of our own funds for private sector Group is determined by the Board of Directors. The investments in developing countries, and we have salary structure for the IFC Chief Executive Officer mobilized more than $107 billion more from others.* (CEO) is determined by positioning a midpoint between the salary structure of staff at the highest In working to end extreme poverty and to boost level, as determined annually by independent U.S. shared prosperity, we collaborate closely with other compensation market surveys, and the salary of the members of the Bank Group. World Bank Group President. The compensation of our executive leadership is transparent. Our Member IFC MD and EVP Makhtar Diop received an annual salary of $408,253, net of taxes. Countries — Strong Shareholder Support OUR MEMBER PERCENTAGE OF COUNTRIES CAPITAL STOCK United States 20.91 Japan 8.27 Germany 5.27 France 4.70 United Kingdom 4.70 India 4.00 Russian Federation 3.78 Italy 3.16 Canada 2.99 The Netherlands 2.30 175 OTHER COUNTRIES 39.92 F Y20 figure reflected mobilization for Loan & Guarantee participations only. The FY21 figure includes all mobilization types. * Please refer to the Operational Highlights table for details. IFC ANNUAL REPORT 2021 85 Corporate Advancing diversity, equity, and inclusion (DEI) Responsibility IFC works with clients across the globe. That broad reach is reflected in our staff who work in more than 100 countries. Having a diverse workforce with essential skills and varied perspectives is Sustainability is an integral part of our critical for IFC to deliver on its strategic agenda. internal business operations. We hold In FY21, IFC raised the bar on DEI. We appointed ourselves accountable to the same our first dedicated Diversity, Equity & Inclusion environmental and social standards (DEI) leader to enhance efforts to create a respectful and inclusive workplace and to define we ask of our clients. This commitment and implement the DEI agenda across the connects IFC’s mission with how we institution. We also added the concept of equity into our commitment to diversity and inclusion — run our business. ensuring that we address the needs of our staff who may be starting from a place of disadvantage, OUR STAFF removing barriers that could limit their potential to thrive. The knowledge, skills, values, and diversity of our staff are key to our comparative advantage, enabling This fiscal year we introduced key performance us to bring innovative solutions and global best indicators aligned with the new World Bank Group practices to our clients. diversity goals, including gender parity targets by grade groups and indicative staff representation across 20 This fiscal year pushed us into unchartered territory sub-regions. We now have a baseline for measuring to address staff challenges in the wake of the improvement with this new focus, as indicated in the COVID-19 pandemic. As part of World Bank Group Gender Balance table on the next page. emergency response measures, we provided wide- ranging support to protect our global workforce, Our recruitment strategy contributes to including health and safety support, financial IFC’s diversity through targeted outreach to assistance, and flexible remote work policies, with underrepresented groups, as well as partnerships a focus on staff and dependents in vulnerable with Employee Resource Groups, including GLOBE locations. The World Bank Group provides an array for LGBT+ staff, All-abilities, and the African Descent of programs and services to promote and protect the Alliance. In FY21, we participated in more than 100 health and security of staff through services focusing talent outreach events in 53 countries across all on personal health and wellness, occupational health regions with more than 63,000 participants in total. and safety, and mental health and well-being. IFC management down to managers and team leads Fostering an inclusive workplace provided the support necessary to rapidly transition our workforce to home-based work at headquarters IFC fosters an inclusive workplace environment as a and in country offices. Results from a staff survey critical part of retaining and developing our diverse showed that most staff adjusted fairly well to home- workforce. Addressing racial inequity became a based work (average score of 8 on a scale of 1-10). In higher priority during the past year, aligned with this same period, 91 percent of the workforce gave the heightened global awareness around racial a favorable response to feeling proud to work at the injustice and systemic racism. IFC offers anti-racism World Bank Group and 79 percent felt a strong sense programming, including listening and discussion of belonging. sessions and training on topics such as unconscious INDICATOR FY21 FY20 FY19 FY18 Total full-time staff 4,283 3,931 3,739 3,918 Non-U.S.-based staff (%) 56.9% 54.8% 53.8% 55.1% Short-term consultants/temporaries (FTEs¹) 1,003 1,014 1,085 1,092 Employee engagement index² ­– 69% 67% 75% Diversity Women managers (target 50%) 39.3% 39.2% 39.5% Part II managers (target 50%) 43.2% 41.0% 40.5% Women GF+ Technical (target 50%) 49.4% 47.8% 46.7% Sub-Saharan/Caribbean GF+ (target 12.5%) 13.7% 13.5% 11.2% 1. FTE is full-time equivalent. 2. There was no Engagement Survey in FY21. 86 IFC ANNUAL REPORT 2021 bias. IFC’s management has adopted specific GENDER FY21 measures aimed at ending racism in the workplace. IFC also launched an Allies Program in partnership STAFF AT OFFICER with our Employee Resource Groups, which LEVEL AND HIGHER MANAGERS* encourages staff to become allies in eliminating Female 1,335 48.5% 91 39.4% biases and fostering inclusion. Male 1,419 51.5% 140 60.6% Total 2,754 231 Enriching staff development The World Bank Group offers a comprehensive GENDER BALANCE INDEX FY21 approach to staff development, focused on virtual delivery of learning resources during the Grades GA-GD 0.419 pandemic. WBG leadership development programs Grades GE-GF 0.900 are designed to bolster personal and collective leadership and management skills in the context Grades GG+ Technical 0.920 of organizational priorities. For example, IFC’s Managers* 0.831 Sponsorship Program builds a pipeline of diverse Total 0.839 leaders by providing visibility and exposure to high potential staff, with a focus on women. The Reverse The Gender Balance Index promotes greater gender Mentorship Program pairs young staff as mentors distribution across all grades. A score of 1 indicates to senior leaders across business functions, fostering gender parity at a particular grade grouping and inter-generational inclusion and innovation. IFC overall. The four grade groupings have different Given the large number of new staff hired into weightings. To close the gender gap, the index the organization in the last two years — most of encourages hiring more women in managerial whom have joined virtually — IFC has focused on and GG+ technical grades. ensuring they have the knowledge, resources and networks needed to thrive. This includes designated WHERE WE WORK FY21 onboarding coordinators, technology support, online training modules, mentoring, and ongoing feedback. STAFF AT ALL GRADE LEVELS United States 1,846 43.1% Other Countries 2,437 56.9% Total 4,283 *Managers include Managers, Directors, Vice Presidents, and Managing Director IFC ANNUAL REPORT 2021 87 Compensation and Benefits competitiveness as determined by independent local market surveys. Given the World Bank Group’s Ensuring competitive compensation and benefits, status as a multilateral organization, staff salaries are IFC applies the World Bank Group’s compensation determined on a net-of-tax basis. framework. Competitive compensation is essential to attract and retain a highly qualified, diverse As of June 30, 2021, the salary structure (net of tax) staff. Salaries for staff recruited in Washington, and annual average net salaries/benefits for World D.C. are based on the U.S. market. Salaries for staff Bank Group staff were as follows: hired outside the United States are based on local Staff Salary Structure and Benefits for Washington, D.C. AVERAGE STAFF AT SALARY/ AVERAGE REPRESENTATIVE MINIMUM MIDPOINT MAXIMUM GRADE GRADE BENEFITSa GRADES JOB TITLES (US$) (US$) (US$) LEVEL (%) (US$) (US$) GA Office Assistant 29,300 41,800 54,300 0.01% 40,840 22,187 GB Team Assistant, Information Technician 35,100 50,200 65,300 0.09% 46,356 25,184 GC Program Assistant, Information Assistant 43,400 62,000 80,600 5.62% 63,679 34,595 GD Senior Program Assistant, Information Specialist, Budget Assistant 51,500 73,600 95,700 5.64% 77,912 42,328 GE Analyst 70,600 100,900 131,200 9.81% 91,345 49,626 GF Professional 93,400 133,400 173,400 22.87% 118,783 64,532 GG Senior Professional 120,800 172,600 224,400 37.64% 166,292 90,343 GH Manager, Lead Professional 165,300 236,100 306,900 15.51% 234,516 127,408 GI Director, Senior Advisor 254,000 317,500 381,000 2.37% 302,536 164,361 GJ Vice President 301,000 354,100 407,200 0.37% 363,738 197,611 GK Managing Director, Executive Vice President, Senior Vice President 334,600 393,600 452,600 0.08% 409,581 261,046 Note: Because WBG staff, other than U.S. citizens, usually are not required to pay income taxes on their WBG compensation, the salaries are set on a net-of-tax basis. These salaries are generally equivalent to the after-tax take-home pay of the employees of the comparator organizations and firms from which WBG salaries are derived. Only a relatively small minority of staff will reach the upper third of the salary range. a. Includes medical, life and disability insurance; accrued termination benefits; and other non-salary benefits. Excludes tax allowances. OUR OFFICES our power contracts, 20 percent of FY20’s electricity came from renewable energy. We work to optimize Minimizing IFC’s impact on the environment is a power usage in the facility. The original headquarters priority for us. That’s why we design and manage building received the 2020 Energy Star Award with a our buildings in a sustainable way. We work to score of 82. reduce energy demands on our facilities and offset 100 percent of emissions that cannot be eliminated. IFC is committed to sustainability throughout our global footprint of office facilities. In FY21, HQ added Using natural resources efficiently a rooftop garden. The yield of this garden will be donated to a local nonprofit organization. A biophilic IFC’s largest office, our headquarters in Washington, design space was added within one department to D.C., accounts for almost half of our global real estate promote wellness and productivity. footprint by square foot. Our headquarters expanded in FY20 with an adjacent building, adding 154,750 IFC’s latest construction in Dakar, Senegal had square feet — a 15 percent increase to the footprint. sustainability at the forefront with a building Both buildings that make up HQ are certified LEED strategy to: maximize natural daylight reducing Platinum — the highest level of energy efficiency for energy use from the grid; incorporate thermal mass Class A office buildings in Washington, D.C. and solar shading into the façade; generate energy from rooftop solar panels; collect rainwater through In FY19, 70 solar panels were installed on the rooftop a system to reduce burdens on local external water to provide renewable power. Additionally, through resources; and many other sustainable features. 88 IFC ANNUAL REPORT 2021 Maintaining climate neutrality FY20 CARBON EMISSIONS METRIC TONS OF INVENTORY FOR IFC’S GLOBAL CARBON DIOXIDE IFC continues to operate carbon-neutral for all OPERATIONS EQUIVALENT globally conducted business, including air travel. Business Travel (Scope 3) 34,692 In FY20, the latest year for which data is available, HQ Office Electricity (Scope 2) 4,490 carbon emissions from our global business operations Country Office Electricity (Scope 2) 4,093 totaled 47,023 metric tons of carbon dioxide Other equivalent — of which business travel accounted for (Scope 1, Scope 2 from Water 74 percent. Office electricity consumption accounted Chiller Electricity, Purchased for an additional 19 percent — just over half of which Steam and Scope 3 mobile was attributable to IFC headquarters. (as of 2013) and HQ Cool Food Pledge emissions (as of 2020)) 3,748 In FY19, IFC announced our first-ever global TOTAL EMISSIONS 47,023 corporate carbon emissions reduction target to Note: Emission factors are in accordance with the World Bank reduce facility-related emissions (Scope 1 and 2) Group’s Inventory Management Plan. The process of validating by 20 percent between 2016 and 2026, as part of a data from country offices extends beyond Q1 of each Fiscal Year. 28 percent reduction pledged by the entire World Therefore, prior fiscal year data are presented in this report. Bank Group over the same period. Percentage reductions year on year conclude that IFC is on track to meet the emissions reduction target. From FY16 to FY20, the emission reductions from Scope 1 and 2 are down 26 percent. However, this is in part due to the transition from offices to home-based work that occurred at the end of Q3 in FY20. The reduction rate is not representative of a full year of office electricity usage. IFC’s carbon emissions per full-time employee rate decreased every year from FY16 to FY19 but increased again in FY20. From FY19 to FY20, the rate went from 8.53 to 9.23. This is due to an increase in both emissions and FTEs during this period. Starting with FY20’s emissions reporting, the WBG is accounting for radiative forcing, the change in radiation received at the surface of the earth due to the emission of GHGs. By applying a multiplier of 1.9 to our Scope 3 air travel emissions, we can better account for those emissions’ impact on the planet. Additionally, we have added emissions from the Cool Food Pledge to our HQ Scope 3 emissions. These are HQ food purchasing-related emissions that are calculated by the World Resources Institute. The addition of these new metrics increased our overall Scope 3 emissions leading to the higher emissions by FTE rate in FY20. We purchase and retire carbon credits (CERs and/ or VERs) and renewable energy certificates (RECs) annually to fulfill our carbon-neutral commitment. CERs and VERs are chosen based on WBG guidelines to ensure high-quality projects that bring tangible development benefits to the communities in which they take place. IFC purchases RECs to neutralize the energy consumption of our HQ office. Twenty percent of our HQ electricity is supplied by renewable energy provided by IFC’s energy provider, which is enforced by DC law. Each year, IFC reports its greenhouse emissions annually in the United Nations Climate Neutral Now initiative. More details can be found at www.ifc.org/corporateresponsibility. IFC ANNUAL REPORT 2021 89 Global Partnerships With this mission in mind, IFC did a corporate Funding Needs Assessment, the results of which are now being integrated into IFC’s annual budgeting process to ensure a tight link between development Partnerships have always been integral partner funding and our country strategies. IFC’s to IFC’s mission. However, such new approach to fundraising and development partnerships entails concentrating resources to relationships have grown in importance ensure the collective focus is on working together over the past year as IFC worked to toward our 2030 commitments and addressing key development challenges. respond to the COVID-19 pandemic and realigned to meet the obligations set This approach allows us to be more strategic and coordinated in our engagement with IFC’s partners. forth in the $5.5 billion capital increase It helps us present a holistic view of IFC’s activities that shareholders endorsed in 2018 and across various themes and regions to align our became effective in 2020. activities with the strategic priorities of our partners, and aids our efforts to strengthen collaboration with our colleagues at the World Bank. Currently, IFC maintains donor relationships and engagements with more than 30 government We are also working on increasing efficiencies in development agencies, with several foundations and the areas of trust funds, particularly in preparing corporations, and with multilateral organizations. proposals for partners and allocating funds. The support IFC receives from these development partners provides essential funding for Upstream, Ultimately, IFC is better positioned than ever to advisory services, and blended finance as well as create markets, incubate new ideas, and allow underpinning the critical role the private sector proven solutions to be scaled up. As our strategy plays in economic development. Taken together, depends more on working Upstream to create this constellation of services comprises the heart markets and to mobilize private sector investment of IFC’s 3.0 strategy. and then focuses more on deploying catalytic capital to address climate change through blended finance, IFC’s reliance and integration with our partners can only deepen. Improving global healthcare The Global Health Platform is a $4 billion Making life better for financing initiative to increase the access of forcibly displaced persons developing countries to critical healthcare supplies required to fight the pandemic, The Prospects Partnership initiative brings including masks, ventilators, test kits, and together IFC, the Government of the vaccines. It includes a $25 million advisory Netherlands, the International Labour component that is intended to create Organization (ILO), the United Nations Refugee projects and open markets for increased Agency (UNHCR), UNICEF, and the World local manufacturing of healthcare products Bank to improve the quality of life for forcibly and service capacities and improve resource displaced persons. A new $17.5 million blended efficiency in the pharmaceutical sector while finance facility is working to de-risk and increasing access to safe and quality healthcare increase the financial viability of high impact services. It will help improve the resilience projects benefitting refugees. The Prospects of medical facilities and other actors in the Partnership is doing this by unlocking private healthcare supply chain; address the gender sector financing for innovative and scalable gap in healthcare employment and leadership; investments that address economic and social and support other efforts along the healthcare challenges, enabling new and emerging private product and service value chain. The advisory sector approaches and solutions for refugees, component is supported by the Governments and demonstrating the commercial viability of of Japan, Norway, and the United Kingdom. refugee-focused investments for the private sector. 90 IFC ANNUAL REPORT 2021 Supporting the food Distributed renewable production value chain in energy solutions Africa A partnership with the Rockefeller Foundation aims to deploy $150 million of the Rockefeller IFC and BMZ, the German Federal Ministry Foundation’s catalytic capital in blended for Economic Cooperation and Development, finance to mobilize up to $2 billion of private launched a new program that will leverage sector investment in distributed renewable greater private sector investments to energy solutions. The partnership will prioritize support the food production value chain countries in Sub-Saharan Africa and other across Africa and increase access to finance regions in which we have identified immediate for rural farmers and businesses. The Euro opportunities. Ultimately, the list of countries 21 million Food Systems Development Program where this partnership will deploy will be focuses on giving food producers, ranging broadened during implementation. By blending from smallholder farmers to small- and philanthropic and private investment funding, medium-sized agribusinesses in Africa, greater the Rockefeller Foundation and IFC will de-risk opportunities to improve their incomes. IFC’s capital investment in distributed renewable technical assistance will strengthen agricultural projects in emerging markets and help to value chains from farm to market. Supply chain address global energy access needs. disruptions caused by the COVID-19 crisis have highlighted weaknesses in the food supply system and created an opportunity to explore technology-based solutions that will make the sector more efficient, adaptive, and resilient. IFC ANNUAL REPORT 2021 91 Financial Commitments to IFC Advisory Trust Funds (US$ million equivalent) Summary FY21 FY20 Governments 179.42 267.79 Institutional/Multilateral Partners 31.15 14.14 Corporations, Foundations, and NGOs 0.00 6.02 Total 210.57 287.95 Governments FY21 FY20 Australia 3.11 7.19 Austria 1.32 7.19 Canada 3.98 0.00 Denmark 3.28 0.89 Finland 0.00 0.00 France 2.42 0.00 Germany 63.64 25.17 Hungary 10.00 0.00 Ireland 0.71 0.66 Japan 37.14 9.37 Korea, Republic of 9.00 0.00 Luxembourg 0.00 1.16 The Netherlands 21.09 52.25 New Zealand 0.00 2.50 Norway 8.63 19.37 Spain 0.00 3.39 Sweden 1.19 23.44 Switzerland 3.80 21.99 United Kingdom 10.11 90.15 United States 0.00 3.05 Total 179.42 267.79 Institutional/Multilateral Partners FY21 FY20 Climate Investment Funds (CIF) 0.00 0.65 European Commission (EC) 28.07 6.85 Global Environment Facility (GEF) 0.00 0.85 Global Infrastructure Facility (GIF) 3.08 5.79 Total 31.15 14.14 Corporations, Foundations, and NGOs FY21 FY20 BHP Foundation 0.00 5.02 Wells Fargo Foundation 0.00 1.00 Total 0.00 6.02 Financial Commitments to IFC Blended Finance Trust Funds (US$ million equivalent) Development Partner FY21 FY20 The Netherlands 17.50 21.70 United Kingdom 53.68 0.00 Total 71.18 21.70 92 IFC ANNUAL REPORT 2021 Portfolio Management Following the financial crisis that took hold in 2008, IFC scaled up our equity commitments. Since 2016, we have modified our approach to equity investments with the goal of improving development Building and proactively managing a results and overall performance. This has translated portfolio that produces strong financial into more moderate growth and greater selectivity. In the last few years, we successfully exited from a results and development impact is at series of mature assets in which IFC no longer had the core of IFC’s approach to portfolio a development role. This rebalancing of our equity portfolio was the result of our regular strategic asset management. We achieve this by allocation and portfolio construction exercises, which pairing a strong presence on the are periodically adjusted as needed. ground with deep sector expertise. This IFC’s Global Equity Heads, which improved our enables us to stay close to our clients governance structure, are critical to strategic and markets, monitor trends, and business development, central oversight, and managing IFC’s larger and more complex equity anticipate impacts of external factors. positions throughout the investment lifecycle. Under the leadership of the Global Equity Heads, Active portfolio management depends on timely and we had seen steady improvements in our portfolio accurate information to drive business decisions. performance in the last few years and despite the An IFC management committee — the Operations unprecedented COVID-19 crisis, our equity portfolio Committee — regularly reviews IFC’s portfolio has bounced back considerably, closing FY21 with a exposure of $64.1 billion for IFC’s own account, positive net impact of $3.2 billion on IFC’s FY21 profit assessing broad trends as well as the performance and loss statement attributed to IFC’s equity book. of select projects. This review is complemented IFC’s services are needed more than ever and we by monthly in-depth discussions about IFC’s key remain focused on actively sourcing and executing sector and country exposures, along with those equity and mezzanine transactions supporting of strategic importance to the Corporation. companies to weather global and local macro and Additionally, quarterly reviews of IFC’s portfolio sector challenges, promoting higher ESG standards, results are presented to the Board, along with an and mobilizing other equity providers for our in-depth analysis at the end of each fiscal year. Our investee companies. investment and portfolio teams, largely based in field offices, complement global reviews with asset- As the world is beginning to recover from the by-asset quarterly assessments, for both debt and pandemic, our equity pipeline is growing with equity investments. strategic and thoughtful investment proposals in critical sectors — from insurance and fintech At the corporate level, IFC combines portfolio companies in the financial inclusion space to digital analysis with sector and local expertise, along infrastructure platforms and logistics clients in the with project knowledge and projections of infrastructure sector as well as new healthcare global macroeconomic and market trends to and agribusiness opportunities. Our disruptive inform decisions about future investments. We technologies and funds team is developing a strong also regularly conduct stress tests to assess the pipeline of co-investment opportunities alongside performance of the portfolio against possible top-tier fund managers in addition to making macroeconomic developments, and to identify and selective, direct investments. address risks. This has been especially important recently, given the impact of COVID-19 on IFC’s Mobilizing capital is imperative to IFC’s success in clients, and the macroeconomic and political responding to the COVID-19 pandemic. We are also dislocations seen in select countries. facilitating the reconstruction of markets in the aftermath of the crisis and supporting the renewal At the project level, our multidisciplinary teams — of private equity flows to emerging markets, to including investment and sector specialists — closely fulfill our goal of having impact at scale. In the near monitor investment performance and compliance term, IFC, through AMC, is pursuing co-investment with investment agreements. We do this through vehicles. These vehicles are likely to use a simple site visits to evaluate project implementation, mobilization structure whereby investors and through active engagement with sponsors automatically co-invest alongside IFC. and government officials, where relevant, to identify potential problems early on and formulate Our Special Operations Department is responsible appropriate solutions. We also monitor our clients’ for determining the appropriate remedial actions environmental and social performance in a risk- for projects in financial distress. It seeks to keep based manner and measure financial performance the project operational to achieve the intended and development results. In recent times, we have development impact and negotiates agreements developed a set of guidelines to facilitate our ongoing with creditors and shareholders to share the burden engagement with clients and other stakeholders of restructuring. Investors and other partners through virtual interactions, while maintaining face- participating in IFC’s operations are kept informed, to-face engagements when the situation allows. and IFC consults with or seeks their consent as appropriate. IFC ANNUAL REPORT 2021 93 IFC continues to invest in information technology governance factors in investment decisions and systems to better support the management of our increasing knowledge of the sustainability issues portfolio. We have also strengthened our portfolio being addressed with capital raised from sustainable support structure and continuously enhance our bond products. governance, through the creation of the corporate Operations Support Unit, which works closely IFC has achieved an expansion of its investor base together with stakeholders both in the global through its activity in sustainable bonds. industry and regional departments. In FY21, new medium- and long-term borrowings totaled $12.7 billion. Treasury Management Liquidity management Funding Liquid assets on IFC’s balance sheet totaled $41.7 billion as of June 30, 2021, compared to IFC raises funds in the international capital markets $40.8 billion a year earlier. Most liquid assets are for private sector lending and to safeguard IFC’s held in U.S. dollars. The exposure arising from assets triple-A credit ratings by ensuring adequate liquidity. denominated in currencies other than U.S. dollars is hedged into U.S. dollars or matched by liabilities Issuances include benchmark bonds in core in the same currency to eliminate overall currency currencies such as U.S. dollars, thematic issuances risk. The level of these assets is determined with to promote strategic priorities such as addressing a view to ensuring sufficient resources to meet climate change, and issuances in emerging-market commitments even during times of market stress. currencies to support the development of capital IFC maintains liquid assets in interest-bearing markets. Most of IFC’s lending is denominated in instruments managed actively against benchmarks U.S. dollars, but we borrow in many currencies to based on the source of funds. Funded liquidity has diversify access to funding, reduce borrowing costs, money-market benchmarks, and net-worth funded and encourage the growth of local capital markets. liquidity is benchmarked to the Bloomberg-Barclays 1- to 3-year U.S. Treasury Index. IFC has played a pioneering role in the area of sustainable bonds. We were one of the earliest IFC holds sufficient liquid assets to meet its existing issuers of green bonds. Since we began our program commitments and fund new commitments for at in 2010, we helped catalyze the market and unlock least one year, including the ability to sustain a capital from the private sector to fund climate-smart period of market stress. The adequacy of liquidity projects. In 2013, we helped turn niche green bonds is assessed using liquidity coverage ratios founded to an established public market, with two landmark in the same principles used to determine our $1 billion benchmark issuances. This past year, IFC credit ratings. passed the $10 billion mark of cumulative green bond issuances after a historic trade with Japan’s Government Pension Investment Fund, GPIF. FY21 TOTAL BORROWING AMOUNT (US$ Investing for sustainable development is now CURRENCY EQUIVALENT) % becoming mainstream, but there remains a huge U.S. dollar USD 6,061,290,000 47.8% funding gap to bridge for the world to meet its British pound GBP 1,509,052,500 11.9% ambitious 2030 development goals. With much of the global economy severely impacted by COVID-19, Australian dollar AUD 1,241,373,000 9.8% our mission is more urgent than ever. Social bonds Japanese yen JPY 605,990,059 4.8% are an avenue for investors to generate returns New Zealand while supporting the alleviation of social issues that dollar NZD 552,762,500 4.4% threaten society or improving access to essential Canadian dollar CAD 383,435,583 3.0% services for those underserved. Chinese yuan In light of COVID-19 and the social challenges borne (Renminbi) CNY 357,989,093 2.8% from coronavirus, social bonds are now front and Brazilian real BRL 268,610,651 2.1% center of the thematic bond market, and demand Russian ruble RUB 255,894,303 2.0% is higher than ever. A majority of the social bonds Euro EUR 229,112,000 1.8% issued this year have been related to funding for issues related to the COVID-19 crisis. Issuances of Mexican peso MXN 210,950,391 1.7% social bonds equaled $165 billion in 2020. Norwegian krone NOK 161,987,041 1.3% Our goal is to continually provide much-needed Other 848,236,628 6.7% liquidity to the growing sustainable bond market Total 12,686,683,749 100% through our continued issuance. In tandem, our investor relations efforts focus on promoting the integration of environmental, social, and 94 IFC ANNUAL REPORT 2021 Managing Risks Consistent with industry and regulatory practice, IFC calculates economic capital for the following risk types: ENTERPRISE RISK MANAGEMENT • Credit risk: the potential loss due to a client’s default or downgrade IFC provides long-term investments to the private • Market risk: the potential loss due to changes in sector in emerging markets, and this work includes market variables (such as interest rates, currency, expanding the investment frontier into the most equity, or commodity prices) challenging markets. IFC also manages the liquidity • Operational risk: the potential loss resulting from of the Corporation, funds itself in the capital inadequate or failed internal processes, people, markets, and executes derivatives transactions. and systems, or from external events In these investment and financial activities, IFC is exposed to a variety of financial and nonfinancial IFC’s Capital Available consists of paid-in capital, risks. Active monitoring and sound management of retained earnings net of designations and certain evolving risks are critical to fulfilling our mission. unrealized gains, and total loan-loss reserves. Excess available capital, beyond that required to support IFC’s framework for enterprise risk management existing business, allows for future growth of our is designed to enable the prudent management of portfolio while also providing a buffer against financial and reputational impacts that originate unexpected external shocks. As of June 30, 2021, total from our business activities. In this context, Capital Available stood at $30.7 billion, while Capital IFC’s risk-management efforts are designed Required totaled $20.5 billion. specifically to help align our performance with our strategic direction. TREASURY RISK MANAGEMENT IFC has developed risk-appetite statements that Treasury risks are managed through a two-tier risk set the direction for our willingness to take on framework: (1) a comprehensive policy framework risks in fulfillment of our development goals. These and (2) a hard economic capital limit for treasury statements reflect our core values of maximizing activities. The policy framework is based on four development impact, preserving our financial principles: sustainability, and safeguarding our brand. Investment in high-quality, liquid assets (1)  CAPITAL ADEQUACY AND through high-quality counterparts FINANCIAL CAPACITY Diversification via position size/ (2)  concentration limits Sound risk management plays a crucial role in Limits on market risks (credit spread, (3)  ensuring IFC’s ability to fulfill our development interest rate, and foreign-exchange risk) mandate. The very nature of IFC’s business, as (4) Proactive portfolio surveillance a long-term investor in dynamic yet volatile emerging markets, exposes us to financial and operational risks. Prudent risk management and a solid capital position enable us to preserve our financial strength and maintain investment activities during times of economic and financial turmoil. The soundness and quality of IFC’s risk management and financial position are demonstrated by our triple-A credit rating, which has been maintained since coverage began in 1989. We assess IFC’s minimum capital requirement in accordance with our economic capital framework, which is aligned with the Basel framework and leading industry practice. Economic capital acts as a common currency of risk, allowing us to model and aggregate the risk of losses from a range of different investment products as well as other risks. IFC ANNUAL REPORT 2021 95 LIBOR Transition IFC has since completed a number of major transition milestones: In 2014, global regulators highlighted financial completed an assessment of the impact of (i)  stability and integrity risks associated with the LIBOR transition on IFC; overreliance on the London Interbank Offered Rate (LIBOR). National working groups worldwide built a program governance model with (ii)  were convened to support a transition away from defined roles and responsibilities; IBORs by identifying robust alternative interest rate benchmarks. The Alternative Reference Rates developed a transition roadmap and robust (iii)  Committee (ARRC) recommended the Secured project management plan; Overnight Financing Rate (SOFR)* to replace US$ LIBOR. formally signed up to the International Swaps (iv)  and Derivatives Association protocol on After several years of preparation for LIBOR’s January 22, 2021. The protocol sets common demise, on March 5, 2021 the Financial Conduct contractual language for legacy LIBOR Authority (FCA), the regulator of LIBOR, confirmed derivatives and includes robust fallbacks to the following timeline for all LIBOR settings to risk-free rates; either cease to be provided by any administrator or to no longer be representative: approved general principles introducing (v)  a disciplined Funds Transfer Pricing • December 31, 2021: Most non-US$ denominated (FTP) framework; settings, as 1-week and 2-month US$ settings; • June 30, 2023: Remaining US$ settings started hedging its borrowings to SOFR; and (vi)  (overnight, 1-, 3-, 6-, and 12-month) Although publication of most US$ LIBOR settings (vii)  issued its first SOFR floating-rate note. will continue for use in existing contracts until mid-2023, regulators have called for no new LIBOR IFC is working with third-party technology contracts to be written after December 31, 2021. vendors to complete all necessary systems’ enhancements to support the SOFR rate. IFC’s IFC’s balance sheet is entirely referenced to LIBOR. New Loan Products Design working group is The move to SOFR is a monumental undertaking developing SOFR loans that IFC plans to start impacting contracts, models, systems, reporting, offering to its clients in the near future. In addition, etc., requiring the concerted work of nearly every IFC participates in Alternative Reference Rates department of IFC. Committees and a variety of other industry working groups, leads a regular MDB/DFI Forum IFC launched its LIBOR Transition program in bringing together 19 institutions to jointly discuss 2019 by establishing an internal LIBOR Transition LIBOR transition-related issues — from new Group (LTG) with representatives from various product developments to systems and legal stakeholder units. documentation. Unlike LIBOR, SOFR is a secured overnight risk-free rate calculated based on the overnight US Treasury repo market. The current * SOFR structures recommend by regulators result in interest rate setting at the end of an interest period, unlike LIBOR which is known in advance. This presents a series of significant challenges, particularly in developing markets. The good news is that the US$ LIBOR transition process (including market developments and regulatory guidance) is quickly evolving, with the prospect of a forward-looking Term SOFR coming into closer view. 96 IFC ANNUAL REPORT 2021 ESG Survey The ESG survey assesses each dealer’s level of ambition and commitment to ESG across Over the last eight years, IFC Treasury has enterprise-level strategy, business and investment operated an Annual Dealer Scorecard through activities, human resources policies, product which it ranks its dealer counterparts on various offerings, and reporting practices. It contains aspects of business, including arbitrage funding questions ranging from their ESG exposure and provided, quality of coverage and investor relations policies, thematic investing, and carbon footprint efforts, ESG standing, and ancillary services. In to ESG reporting practices, and evaluates their recent years there has been an increasing focus on commitment to achieving the goals of the Paris integrating ESG aspects into traditional Treasury Agreement. The data collated is used to engage functions, for example, through thematic bond with and provide feedback to the dealers. Results issuances and considering ESG in investment from the ESG survey also form 10 percent of decisions. To this end, IFC’s Funding and Investor the overall Annual Dealer Scorecard ranking, a Relations team developed an annual survey to basis by which IFC selects banks for its funding assess the ESG facets of the approximately 40 transactions. ESG factors are thus considered banks that provide underwriting and dealing when mandating banks for future bond issuances services for IFC’s $14 billion annual funding and investor activities. program. It is a first-of-its-kind initiative. IFC ANNUAL REPORT 2021 97 Reporting Under GOVERNANCE the Task Force on What’s New? Climate-related • Climate Business Department joined the Financial Disclosures investment Vice Presidency Unit, further mainstreaming climate into investments and reporting to Senior Vice President of Operations ­ LIMATE-­RELATED FINANCIAL C • Broadened the network of Climate Anchors to include senior staff from risk, treasury, strategy, DISCLOSURE and upstream departments This report is IFC’s fourth consecutive disclosure under the guidelines recommended by the Task Force on Climate-related Financial Disclosures (TCFD). IFC’s climate business and risk are overseen by The report reflects IFC’s continued commitment IFC’s Managing Director and Executive Vice to maintain and strengthen our climate-related President, who reports to the President of the financial risk assessment, management, and World Bank Group on climate business performance reporting practices. All four reports can be found and climate risk evaluation. The World Bank Group online with links to relevant references. President reports to the World Bank Group (IBRD, IDA, IFC, MIGA) Board of Directors. The Board has IFC has its TCFD reporting audited by EY, a mandated as part of the recent capital increase recognized third party, as part of the annual review that IFC meet several climate-related requirements, of IFC’s non-financial reporting. This review of our including screening all investments for climate risk, qualitative and quantitative disclosures helps us aligning new investments with the Paris Agreement improve our TCFD reporting every year and ensures by end of FY25, and scaling climate-related that the information provided is material to investors commitments by 2030. and in-line with global best practices. The President of the World Bank Group sets the Group’s public climate targets. Progress on targets GOVERNANCE is reported to the IFC Management Team and the Board as part of the Corporation’s Quarterly Board • Describe how Board considers climate- Reports. Separately, the Bank Group also reports related issues when reviewing and guiding annually to the Board of Directors specifically strategy, policies & objectives; and monitoring on climate including progress toward all climate implementation and performance. commitments (see Metrics & Targets section below • Describe how management monitors climate- for further details). related issues. IFC has a dedicated Climate Business Department STRATEGY that provides deep in-house expertise on climate. The Climate Business Department helps set • Describe the resilience of IFC’s strategies to corporate climate strategy and supports investment climate-related risks and opportunities. teams to identify climate investment opportunities and mitigate climate risk. This year the Climate • Consider a transition to a lower-carbon Business Department has been further integrated economy consistent with a 2˚C or lower with IFC’s operations. Previously included within scenario. the purview of the Economics and Private Sector Development Vice President, climate is now housed RISK MANAGEMENT under a new Cross-Cutting Solutions Vice Presidency under the Senior Vice President (SVP) of Operations. • Describe the risk management process for The reorganization will strengthen operational identifying and assessing climate-related risks. oversight of climate change as a key implementation priority. The SVP will continue to report on IFC’s • Describe how the processes for identifying, climate business and risk to our MD and Executive VP. assessing and managing climate-related risks are integrated into overall risk management. The Climate Business Department supports the • Provide internal carbon prices where applicable. analysis of climate risk through tools such as carbon pricing and assessment of transition and METRICS AND TARGETS physical climate risk in investment projects. It also works with mainstream investment and business • Describe the methodologies used to estimate development teams to identify low-carbon climate-related metrics. investment opportunities through its industry sector experts, metrics specialists, finance professionals, and strategists. The Department provided a 98 IFC ANNUAL REPORT 2021 technical briefing on climate finance to the Board on STRATEGY May 25, 2021, and will be reporting individual climate finance numbers to the Board going forward. What’s New? IFC’s Climate Anchors Network continues to integrate climate business throughout the • The World Bank Group’s new Climate Change Corporation. The Climate Anchors Network Action Plan FY21–25 was endorsed by the Board comprises senior staff in each industry and regional department as well as key operational departments • IFC committed to aligning 85 percent of Board- including Legal and Compliance Risk, Corporate Risk approved real sector operations with the goals Management, and Environmental and Social teams. of the Paris Agreement starting in July 2023 and Regional and departmental Climate Anchors jointly 100 percent starting in July 2025 report to their department Director and to the • New Upstream business development unit: Climate Business Director. This year, a credit officer, Climate percentage of business development a specialist from IFC’s Upstream department (IFC’s actively tracked under Upstream activities new market development unit), a senior syndications officer from the Treasury department, and a principal • FY21 own-account investment in climate: strategy officer on IFC’s global sustainability strategy $4 billion joined the Climate Anchors Network. • FY21 mobilization of external private capital: $3.7 billion IFC regularly consults with peers to further common understanding of good practices. The TCFD informal working group of multilateral development banks (MDBs) convened by IFC in the last fiscal year continues to gain momentum, encouraging the Increasing IFC’s investment in climate business. sharing of new approaches to help each organization In FY21, IFC’s total climate-related commitments integrate TCFD more comprehensively into their were over $4 billion, or 32 percent of our new operations. In its capacity as Chair of the MDB investments (see Table 1). Despite the economic Climate Group in the first half of FY21, IFC launched a ramifications of the ongoing COVID-19 pandemic, technical webinar series for MDBs on topics such as IFC’s climate commitments — both own account and evolving standards (e.g., EU taxonomy), adaptation mobilization — saw a year-on-year increase. benefit mechanisms, and climate markets (Article 6 of the Paris Agreement.) Climate Change Action Plan. In June 2021, the World Bank Group Board endorsed its new Climate IFC has also engaged with 2⁰ Investing Initiative, Citi, Change Action Plan (CCAP) for FY21–25, which Oliver Wyman, PCAF-Navigant, Potsdam Institute, will support countries and private sector clients Standard Bank, Science-Based Targets Initiative, to maximize the impact of climate finance, aiming S&P Global Trucost, UNEP-FI, and WSP, among for measurable improvements in adaptation and others. More broadly, IFC retains membership resilience and measurable reductions in emissions. in several climate-related corporate leadership initiatives, such as the Principles for Responsible As part of the new commitments, IFC will increase Investment, the TCFD (where IFC is a supporting its direct climate financing to 35 percent of total institution), One Planet Summit, the One Planet commitments on average over the five-year period, Lab, the Global Green Bond Partnership, the Green significantly higher than the 26 percent average Bond Principles (of which IFC was elected Chair) the achieved between FY16–20. IFC is also committed Carbon Pricing Leadership Coalition, and the Fashion to aligning our financial flows with the objectives of Industry Charter for Climate Change (where IFC is a the Paris Agreement. Starting July 1, 2023, 85 percent supporting institution.) of Board-approved real sector operations will be aligned with the Paris Agreement’s goals, and 100 percent of these will be aligned starting July 1, 2025. A similar approach will be taken for financial institutions and funds once a methodology has been finalized amongst MDBs. As part of the CCAP, IFC will focus on five transformative key systems that generate over 90 percent of global GHG emissions — energy; agriculture, food, water, and land; cities; transport; and manufacturing. Each is underpinned by our investments and products through local financial institutions. We recognize that many carbon- intensive industries such as cement, chemicals, steel, and heavy transport are essential to economic development and are currently without low-carbon alternatives. IFC is helping carbon-intensive client IFC ANNUAL REPORT 2021 99 Table 1: Climate Change Commitments: Five-Year Trend TOTAL CLIMATE FINANCE COMMITMENTS (US$ MILLIONS) FY21 FY20 FY19 FY18 FY17 FY16 Own account long-term finance (LTF) $4,021 $3,324 $2,603 $3,910 $2,996 $1,986 Core mobilization $3,610 $3,500 $3,172 $4,542 $1,775 $1,285 Total $7,631 $6,824 $5,775 $8,452 $4,771 $3,271 Figure 1: IFC Climate Business as a Percentage of Total Own Account Commitments: Ten-Year Trend 40% IFC Climate Business % of own account only 35% 34 32 29 30 30% 25 25% 22 20% 18 19 18 15% 13 10% 5% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 companies to decarbonize their business and FY21, IFC retained strong climate business (our improve financial sustainability, ultimately reducing own account investment as well as mobilization) the carbon risk of IFC’s portfolio. through FIs ($3.4 billion), and in resource efficiency ($1.6 billion), renewable energy ($1.4 billion), Integrating low-carbon and resiliency across green buildings ($611 million), and climate-smart sectors. IFC continues to diversify our climate agribusiness and forestry ($341 million). business, identifying new areas of growth. In Table 2: Three-Year Average Climate Investment in Key Sectors Total (Own Account + Mobilization) (US$ millions) Technology & Innovation Other Energy Urban & Transport Agribusiness & Forestry Industrial & Commercial Resource Efficiency Green Buildings Financial Institutions Renewable Energy FY 13-15 FY 16-18 FY 19-21 0 500 1000 1500 2000 2500 3000 100 IFC ANNUAL REPORT 2021 Targeting new areas of growth: In addition group on the Taskforce for Nature-related Financial to growing IFC’s existing climate business, IFC Disclosure (TNFD), building upon its experience with continues to target new areas of growth. the TCFD. IFC is beginning to develop sector-wide approaches to integrate biodiversity considerations • Buildings: In FY21, we expanded our EDGE green at the earliest stages of landscape planning, buildings team with two new hires, reflecting particularly in agriculture and infrastructure. IFC will our belief that this sector presents a significant develop new approaches and business models to opportunity for climate-smart investment. IFC’s support biodiversity finance and explore catalyzing EDGE certification now includes EDGE, EDGE private financing in its client markets. Advanced, and a zero-carbon certification. In the • Agriculture: IFC continues to transition its climate- last year, IFC has expanded its green buildings smart agribusiness by focusing investments in three offer to warehouses and banks. Drawing from our strategic areas: (i) helping improve productivity experience with EDGE, we have also developed and while reducing input use and GHG emissions per are piloting the Building Resilience Index, a new tool ton of output, especially through precision farming to help building developers assess and report to and regenerative or conservation agriculture; (ii) banks and insurers location-specific climate change making livestock production more sustainable while related risks and risk mitigation measures that increasing productivity; and (iii) reducing post- address these risks. harvest losses in supply chains globally (e.g. through • Transport: IFC supports the WBG approach to improved logistics and distribution, appropriate low-carbon resilient transport including integrated packaging solutions, modern storage facilities, and transport systems (including public transit), digital cold chains). technologies, commercial transport (including • Sustainable Finance: IFC is expanding its shipping), and increasing the share of electric sustainable finance products beyond green loans vehicles in the global fleet — particularly as the and green bonds to offer blue bonds and blue loans, global power sector decarbonizes. A near-term IFC sustainability-linked finance, and climate transition focus area is electric buses for public transit in cities, products. IFC has developed a working framework which will combine some of these approaches, for the sustainability-linked and transition financial leverage IFC’s Upstream programs to develop a features in FY21. pipeline of new investments and enhance IFC’s experience in the sector. Investing in the Green Rebuild. Given global • Manufacturing: IFC finds that the largest market challenges resulting from the COVID-19 mitigation potential in manufacturing globally lies in pandemic, IFC is providing immediate liquidity to energy-intensive and material conversion industries. clients and planning for investments that help rebuild IFC will transition its investments across heavy hard-hit economies. IFC is identifying where new manufacturing industries by applying three key liquidity support to companies in emerging markets principles. First, IFC will not support new coal-fired can be connected to lower-carbon pathways and power projects or wet process plants in cement. a more resilient rebuild. IFC published its Ctrl- Second, IFC will differentiate the sustainability Alt-Delete: A Green Reboot paper in FY21, which and climate “bar” for investments based on the identified potential investment opportunities of over development stage of client countries and will $10 trillion in emerging markets in driving a greener promote progressive transitional sustainability economic recovery from COVID-19 and catalyzing improvements. Third, IFC will assess each project’s a just climate transition. The Climate Business sustainability and climate-related drivers, such as Department works with the industry teams to define energy source and alternatives, materials used and our own approach to a green economic recovery and alternatives, products produced and alternatives, identify potential investments in emerging markets and process technology, striving for best-in-class for the same. production processes. • Cities: In FY21, we launched the new Advance Building a pipeline of low-carbon and resilient Practices for Environmental Excellence in Cities projects. As part of IFC 3.0, we are increasing (APEX) initiative to help build markets and also our capacity to create new markets for climate identify low-carbon and resilient investment solutions. IFC has created Upstream units embedded opportunities in cities. across industries and regions to build opportunities • Energy: In addition to continuing investments in for investments in three to five years. Upstream traditional renewable energy, IFC is building its activities consist of pre-investment work such investment potential in new technologies such as technical assistance, capacity building, and as offshore wind, hydrogen, and battery storage. support to private clients and governments Offshore wind projects have mostly been in including on regulatory frameworks and reform, industrialized countries, however, as the technology often in collaboration with the World Bank and costs are declining, IFC is working with the WB and the Multilateral Investment Guarantee Agency. MIGA to create an investment pipeline in emerging Upstream activities prioritize climate-related economies. Green Hydrogen investments are on a business development to help prepare markets for a longer-time horizon, however, IFC is building internal low-carbon future — IFC actively tracks and updates capacity and tracking market players. its management team on the climate percentage of • Nature-based Solutions: As noted in the our upstream pipeline, allowing the management Climate Change Action Plan, IFC is also examining team a line of sight on our green business and investment opportunities in biodiversity and nature- portfolio in coming years. based solutions (NBS). IFC is part of the working IFC ANNUAL REPORT 2021 101 In addition, we are working with clients and other are acceptable given climate and development financial institutions in emerging markets to improve realities. IFC’s NDC alignment methodology will their climate risk management capacity and their continuously evolve as we monitor how countries’ TCFD reporting, which will help IFC have better NDCs are updated and as our business moves toward insight into our investees’ climate risk exposure. alignment with the Paris Agreement. Internal incentives. This year, IFC initiated the first-ever Climate Cup, co-sponsored by the Climate Business Department and the Disruptive SECTOR SPOTLIGHT: Technologies and Funds Department, to select IFC’s most innovative climate project. The virtual An Opportunity to competition kicked off with a “Sweet Sixteen” roster of IFC’s climate projects dating back to 2005 and Green Cities was won by Belgrade Waste-to-Energy (WtE), the first privately financed large-scale WtE project in the As cities grapple with meeting the needs of their Balkan region and among the largest Public-Private growing populations and tackling challenges Partnership transactions in Serbia. such as housing, air pollution, congestion, and energy access, there is a strong need and To further create fluency in low-carbon markets an opportunity to ensure a green approach among investment staff, the Climate Business to urbanization. IFC estimates that there is a Department held trainings across regional and $29.4 trillion climate investment opportunity operational teams to familiarize staff with key in emerging market cities around the world, in market and policy trends, business opportunities, key sectors such as renewable energy, public and available tools and resources on climate transport, waste, electric vehicles, water, and business. Some topics covered included evolving green buildings. markets for green bonds, sustainability-linked and transition finance. The department will continue to Between FY18 and FY20, IFC invested over expand trainings across regions and tools. $400 million in the urban and transport sector. We have been working on the development of Resilience of strategy. In FY21, IFC road-tested new global products and initiatives to grow our leading market approaches to scenario analysis cities’ business in a climate-smart manner. The and found them to be unsuitable for evaluating the goal is to prioritize climate-smart investments resilience and risk of IFC’s portfolio, which mainly that help cities leverage strapped public comprises unlisted, private clients in emerging funding by bringing in significant private sector markets. IFC is now exploring the development of investment to generate jobs while addressing a bespoke methodology. other vital issues like greenhouse gas reduction and resource shortages. To this end, in FY21, While we navigate this top-down approach IFC launched the APEX (Advance Practices for to climate scenario analysis, IFC has begun to Environmental Excellence in Cities) Program, a implement several interim bottom-up measures new initiative to green cities. to ensure the resilience of our investments. IFC has been conducting deep dives to embed The APEX Program will support cities to climate into country investment strategies and accelerate the implementation of policy actions sectoral strategies for high-emitting sectors like and investments that significantly contribute chemicals and power. IFC, along with the World to transitioning to low-carbon and resource- Bank and MIGA, is creating joint Country Climate efficient growth pathways. & Development Reports (CCDRs) that identify the potential, biggest climate opportunities in each The Program will combine both product country. These reports will be overseen by IFC Vice development and technical assistance to Presidents and chaired by IFC Regional Directors help cities identify low carbon investments and led by the country offices. The report writing and track their impact, thereby developing a exercise will further build internal climate capacity in pipeline for climate financing. It will launch a country offices and integrate climate opportunities digital tool for diagnostic purposes and create and risks into the core strategic decisions. a scalable approach for developing Climate Action Plans. Lessons from pilot cities will be In addition, IFC is developing a systematic integrated into the APEX approach to replicate methodology to evaluate the alignment of our across emerging market cities. investments in hard-to-abate sectors with countries’ NDCs on a project-by-project referral APEX will be key to achieving a post- basis. This is particularly essential for investments COVID-19 green recovery by identifying in key transition sectors such as gas-fired power investment opportunities and accelerating in the least developed countries. We are using this the implementation of strategies to establish analysis to understand where such investments green cities in emerging markets. 102 IFC ANNUAL REPORT 2021 Transition risk.² IFC uses carbon pricing to address RISK MANAGEMENT transition risk and avoid stranded assets. Since May 2018, a carbon price is included in the economic What’s New? analysis of project finance and corporate loans with defined use of proceeds in the cement, chemicals, and thermal power generation sectors, where • Portfolio assessment of IFC’s exposure to estimated annual project emissions are over 25,000 physical climate risk by sector and country tons of carbon dioxide equivalent. IFC includes the impact of the carbon price on the project’s • Inclusion of carbon pricing assessment in board economic performance in Board papers. The price papers of all real sector projects with annual levels will continue to be consistent with the High- emissions over 25,000 tCO2 e and known use of Level Commission on Carbon Prices and with the proceeds World Bank. IFC follows the WBG practice of not investing in greenfield coal power generation. In 2019, IFC In FY21, IFC continued to expand our existing extended this practice to upstream oil and gas climate risk management of both physical and investments. In the last ten years, IFC has had no transition risk. IFC continues to integrate climate new investments in coal mining or coal power in its risk, credit, and investment operations via the generation projects. interdepartmental working group on climate risk that was formed in FY20. Over the last year, the As part of our efforts to address climate risks and working group convened to integrate climate risk minimize indirect exposure to coal-related projects, into IFC’s investment decisions. In addition, IFC will IFC does not provide loans to financial institutions align its direct investments with the goals of the for coal-related activities. To further reduce exposure Paris Agreement, using a screen that covers both to coal, IFC no longer provides general-purpose transition and physical climate risks (see the section loans to financial institutions. Targeted loans are on targets). directed to key strategic sectors, such as micro-, small-, and medium-size enterprises, women-owned Physical risk.¹ IFC screens projects for climate risk businesses, climate-related projects, and housing in an expanding number of sectors. During project finance. The use of proceeds is disclosed on IFC’s appraisal, IFC’s project teams assess potential direct Project Information Portal. Through our Approach and indirect effects that climate-related impacts to Greening Equity Investments for new equity may have on the project’s financial, environmental, and equity-like investments, IFC seeks to help our and social performance. Potential risks are further financial institution clients increase their climate explored and, where necessary, addressed and lending and reduce their exposure to coal-related mitigated through a variety of measures that may projects to zero or near-zero by 2030. include operational or CAPEX interventions. Screening has been mainstreamed for the roads, ports and As noted above, IFC has begun to assess our waterways, airports, forestry, insurance, and pulp and investments for how they align with the project paper sectors; screening for mining and hydropower country’s NDC, which we consider to be indicative were mainstreamed as of July 1, 2021. As part of IFC’s of future climate-driven policy changes. For further commitment to the Paris Alignment under the new details, see the Resilience of Strategy section. CCAP, IFC is committed to expanding physical climate risk screening to all real sector projects by FY23, and In addition to minimizing risk in new investments, all remaining projects by FY25. IFC is analyzing our active portfolio for exposure to transition risk, with the aim to identify key sectors In FY21, IFC has also developed a forward-looking or regions requiring additional risk mitigation focus. tool to assess the exposure of IFC’s portfolio In addition to evaluating existing investments, we to key physical climate hazards by sector and are developing financial (debt) products in line with country. Identification of elevated exposure to the ICMA Climate Transition Finance Handbook that climate impacts corresponds to the combination of can assist carbon-intensive companies/clients with sub-sectoral sensitivities, project characteristics, the transition to a more sustainable pathway. An and location. The dominant drivers in IFC’s most investment will be considered by IFC as contributing exposed operations include those related to water, to transition if it displaces higher emitting options or such as water stress, drought, and flood. This tool documents negative net GHF emissions provided it was validated using our portfolio from 2016 to 2019, supports the penetration of lower-emitting options which was assessed for physical climate impact using and aligns with the goals of the Paris Agreement. supervision reports. IFC’s decarbonization efforts will be based on ICMA’s handbook. 1. Physical risks are those resulting from disruptions and impacts of climate change-related events and can be both acute and chronic. Examples of physical risks include droughts, floods, increasing sea levels, rising temperatures, etc. that may have an impact on supply chains, operational capacity, damage to physical assets, and other aspects of the business. 2. Transition risks are those faced by investors as part of the global shift to a low-carbon economy. Examples of transition impacts include changes in climate and energy policies, a shift to low-carbon technologies, changes in consumer preferences, and reputation and liability issues. Transitional impacts can vary substantially depending on scenarios for policy and technology changes. IFC ANNUAL REPORT 2021 103 Impact Assessment. IFC assesses the expected and starting on July 1, 2025. The assessment is based actual impact of its projects using scores based on on a joint MDB methodology to which IFC Anticipated Impact Measurement and Monitoring contributed. It will cover both the mitigation (AIMM) frameworks, including environmental and (greenhouse gas) and adaptation (resilience) goals climate effects. The expected effects are reported to of the Paris Agreement. IFC is leading the MDBs in the Board in the project Board Paper and monitored designing a Paris Alignment methodology to assess and measured during the life of the project. IFC also intermediary investments. The timeline for the reports on aggregate thematic level data — such as Paris Alignment of IFC’s intermediary financing is expected GHG emissions reduced, jobs created, etc. — expected to be announced in October 2021. in our annual report. In FY21, committed investment projects are expected to help our clients reduce Investment disclosure. IFC reports climate finance annual greenhouse gas emissions by 12 million tons commitments in this annual report (see page 78) and of carbon dioxide equivalent. in the Joint Report on Multilateral Development Banks’ Climate Finance. In our annual Green Bond Impact Report, Climate finance targets. In FY21, IFC’s climate IFC also reports on the expected environmental investments comprised 32 percent of total own impact of projects financed through the green bonds account commitments, exceeding the corporate that IFC issues. As a signatory of PRI, IFC is mandated target of 28 percent. As part of the CCAP, the World to report under PRI’s TCFD-aligned indicators. Emissions calculations. IFC continues to estimate METRICS AND TARGETS and report aggregate greenhouse-gas emissions reductions from IFC investments (Scope 3 emissions) through this annual report (see page 89). IFC What’s New? developed a GHG accounting methodology in FY19 and has been estimating gross and net greenhouse gas (GHG) emissions from its real sector investment • Climate investments comprised 32 percent of projects since FY19. IFC estimates gross GHG total own account FY21 commitments emissions for all real sector projects with emissions • IFC developed and is road-testing a draft over 25,000 metric tons of carbon dioxide equivalent, methodology on Paris Agreement alignment for and net emissions on a project-by-project basis for investments in the real sector real sector projects where possible. IFC continues to disclose ex-ante estimated annual gross GHG • IFC is developing a Paris Agreement alignment emissions through the publicly available Environmental methodology for financial institutions and funds and Social Review Summary.⁴ IFC has been carbon neutral in all our business operations including business travel (Scope 1 and 2 Bank Group announced that climate investments³ emissions) since FY09. Prior targets have cut energy will comprise, on average, 35 percent of IFC’s use in IFC’s headquarters by 18 percent (see page 89). own-account investments over the FY21–25 period. In FY19, IFC set a global, internal carbon-reduction The IFC corporate target is translated to investment commitment to cut our facility-related emissions by teams through departmental and regional climate 20 percent by 2026, from a 2016 baseline. This target business targets. is in line with the World Bank Group’s commitment to reduce facility-related emissions by 28 percent Climate investments are those that reduce GHG over the same period. All remaining emissions are emissions or increase resiliency, as measured by joint compensated via carbon offsets. MDB guidelines. IFC began to apply the updated Joint MDB Methodology for Climate Finance Tracking across its operations in July 2021. The revised metrics include a tightened baseline for existing sectors and the inclusion of additional sectors. The methodology has been updated to account for the evolving market context, limit climate-related risks, and take advantage of new climate opportunities. Paris Agreement Alignment. IFC will align 85 percent of its Board-approved real sector operations with the goals of the Paris Agreement starting July 1, 2023, and 100 percent of these 3. IFC’s Definitions and Metrics for Climate-Related Activities identifies projects and sectors that qualify as climate investments; these definitions are harmonized with other multilateral development banks. https://www.ifc.org/wps/wcm/connect/topics_ext_content/ ifc_external_corporate_site/climate+business/resources/ifc-climate-definition-metrics 4. IFC Project Information & Data Portal. https://disclosures.ifc.org/#/landing. 104 IFC ANNUAL REPORT 2021 Financial Performance Summary The financial performance of IFC has been The main elements of IFC’s net income and significantly influenced by the volatile emerging comprehensive income and influences on the level equity markets, and reflects the year-over-year and variability of net income and comprehensive movements in equity valuation. IFC’s net income was income from year to year are: $4,209 million in FY21, as compared to a net loss of $1,672 million in FY20, mainly driven by the rebound in equity valuations post the immediate effect of COVID-19. ELEMENTS SIGNIFICANT INFLUENCES Net income: Yield on interest earning assets Market conditions including spread levels and degree of competition. (principally loans) Nonaccruals and recoveries of interest on loans formerly in nonaccrual status and income from participation notes on individual loans are also included in income from loans. Liquid asset income Realized and unrealized gains and losses on the liquid asset portfolios, in particular the portion of the liquid assets portfolio funded by net worth, which are driven by external factors such as the interest rate environment and liquidity of certain asset classes within the liquid asset portfolio. Income from the equity Global climate for emerging markets equities, fluctuations in currency investment portfolio markets and company-specific performance for equity investments. Overall performance of the equity portfolio. Provision for losses on loans, Risk assessment of borrowers, probability of default, loss given default and loss guarantees, and available-for-sale emergence period. debt securities Other income and expenses Level of advisory services provided by IFC to its clients, the level of expense from the staff retirement and other benefits plans, and the approved and actual administrative expenses and other budget resources. Gains and losses on other non- Principally, differences between changes in fair values of borrowings, excluding trading financial instruments IFC’s credit spread (beginning in FY19, changes attributable to IFC’s credit accounted for at fair value spread are reported in other comprehensive income, prior to FY19, such changes were reported in net income) and associated derivative instruments and unrealized gains or losses associated with the investment portfolio including puts, warrants, and stock options, which in part are dependent on the global climate for emerging markets. These securities may be valued using internally developed models or methodologies utilizing inputs that may be observable or non-observable. Grants to IDA Level of the Board of Governors-approved grants to IDA. IFC ANNUAL REPORT 2021 105 ELEMENTS SIGNIFICANT INFLUENCES Other comprehensive income: Unrealized gains and losses on Global climate for emerging markets, fluctuations in currency and commodity debt securities accounted for as markets and company-specific performance and consideration of the extent available-for-sale to which unrealized losses are considered a credit loss. Debt securities may be valued using internally developed models or methodologies utilizing inputs that may be observable or non-observable. Unrealized gains and losses Fluctuations in IFC’s own credit spread measured against U.S. dollar LIBOR, attributable to instrument-specific resulting from changes over time in market pricing of credit risk. As credit credit risk on borrowings at fair spreads widen, unrealized gains are recorded and when credit spreads narrow, value under the Fair Value Option unrealized losses are recorded. Unrecognized net actuarial gains Returns on pension plan assets and the key assumptions that underlay and losses and unrecognized prior projected benefit obligations, including financial market interest rates, staff service costs on benefit plans expenses, past experience, and management’s best estimate of future benefit cost changes and economic conditions. IFC reported income of $4,209 million in FY21, as compared to a loss of $1,672 million in FY20, mainly driven by the rebound in equity valuations post the immediate effect of COVID-19. The $5,881 million increase was principally a result of the following: Change in Net Income (Loss) FY21 vs FY20 (US$ millions) 1,158 5,881 6,000 839 (282) (111) (9) 4,153 10 4,000 2,000 123 0 Equity Unrealized Total Income Loan Loss Unrealized Net Administrative Others Change in Income Gains on from Loans Provision Gains on Treasury Expenses & Net Income Equity and Debt Loans and Income Pensions Securities Debt Securities 106 IFC ANNUAL REPORT 2021 IFC’s equity investment portfolio returned IFC’s liquid asset income, net of allocated charges $3,201 million in FY21 as compared to a loss of on borrowings, was $224 million in FY21, compared $1,067 million in FY20. A major component for FY21 to $506 million in FY20. FY20 Treasury Income was unrealized gains of $2,550 million, which mainly benefited significantly from the rally in U.S. reflected the market recovery that began in FY20 Treasuries. Q4 and has continued throughout FY21, notably observed in the Disruptive Technologies and Funds Administrative and pension expenses increased portfolio. by $111 million from $1,299 million in FY20 to $1,410 million in FY21, mainly driven by a $67 million IFC recorded a loan loss provision release of increase in pension expenses due to the increased $201 million in FY21 as compared to a loan loss amortization of the actuarial loss from the lower provision charge of $638 million in FY20, reflecting discount rate at the end of FY20 and lower expected an overall improvement in credit quality. returns on plan assets, and increase in administrative expenses by $44 million mainly due to higher staff Unrealized gains from loans and debt securities were costs resulting from a sharp increase in staff count. $735 million in FY21, as compared to unrealized losses of $423 million in FY20, primarily due to narrowing For additional information about IFC’s financial credit risk spreads and the impact of increased performance, see Section VIII — Results of interest rates on the fair value of swaps that are used Operations. to hedge loans at amortized cost and available-for- sale debt securities. IFC’s net income (loss) for each of the past five fiscal years ended June 30, is presented below (US$ millions): IFC’s Net Income (Loss), Fiscal Years 2017–20211 Fiscal year ended June 30 (US$ millions) 2017 1,418 2018 1,280 2019 93 2020 (1,672) 2021 4,209 Prior to the year ended June 30, 2020 (FY20), IFC reviewed the calculation of Income Available for management used Income Available for Designations Designations in FY20 due to the adoption of ASU (a non-U.S. GAAP measure) as a basis for 2016-01 in FY19, which resulted in all unrealized gains designations of retained earnings. Income Available and losses on equity investments being reported in for Designations generally comprised net income Net Income. Beginning in FY20, IFC uses “income excluding: net unrealized gains and losses on equity excluding unrealized gains and losses on investments investments, net unrealized gains and losses on and borrowings and grants to IDA” as the metric for non-trading financial instruments accounted for at Income Available for Designations. fair value, income from consolidated entities other than AMC², and expenses reported in net income related to prior year designations. 1. IFC’s Net Income (Loss) are not directly comparable due to the adoption of ASU 2016-01 in FY19. 2. Effective January 31, 2020, IFC Asset Management Company, LLC (AMC) was merged into IFC. IFC, as the successor to AMC, has assumed all the assets, rights, liabilities, and obligations of AMC. The AMC business is now operated as a division within IFC. This change did not have a significant impact on IFC’s financial position, results of operations, or cash flows. IFC ANNUAL REPORT 2021 107 Reconciliation of Reported Net Income or Loss to Income Available for Designations (US$ millions) FY21 FY20 FY19 Net income (loss) $ 4,209 $ (1,672) $ 93 Adjustments to reconcile Net Income (Loss) to Income Available for Designations Unrealized (gains) losses on investments (3,285) 2,026 1,121 Unrealized (gains) losses on borrowings (71) 218 15 Grants to IDA 213 – – Advisory Services expenses from prior year designations – – 54 Adjustments to conform to approach to designations approved by IFC’s Board in FY17 – – (377) Other – – 3 Income available for designations $ 1,066 $ 572 $ 909 108 IFC ANNUAL REPORT 2021 Selected Financial Data as of and for the Last Five Fiscal Years (US$ millions) AS OF AND FOR THE FISCAL YEARS ENDED JUNE 30 2021 2020 2019 2018 2017 Consolidated income highlights: Income from loans and guarantees, including realized gains and losses on loans and associated derivatives $ 1,116 $ 1,510 $ 1,774 $ 1,377 $ 1,298 Release of provision (provision) for losses on loans, off- balance sheet credit exposures and other receivables 201 (638) (87) (90) (86) Income (loss) from equity investments and associated derivatives 3,201 (1,067) (253) 853 707 Income from debt securities, including realized gains and losses on debt securities and associated derivatives 340 231 126 363 282 Provision for losses on available-for-sale debt securities (3) – – – – Income from liquid asset trading activities 327 1,039 1,291 771 917 Charges on borrowings (326) (1,181) (1,575) (1,041) (712) Other income 595 559 622 578 528 Other expenses (1,687) (1,628) (1,746) (1,662) (1,617) Foreign currency transaction (losses) gains on non- trading activities (148) 144 159 123 (188) Income (loss) before net unrealized gains and losses on non-trading financial instruments accounted for at fair value and grants to IDA 3,616 (1,031) 311 1,272 1,129 Net unrealized gains (losses) on non-trading financial instruments accounted for at fair value 806 (641) (218) 88 394 Income (loss) before grants to IDA 4,422 (1,672) 93 1,360 1,523 Grants to IDA (213) – – (80) (101) Net income (loss) 4,209 (1,672) 93 1,280 1,422 Less: Net gains attributable to non-controlling interests – – – – (4) Net income (loss) attributable to IFC $ 4,209 $ (1,672) $ 93 $ 1,280 $ 1,418 Consolidated balance sheet highlights: Total assets $ 105,264 $ 95,800 $ 99,257 $ 94,272 $ 92,254 Liquid assets 41,696 40,791 39,713 38,936 39,192 Investments 44,991 41,138 43,462 42,264 40,519 Borrowings outstanding, including fair value adjustments 55,699 55,486 54,132 53,095 54,103 Total capital $ 31,244 $ 25,182 $ 27,606 $ 26,136 $ 25,053 of which Undesignated retained earnings $ 11,395 $ 7,166 $ 25,905 $ 23,116 $ 21,901 Designated retained earnings 207 433 366 190 125 Paid-in capital 20,760 19,567 2,567 2,566 2,566 Accumulated other comprehensive (loss) income (AOCI) (1,118) (1,984) (1,232) 264 458 Non-controlling interests – – – – 3 IFC ANNUAL REPORT 2021 109 Key Financial Ratios 2021 2020 2019 2018 2017 Financial ratiosb: Return on average assets (U.S. GAAP basis)a, c 4.2% (1.7)% 0.1% 1.4% 1.6% Return on average assets (non-U.S. GAAP basis)d 0.9% 0.6% 1.4% 1.4% 1.3% Return on average capital (U.S. GAAP basis)a, e 14.9% (6.3)% 0.3% 5.0% 5.9% Return on average capital (non-U.S. GAAP basis)f 3.0% 2.1% 4.9% 5.1% 4.9% Overall liquidity ratiog 114% 96% 104% 100% 82% Debt to equity ratioh 2.1 2.2 2.2 2.5 2.7 Total reserve against losses on loans to total disbursed portfolioi 4.9% 6.3% 4.7% 5.1% 6.1% Capital measures: Total Resources Available (US$ billions)j 30.7 28.2 27.8 24.7 23.6 Total Resources Required (US$ billions) k 20.5 20.3 21.8 20.1 19.4 Strategic Capitall 10.3 7.9 6.0 4.6 4.2 Deployable Strategic Capital (DSC) m 7.2 5.0 3.2 2.2 1.8 Deployable Strategic Capital Ratio (Deployable Strategic Capital expressed as a percentage of Total Resources Available) 23.4% 17.9% 11.6% 8.7% 7.8% a. This ratio is not directly comparable due to the adoption of ASU 2016-01. b. Certain financial ratios, as described below, are calculated excluding the effects of unrealized gains and losses on investments, other non‑trading financial instruments, AOCI, and impacts from consolidated Variable Interest Entities (VIEs). c. Net income for the fiscal year as a percentage of the average total assets during the fiscal year. d. Return on average assets is defined as Net income, excluding unrealized gains/losses on investments accounted for at fair value, income from consolidated VIEs and net gains/losses on non-trading financial investments, as a percentage of total disbursed loan and equity investments (net of reserve), liquid assets net of repos, and other assets averaged during the fiscal year. e. Net income for the fiscal year as a percentage of the average of total capital during the fiscal year (excluding payments on account of pending subscriptions). f. Return on average capital is defined as Net income, excluding unrealized gains/losses on investments accounted for at fair value, income from consolidated VIEs and net gains/losses on non-trading financial investments, as percentage of the paid-in share capital and accumulated earnings (before certain unrealized gains/losses and excluding cumulative designations not yet expensed) and calculated as a percentage of the average total assets during the fiscal year. g. Overall Liquidity Policy states that IFC would at all times maintain a minimum level of liquidity, plus undrawn borrowing commitments from the IBRD, such that it would cover at least 45% of the next three years’ estimated net cash requirements. h. Debt to equity (leverage) ratio is defined as the number of times outstanding borrowings plus committed guarantees cover paid-in capital and accumulated earnings (net of retained earnings designations and certain unrealized gains/losses). i. Total reserve against losses on loans to total disbursed loan portfolio is defined as reserve against losses on loans as a percentage of the total disbursed loan portfolio. j. Total resources available (TRA) is the total capital of the Corporation, consisting of (i) paid-in capital; (ii) retained earnings net of designations and some unrealized gains and losses; and (iii) total loan loss reserve. k. Total resources required (TRR) is the minimum capital required to cover the expected and unexpected loss on IFC’s portfolio, calibrated to maintain IFC’s triple-A rating. TRR is the sum of the economic capital requirements for IFC’s different assets, and it is determined by the absolute size of the committed portfolio, the product mix (equity, loans, short-term finance, and liquid assets portfolio assets), and by operational and other risks. l. Strategic Capital is defined as total resources available, less total resources required. May differ from the sum of individual figures due to rounding. Deployable Strategic Capital is defined as 90% of total resources available, less total resources required. m. 110 IFC ANNUAL REPORT 2021 COMMITMENTS CORE MOBILIZATION Long-Term Finance Commitments comprise Core Mobilization is financing from entities other Own Account and Core Mobilization and totaled than IFC that becomes available to clients due to $23.3 billion in FY21, an increase of $1.3 billion or IFC’s direct involvement in raising resources. 6 percent from FY20. IFC’s FY21 Long-Term Finance Own Account Commitments were $12.5 billion ($11.1 billion in FY20) and Core Mobilization was FY21 vs FY20 Long-Term $10.8 billion ($10.8 billion in FY20). Short-Term Finance Commitments (Own Finance Commitments were $8.2 billion in FY21, as compared to $6.5 billion at FY20. Total program Account and Core Mobilization) delivery (LTF and STF) was $31.5 billion in FY21 as compared to $28.4 billion in FY20. and Short-Term Finance (US$ millions) In direct response to the COVID pandemic, IFC committed $10.8 billion in FY21 including $2.3 billion FY21 FY20 under its Fast Track COVID-19 Facility in support Long-Term Finance of IFC’s existing clients. Outside of the facility, IFC Commitments (Own committed an additional $8.5 billion in financing to Account and Core support clients in response to the crisis. Mobilization) and Short-Term Finance $ 31,500 $ 28,430 Long-Term Finance Own Account Commitments 12,474 11,135 Core Mobilization 10,831 10,826 Short-Term Finance Commitments 8,195 6,469 IFC ANNUAL REPORT 2021 111 Asset Management Company (AMC) Funds Managed by AMC FY21 vs FY20 (US$ millions unless otherwise indicated) THROUGH JUNE 30, 2021 TOTAL FUNDS RAISED SINCE INCEPTION FOR THE YEAR ENDED JUNE 30, 2021 FROM CUMULATIVE INVESTMENT INVESTMENT OTHER INVESTMENT COMMITMENTS DISBURSEMENTS TOTAL FROM IFC INVESTORS COMMITMENTSb MADE BY FUNDc MADE BY FUND Investment Period IFC Financial Institutions Growth Fund, LP (FIG Fund) $ 505 $ 150 $ 355 $ 259 $ 81 $ 45 IFC Middle East and North Africa Fund, LP (MENA Fund) 162 60 102 78 12 7 IFC Emerging Asia Fund, LP (Asia Fund) 693 150 543 374 203 127 Post Investment Period IFC Capitalization (Equity) Fund, LP (Equity Capitalization Fund) 1,275 775 500 1,214 – – IFC Capitalization (Subordinated Debt) Fund, LP (Sub-Debt Capitalization Fund) 1,725 225 1,500 1,614 – – IFC African, Latin American and Caribbean Fund, LP (ALAC Fund) 1,000 200 800 876 – 2 Africa Capitalization Fund, Ltd. (Africa Capitalization Fund) 182 – 182 130 – – IFC Catalyst Fund, LP, IFC Catalyst Fund (U.K.), LP and IFC Catalyst Fund (Japan), LP (collectively, Catalyst Funds) 418 75 343 363 – 24 IFC Global Infrastructure Fund, LP (Global Infrastructure Fund)a 1,430 200 1,230 929 – – IFC Global Emerging Markets Fund of Funds, LP and IFC Global Emerging Markets Fund of Funds (Japan Parallel), LP (collectively, GEM Funds) 800 150 650 757 – 112 Women Entrepreneurs Debt Fund, LP (WED Fund) 115 30 85 110 – – China-Mexico Fund, LP (China-Mexico Fund) 1,200 – 1,200 350 30 17 IFC Russian Bank Capitalization Fund, LP (Russian Bank Cap Fund)d 550 250 300 82 – – Total $10,055 $2,265 $7,790 $7,136 $326 $334 Includes co-investment fund managed by AMC on behalf of Fund LPs. a. Net of commitment cancellations. b. E xcludes commitment cancellations from prior periods. c. Fund closed and liquidated. d. 112 IFC ANNUAL REPORT 2021 Asset Management Company (AMC) Funds Managed by AMC FY21 vs FY20 (US$ millions unless otherwise indicated) THROUGH JUNE 30, 2020 TOTAL FUNDS RAISED SINCE INCEPTION FOR THE YEAR ENDED JUNE 30, 2020 FROM CUMULATIVE INVESTMENT INVESTMENT OTHER INVESTMENT COMMITMENTS DISBURSEMENTS TOTAL FROM IFC INVESTORS COMMITMENTSb MADE BY FUNDc MADE BY FUND Investment Period IFC Financial Institutions Growth Fund, LP (FIG Fund) $ 505 $ 150 $ 355 $ 178 $20 $ 7 IFC Middle East and North Africa Fund, LP (MENA Fund) 162 60 102 66 – 6 IFC Emerging Asia Fund, LP (Asia Fund) 693 150 543 171 26 13 Post Investment Period IFC Capitalization (Equity) Fund, LP (Equity Capitalization Fund) 1,275 775 500 1,226 – – IFC Capitalization (Subordinated Debt) Fund, LP (Sub-Debt Capitalization Fund) 1,725 225 1,500 1,614 – – IFC African, Latin American and Caribbean Fund, LP (ALAC Fund) 1,000 200 800 876 – 3 Africa Capitalization Fund, Ltd. (Africa Capitalization Fund) 182 – 182 130 – – IFC Catalyst Fund, LP, IFC Catalyst Fund (U.K.), LP and IFC Catalyst Fund (Japan), LP (collectively, Catalyst Funds) 418 75 343 365 – 30 IFC Global Infrastructure Fund, LP (Global Infrastructure Fund)a 1,430 200 1,230 929 – – IFC Global Emerging Markets Fund of Funds, LP and IFC Global Emerging Markets Fund of Funds (Japan Parallel), LP (collectively, GEM Funds) 800 150 650 757 17 71 Women Entrepreneurs Debt Fund, LP (WED Fund) 115 30 85 110 – – China-Mexico Fund, LP (China-Mexico Fund) 1,200 – 1,200 320 – 35 IFC Russian Bank Capitalization Fund, LP (Russian Bank Cap Fund)d 550 250 300 82 – – Total $10,055 $2,265 $7,790 $6,824 $63 $165 a. Includes co-investment fund managed by AMC on behalf of Fund LPs. b. Net of commitment cancellations. c. Excludes commitment cancellations from prior periods. d. The Russian Bank Cap Fund was liquidated during FY18. IFC ANNUAL REPORT 2021 113