Annual Report 2017 Creating Markets There are Big Opportunities in Development Finance... IFC Annual Report 2017 ...we can End Poverty  by 2030, Rebuild Conflict- 01 Affected Economies, Tackle Climate Change, Advance Gender Equality, by maximizing private finance for development. Creating Markets IFC Operational Highlights Dollars in millions, for the years ended June 30 2017 2016 2015 2014 2013 Long-Term Investment Commitments FOR IFC’S OWN ACCOUNT $ 11,854 $ 11,117 $ 10,539 $ 9,967 $ 11,008 Number of projects 342 344 406 364 388 Number of countries 75 78 83 73 77 CORE MOBILIZATION* $ 7,461 $ 7,739 $ 7,133 $ 5,142 $ 6,504 Syndicated loans 1 $ 3,475 $ 5,416 $ 4,194 $ 3,093 $ 3,098 IFC Initiatives & Other $ 2,207 $ 1,054 $ 1,631 $ 1,106 $ 1,696 Asset Management Company (AMC) Funds $ 531 $ 476 $ 761 $ 831 $ 768 Public-Private Partnership (PPP) 2 $ 1,248 $ 793 $ 548 $ 113 $ 942 TOTAL INVESTMENT COMMITMENTS $ 19,316 $ 18,856 $ 17,672 $ 15,109 $ 17,512 Investment Disbursements For IFC’s account $ 10,355 $ 9,953 $ 9,264 $ 8,904 $ 9,971 Syndicated loans 3 $ 2,248 $ 4,429 $ 2,811 $ 2,190 $ 2,142 TOTAL INVESTMENT DISBURSEMENTS $ 12,602 $ 14,382 $ 12,075 $ 11,094 $ 12,113 Committed Portfolio Number of firms 2,005 2,006 2,033 2,011 1,948 For IFC’s account $ 55,015 $ 51,994 $ 50,402 $ 51,735 $ 49,617 Syndicated loans 4 $ 16,047 $ 16,550 $ 15,330 $ 15,258 $ 13,633 TOTAL COMMITTED PORTFOLIO $ 71,062 $ 68,544 $ 65,732 $ 66,993 $ 63,250 Short-Term Finance Average Outstanding Balance $ 3,185 $ 2,807 $ 2,837 $ 3,019 $ 2,739 Advisory Services Advisory Services program expenditures $ 245.7 $ 220.6 $ 202.1 $ 234.0 $ 231.9 Share of program in IDA countries 5 63% 62% 65% 66% 65%  * Financing from entities other than IFC that becomes available to client due to IFC’s direct involvement in raising resources. 1. Includes B-Loans, Parallel Loans, and MCPP Loans. 2. Third-party financing made available for public private partnership projects due to IFC’s mandated lead advisor role to national, local, or other government entity. 3. Includes B-Loans, Agented Parallel Loans and MCPP Loans 4. Includes B-Loans, A-Loan Participations (ALPS), Structured A-Loan Participation Sales (SALPS), Agented Parallel Loans, Unfunded Risk Participations (URPs) and MCPP Loans 5. All references in this report to percentages of advisory program expenditures in IDA countries and fragile and conflict-affected areas exclude global projects. FinancialHighlights Financial Highlights Dollars in millions, as of and for the years ended June 30* Dollars in millions, as of and for the years ended June 30* 2017 2016 2015 2014 2013 Net income (loss) attributable to IFC 1,4182017 -332016 445 2015 1,483 2014 1,018 2013 to IDA(loss) attributable to IFC Net income Grants 1,418 101 330 -33 340 445 251 1,483 340 1,018 to IDAgrants to IDA Grants before Income 1,523 101 296 330 749 340 1,739 251 1,350 340 Income Total before grants to IDA assets 1,523 90,434 296 87,548 749 84,130 1,73977,525 1,350 92,254 Total assets Loans, equity investments and debt securities, net 90,434 37,578 92,254 37,356 40,519 84,13034,67777,525 87,548 38,176 Estimated fair value Loans, equity of equity investments investments and debt securities, net 40,519 13,664 14,658 37,578 14,890 37,356 14,834 38,17613,30934,677 Key Ratios Estimated fair value of equity investments 14,658 13,664 14,834 14,890 13,309 Key Ratios Return on average assets (GAAP basis) 1.60% 0.00% 0.50% 1.8% 1.3% Return Returnon onaverage averagecapital assets (GAAP (GAAPbasis) basis) 1.60% -0.10% 5.90% 0.00% 1.80% 0.50% 6.4% 1.8% 4.8% 1.3% Cash and liquid investments as a percentage of next Return on average capital (GAAP basis) 5.90% -0.10% 1.80% 6.4% 4.8% three years’ estimated net cash requirements 82% 85% 81% 78% 77% Cash and liquid investments as a percentage of next Debt-to-equity ratio 2.7:1 2.8:1 2.6:1 2.7:1 2.6:1 three years’ estimated net cash requirements 82% 85% 81% 78% 77% Total resources required ($ billions) 19.4 19.2 19.2 18.0 16.8 Debt-to-equity ratio 2.7:1 2.8:1 2.6:1 2.7:1 2.6:1 Total resources available ($ billions) 23.6 22.5 22.6 21.6 20.5 Total resources required ($ billions) 19.4 19.2 19.2 18.0 16.8 Total reserve against losses on loans to total Total resources disbursed loan available portfolio ($ billions) 6.1%23.6 7.4% 22.5 7.5% 22.6 6.9% 21.6 7.2% 20.5 Total reserve against losses on loans to total *  disbursed loan See Management’s portfolio Discussion 6.1% for details 7.4% and Analysis and Consolidated Financial Statements 7.5% of these6.9% on the calculation numbers: 7.2% http://www.ifc.org/FinancialReporting  ee Management’s Discussion and Analysis and Consolidated Financial Statements for details on the calculation of these numbers: * S http://www.ifc.org/FinancialReporting Table of Contents Table of Contents 12 Letter from Jim Yong Kim, 18 Creating Markets, Creating World Bank Group President Opportunities 12 Letter from Jim Yong Kim, 18 Creating Markets, Creating World Bank Group President Opportunities 14 Letter from 56 IFC Year in Review from Le Houérou, Philippe 14 Letter 56 IFC Year in Review IFC CEO Philippe Le Houérou, 60 World Bank Group 60 World Bank Group IFC CEO Summary Results Summary Results 16 Our Management Team 16 Our Management Team 64 4About 6 Us About Us IFC works with entrepreneurs to create jobs and opportunities. IFC is to Lead Positioned Six Decades of Experience IFC Annual Report 2017 02 – 03 in mobilizing private capital for development. Experience Matters We are the largest global development institution focused on the private sector. We leverage the full range of World Bank Group capabilities. Creating Markets Creating Markets Private sector innovations can help address the most urgent challenges of development. Logistics: Backed by IFC, India's BlackBuck is lowering shipping costs while raising drivers' incomes. Digital Finance: IFC and China’s Ant Financial Services Group are helping 100 million people access financial services by 2020. Capital Markets: The World Bank Group’s Joint Capital Markets Program is accelerating capital-markets development wherever it’s needed most. Solar Power: IFC’s innovative Scaling Solar initiative is helping governments procure privately funded power stations quickly and inexpensively. It Takes A Comprehensive Approach - Establishing regulatory and policy frameworks that improve public governance and enable markets to thrive - Promoting competition and innovation that causes others to improve their game - Achieving demonstration effects that encourage replication - Building capacity and skills to open new markets IFC Annual Report 2017 04 – 05 Creating Markets Maximizing Finance for Development By working together, development institutions can direct every available dollar to areas that need it most. IFC Annual Report 2017 Creating the Right Tools and Platforms to reduce investment risks in countries, sectors, and projects MOBILIZATION PLATFORMS BLENDED FINANCE - The Managed Co-Lending Uses small amounts of 06– 07 Portfolio Program concessional donor funds to Crowds in billions in private mitigate risks, opening the capital from insurance door to much larger amounts companies and others for of private investment. IFC projects - IFC Asset Management Company Manages billions in assets for investment in IFC projects. Asking the Right Questions — The “Cascade” 1 When a project is presented, the 3 If the answer is NO … World Bank Group asks: We ask: Is it because of: “Is there a sustainable private Policy or regulatory gaps or sector solution that limits public weaknesses? debt and contingent liabilities?” If so, we provide support for policy and regulatory reforms. 2 If the answer is YES … Risks? We promote private solutions. If so, we assess whether Bank Group instruments can mitigate them. 4 If the project requires public Creating Markets funding, we pursue that option. Achieving the Best Outcomes How We Helped Jordan Create Jobs and Boost Revenues IFC Annual Report 2017 Jordan’s key international airport with the World Bank and IFC to receives twice as many passengers leverage private capital. The result: today as it did a decade ago. This a world-class facility that has reflects an innovative approach generated more than $1 billion in to infrastructure finance. Instead new government revenues while of incurring new government adding no public debt — a ​ nd debt to pay for a much-needed boosting tourism, creating jobs, airport expansion, Jordan worked and supporting economic growth. 08 – 09 Creating Markets Creating Markets, Creating Opportunities Taking on the Toughest Challenges Lina Riascos studies at Uniminuto, an IFC-supported university serving low-income students in Colombia. Putting IFC at the Heart of Development Finance Growth = Jobs = Stability IFC Annual Report 2017 10 – 11 Creating Markets Letter from Jim Yong Kim World Bank Group President As I travel around the world, I am continually reminded of how much smaller the world seems to be getting. Thanks to technology — ​especially the internet, mobile phones, and nearly everyone can social media — ​ see how everyone else lives. For many, living standards in the most developed countries, once unknown to the world’s poor, are now as familiar as their own communities. We committed to drastically IFC Annual Report 2017 scaling up IDA’s development interventions through innovative financing. For example, we are leveraging IDA’s equity by blending donor contributions with inter- nal resources and funds raised through debt markets. As a result of these efforts and the continued strong support of our partners, we achieved a record $75 billion replenishment for IDA18. As we head into FY18, we’re using new tools, like the $2.5 billion Private Sector Window, to mobilize private capital for the poorest countries. The International Finance Corporation (IFC) and the This awareness has changed how annual funding for development. Multilateral Investment Guarantee people think about their lives, and We must now leverage our scarce Agency (MIGA), our two institutions it is raising expectations about resources even more to crowd in focused on private sector devel- what is possible. Aspirations, once vastly more private capital, com- opment, are leading our efforts rooted in local experiences, are bine it with our expertise, and to create markets and crowd in converging around the world. And invest in developing countries. private sector investment in devel- as people’s aspirations rise, so too oping countries. will demands for education, jobs, To spur that level of financing, we and services like health care and need to create markets and bring IFC delivered a significant amount transportation — ​opportunities for more private sector rigor and of financing for private sector a better life for themselves and for innovation to our client countries, development — a​ bout $19.3 billion, their families. As the world is virtu- especially the poorest and most including nearly $7.5 billion mobi- ally shrinking, the divide between fragile ones. We have to start by lized from investment partners. people is widening. Our role and asking routinely whether private 12 – 13 Nearly $4.6 billion of this went our ambition at the World Bank capital, rather than government to IDA countries, and nearly Group is to bridge that divide. funding or donor aid, can finance $900 million went to fragile and We need to use all of our energy, a project. If the conditions are not conflict-affected areas. knowledge, creativity, and financ- right for private investment, we ing capacity to help countries meet need to work with our partners MIGA issued $4.8 billion, using the expectations of all their citizens. to de-risk projects, sectors, and political risk insurance and credit entire countries. Through dialogue enhancement guarantees to draw This means accelerating progress and knowledge transfers, we can in private investors and lenders to on our two goals — e ​ nding extreme help governments reform laws developing countries. Forty-five poverty by 2030, and boosting and regulations, and improve percent of projects supported in prosperity among the poorest economic practices. We can instill fiscal year 2017 were in IDA-eligible 40 percent in low- and middle-​ new, more efficient ways to finance countries, and 21 percent were income countries. To accomplish development. This won’t be easy, in countries affected by conflict those goals, we are supporting but it’s the only way we can help and fragility. investments in countries that will countries at the scale that these lay the foundations for sustainable times require. Across the World Bank Group, and inclusive economic growth. We we’re working to ensure that we are investing in people, in the youth This year, the World Bank Group have the knowledge, resources, in particular, so individuals — ​ and committed more than $61 billion and tools to be effective and agile countries — c ​ an fulfill their potential in loans, grants, equity investments, in the face of rapid change. We’re and look toward a brighter future. and guarantees to its members ready to scale up and strengthen And we are strengthening resilience and private businesses. [See our engagement to help coun- to the global shocks that affect page 60 for a summary of World tries overcome their development ​ike pandemics, climate all of us — l Bank Group results.] challenges, create equality of change, refugees, and famine. opportunity, and give everyone the The International Bank for chance to meet their aspirations. Yet while the world seems to be Reconstruction and Development getting smaller, our challenges are (IBRD) saw continued client Creating Markets multiplying. We must constantly demand for its services and made evolve and adapt to meet them. commitments totaling $22.6 billion. At the World Bank Group, we And the International Development are fundamentally rethinking our Association (IDA), our fund for the approach to development finance. poorest, provided $19.5 billion to Jim Yong Kim We have billions of dollars to work support countries most in need to World Bank Group President with, but the world needs trillions in face their toughest challenges. Letter from Philippe Le Houérou IFC Chief Executive Officer “With the knowledge we have accumulated over 60 years, IFC is uniquely placed to give the private sector a central role in financing and delivering development solutions. The scale of this ambition, together with IFC’s objective of doing more in the poorest countries, based on new requires a new strategic framework — ​ which analytical and financial tools and approaches — ​ IFC is now rolling out.” For more than six decades, IFC IFC is uniquely placed to help for women by helping them access has been a leader in private deliver on this ambitious agenda, financial services, by supporting sector development — ​working given the knowledge we have female entrepreneurs as they with multinational, regional, and accumulated over 60 years. The expand their businesses, and by local companies to accelerate scale of this ambition, together fostering gender parity in the cor- growth and lift people out of with IFC’s objective of doing more porate world. We also increased poverty while promoting global in the poorest countries, requires our support for innovation and dis- competitiveness and standards for new approaches and new tools. ruptive technologies. our clients. Fiscal year 2017 was a We call this strategic framework banner year for IFC: We invested “IFC 3.0.” In FY17, our investment portfolio at record levels while intensifying grew by more than $3 billion to our focus on the most challenging A RECORD YEAR $55 billion. The size and diversity regions and markets and investing of this portfolio ensured that we a record amount to help address In my first full year at IFC, I saw delivered impact across different climate change. While we are many examples of our staff’s dimensions. For example, our proud of these results, we know we dedication, professionalism, drive, clients provided 2.4 million jobs, need to do much more. and creativity — ​ strong evidence delivered $411 billion in micro, small, of our ability to deliver. In the FY17 and medium loans, generated Two years ago, 193 countries context of strengthening growth power for 79 million people, endorsed the 2030 Agenda, includ- and improving market conditions provided gas to 60 million, and ing the Sustainable Development in developing economies, we distributed water to 14 million. Goals and the Paris Climate delivered a record $19.3 billion in Accord. It will take a vast increase financing to private companies in Working upstream, we continued in financing to achieve these 75 countries. This includes nearly to offer comprehensive advisory objectives, given current levels $7.5 billion in funds mobilized solutions to clients, especially in of poverty and the magnitude of directly from other investors, of fragile and conflict-affected areas other development challenges. which $531 million was made and IDA countries. In FY17, 63 per- Public resources alone are insuffi- available through IFC Asset cent of IFC’s advisory program cient. That’s why, at the Financing Management Company. was delivered to clients in IDA for Development Conference in countries and 20 percent in fragile Addis Ababa in July 2015, the Nearly a quarter of the financing and conflict-affected areas, while development community commit- we provided went to the poorest 26 percent was climate-related. ted to a new vision — ​ “From Billions countries — t ​ hose eligible to borrow In addition, almost a third of to Trillions,” in which the private from the World Bank’s International new advisory projects included a sector plays a central role in deliv- Development Association (IDA). focus on gender impact in proj- ering development solutions while Our climate-related investments ect design. public resources are used strategi- climbed to a record of nearly cally to develop projects, mitigate 25 percent of our financing. In risks, and enable the private sector addition, we increased our focus on to invest sustainably. creating economic opportunities markets in eligible countries. IFC Annual Report 2017 With the four facilities under the PSW — t ​ he Risk Mitigation Facility, the Blended Finance Facility, the Local Currency Facility, and the MIGA Guarantee Facility — t ​ otal- ing $2.5 billion, we will have new de-risking tools to address high- risk projects, and overcome the challenge of limited access to local-currency loans. These are innovative facilities to enable private sector investment in IDA countries. IFC will implement them on behalf of IDA, creating a stron- ger pipeline of transactions for ourselves and others to finance. A NEW STRATEGIC governments, the World Bank, FRAMEWORK MIGA, and development partners Through our mobilization efforts to catalyze market creation by and the investments from spon- Our strategy, “IFC 3.0,” is embed- establishing the necessary reg- sors and other co-investors, every ded in the Bank Group’s Forward ulatory and policy frameworks, dollar of IFC investment currently Look vision. It recognizes that to promoting private sector compe- contributes to $4 of financing for step up our game in the most dif- tition, encouraging the spread of development. IFC continues to ficult geographies and to achieve best practices and new technolo- innovate beyond our successful impact at scale, we must move gies, and building local capacity loan syndications and invest- from responding to demand to and skills. We have also launched a ments by IFC Asset Management working proactively — ​leveraging World Bank Group–wide approach Company in private equity. A the strengths of the entire World that calls for closer collaboration recent example is IFC’s Managed Bank Group and other develop- among our colleagues to maximize Co-Lending Portfolio Program ment partners — ​ to create markets, finance for development. We call for Infrastructure, which taps into and mobilize private sector this approach the “Cascade.” Bank private capital from insurance resources at a greater scale. To Group staff, working with our cli- 14 – 15 companies to finance a share of that end, we developed new ana- ents, will first seek private sector IFC’s portfolio of infrastructure lytical and financial tools and solutions to address development loans. Institutional investors hold approaches. challenges — ​ where such solutions large pools of money that could are advisable and can be effec- be made to work for development. New analytical tools and tive — ​and reserve public financing This model opens the door for approaches: Achieving develop- for projects only when other these funds. ment results has always been options are suboptimal. essential at IFC. Given the increas- IFC’s new strategic framework is a ing complexity of the issues our Advisory services are a critical part concrete response to the challenge client countries face, we have of IFC’s strategy to create markets of converting “Billions to Trillions” of strengthened our toolkit. We and mobilize private investments — ​ development finance. By starting developed a new framework — ​ especially in the poorest and to deploy the new tools given to us Anticipated Impact Measurement most conflict-affected areas of by our Board, by bringing greater and Monitoring, or AIMM — ​ to the world. This year, our Board analytical depth to our work, and enable us to better define, measure of Directors gave us additional by working more closely as a team and articulate the development tools and resources, agreeing to with our World Bank Group col- impact of each project and to reduce IFC’s annual transfer of net leagues, our clients and our other focus scorecards and incentives on income to IDA in order to launch partners, we will amplify our devel- the delivery of economic impact. the Creating Markets Advisory opment impact in the years ahead. Eventually, we will be able to judge Window. This three-year funding Through strong partnerships with and communicate our results not facility of up to $213 million will the private and public sectors, we only from an operational and address increased demand for IFC can enhance our power to create financial perspective but also Advisory Services, including for markets and improve the lives of from a development and portfolio upstream work in preparing project millions of people. perspective. pipelines and creating markets in IDA-eligible and fragile and con- To systematically look for and flict-affected countries. Creating Markets act upon opportunities to create markets and maximize finance for New financial tools and approaches: development, we have initiated The Board also approved the IDA18 country-level private sector diag- Private Sector Window (PSW), sup- Philippe Le Houérou nostics. These will help pinpoint porting our strategy of expanding IFC Chief Executive Officer where we can work together with private investment and creating Our Management Team Our leadership team ensures that IFC’s resources are deployed effectively, with a focus on maximizing development impact and meeting the needs of our clients. IFC’s Management Team benefits from years of development experience, a diversity of knowledge, and distinct cultural perspectives. The team shapes our strategies and policies, positioning IFC to create opportunities where they are needed most. Philippe Le Houérou IFC Chief Executive Officer IFC Annual Report 2017 Mohamed Gouled Jingdong Hua Saran Kebet-Koulibaly Vice President, Risk and Financial Vice President and Treasurer Vice President, Portfolio Management Sustainability Hans Peter Lankes Bernard Lauwers Nena Stoiljkovic Vice President, Economics and Vice President and Vice President, Blended Finance and Private Sector Development World Bank Group Controller Partnerships 16 – 17 Ethiopis Tafara Dimitris Tsitsiragos General Counsel and Vice President, Vice President, New Business ESG Sustainability and Compliance Risk Creating Markets Stephanie von Friedeburg Gavin E.R. Wilson Vice President, Corporate Strategy CEO, IFC Asset Management and Resources Company Creating Creating Opportu In an era of scarce public resources, a strong and engaged private sector is indispensable to ending poverty and boosting shared prosperity. That is where IFC comes in — ​ we know how to unlock private investment, creating markets and opportunities where they’re needed most. IFC Annual Report 2017 18 – 19 Creating Markets Markets, nities Unlocking Private Investment IFC Annual Report 2017 20 – 21 For six decades, IFC has been at the leading edge of mobilizing private capital for development — w ​ hich will be essential to achieve the Sustainable Development Goals. Our innovative platforms make it easier for investors — ​ ranging from commercial banks to insurance companies and sovereign wealth funds — ​to join us in accelerating development in challenging markets. Creating Markets Ending poverty is an We also introduced MCPP Infrastructure, a pioneering expensive undertaking: initiative to mobilize up to $5 billion the gap between what from insurance companies and other institutional investors for is needed and what investment in infrastructure projects in emerging markets. is available amounts The effort builds on the success to trillions of dollars of IFC’s $3 billion Managed Co-Lending Portfolio Program, each year. a loan-syndications initiative that enabled third-party investors to That is why the private sector must participate passively in IFC’s senior be involved. IFC plays a critical loan portfolio. role in building the platforms and creating the opportunities for the In another significant step for- private sector to accelerate devel- ward, we launched the IFC opment. We mobilize capital from Emerging Asia Fund, whose banks, sovereign funds, and inter- partners include a number of national financial institutions. By high-quality institutional investors. putting private capital to work, we The fund, which is managed by achieve far greater development IFC Asset Management Company, impact than we could on our own. will make equity and equity-like investments across all sectors in IFC mobilizes funds through two emerging markets in Asia. major platforms. The first, IFC Asset Management Company, IFC is increasingly using a prom- manages $9.8 billion in assets ising tool — ​blended finance — ​to through 13 investment funds, unlock private capital. Private including $2.3 billion from IFC. investors often avoid projects that The second, our loan-syndications involve untested approaches — o ​r program, has mobilized more are in markets perceived as too than $62 billion from more than risky. Blended finance entails 500 financing partners for proj- using small amounts of conces- ects in emerging markets since sional donor funds to mitigate its inception in 1959. At the end specific investment risks, opening of FY17, our syndications portfolio the door to far greater sums of totaled $16 billion. private investment. In FY17, we used $188 million of donor funds In FY17, IFC mobilized nearly to catalyze $726 million in private $7.5 billion for investment in investment. developing countries — ​including IFC client CIPREL hires many students from this vocational school in Côte d'Ivoire. more than $1.2 billion through public-private partnerships. We also created several multibillion-dollar platforms for private investors to join us to address the most urgent development challenges of our time. This year, we launched the world’s biggest green-bond fund dedi- cated to emerging markets. The $2 billion Green Cornerstone Bond Fund is aimed at unlocking private funding for climate-related proj- ects. IFC partnered with Amundi, Europe’s largest listed asset manager, to create the fund. IFC intends to invest up to $325 mil- lion, which the fund will use to buy green bonds issued by banks in developing countries. Amundi will raise the rest of the $2 billion from institutional investors worldwide. IFC Annual Report 2017 MOBILIZATION Creating Platforms to Accelerate Development CREATING MARKETS, CREATING OPPORTUNITIES Green Cornerstone 22 – 23 Bond Fund We launched the world’s first green-bond fund dedicated to emerging markets. Creating Markets LOCAL CAPITAL MARKETS Driving Sustainable Economic Growth CREATING MARKETS, CREATING OPPORTUNITIES IFC Social Bond Program Our $500 million benchmark bond is helping expand financing for women-owned enterprises. IFC Annual Report 2017 Strong local capital In March 2017, we launched a new Social Bond Program — b ​ y issuing markets are essential for a a $500 million global benchmark thriving private sector. bond to expand financing for women-owned enterprises and They help people and businesses low-income communities. The size obtain long-term financing. They of the issuance is expected to help encourage the kind of entrepre- deepen the market for a new but neurial risk-taking that fosters rapidly growing category of sus- innovation and accelerates job tainability bonds, which expand creation and economic growth. financing for environmental, social, They can shield entire economies and governance objectives. Our against potentially destabilizing new program merged two existing fluctuations in international finan- IFC bond products — t ​ he Banking cial markets. on Women Bond Program and the Inclusive Business Bond Program — ​ IFC plays a vital role in strength- that have raised $268 million ening local capital markets, and $296 million, respectively, introducing innovative tools to since 2013. unlock private sector funds for an array of important development We continued to deepen markets goals. We are often the first inter- for local-currency bonds. In the national nongovernment issuer of Dominican Republic, we issued local-currency bonds in developing the equivalent of $4 million in countries, helping to establish the bonds denominated in Dominican conditions that enable local mar- pesos — ​ our second “Taino” bond kets to grow and thrive. We help in less than five years. Proceeds developing countries draft policies of the six-and-a-half-year bond and regulations that build stronger will be invested in Banco de capital markets. Ahorro y Crédito Adopem, a lead- ing local microfinance institution, 24 – 25 This year, we launched the Joint to expand long-term lending to Capital Markets Program, which micro-entrepreneurs. leverages the collective expertise of World Bank Group institutions In Colombia, we helped to accelerate capital-markets Bancolombia issue the first-ever development wherever it’s needed green bond by a private financial most — b ​ eginning with Bangladesh, institution in Latin America. Egypt, Kenya, Morocco, Peru, The proceeds — e ​ quivalent to Vietnam, and the countries of will be used to finance $115 million — ​ the West African Economic and climate-smart projects in the Monetary Union. country, setting an example that could encourage other financial In October 2016, we issued a first- institutions in the region to of-its-kind bond to protect forests undertake similar bond issuances. and expand capital markets for carbon credits. The five-year IFC In all, IFC has issued bonds in Forests Bond, listed on the London 20 local currencies. We have also Stock Exchange, was sold to major provided nearly $23 billion in global institutional investors — ​ who local-currency financing across were given the option of getting 73 currencies — ​ through loans, repaid either in carbon credits or swaps, guarantees, risk-sharing cash. It raised $152 million to pre- facilities, and securitized products. vent deforestation and promote development in emerging markets. Creating Markets IFC's "Taino" bond program enabled Josefina Arnaud Jimenez to obtain financing for her farm. Driving Growth IFC Annual Report 2017 IFC focuses on sectors that have the potential to create the most jobs and distribute wealth most widely and evenly. We help the underserved gain access to finance. We help build human capital by improving the quality and availability of health care and education. We finance technology companies that are changing the world. 26 – 27 Creating Markets Across the world, about At the start of FY17, IFC completed a $150 million financing package 1 billion people live for the construction and operation without electricity. More of Panama’s first natural-gas-fired power plant — A ​ ES Colon. The than 800 million people 380-megawatt plant is expected to generate power that would oth- wake up every morning erwise be produced using heavy in slums, and an equal fuel and diesel. That would repre- sent a reduction of about 1 million number lack access to tons of carbon dioxide emissions clean water. each year — e​ qual to taking more than 200,000 cars off the road. These numbers tell us that infra- structure in developing countries In India, we played a critical role hasn’t kept up with population in the 750-megawatt REWA Ultra growth and the desire for better Mega Solar Limited, one of the living standards. Inadequate largest single-site solar plants. infrastructure also constrains busi- IFC helped the Indian government ness productivity and economic and the state of Madhya Pradesh growth — i ​n Africa, for example, design a robust project structure better infrastructure could boost and a transparent global auction productivity by 40 percent. to select a private developer. Solar tariffs are as cheap as coal tariffs, Modern infrastructure is indispens- and the energy generated will able in the fight to end poverty power metropolitan rail transpor- and boost shared prosperity. Since tation in New Delhi. 2007, IFC has invested nearly $29 billion in infrastructure, mobi- In many countries, the absence of lizing an additional $21 billion modern airports and other trans- from other investors. In fiscal year portation infrastructure can pose 2017 alone, IFC invested $3.1 billion, an obstacle to growth. To help over- including funds mobilized from come this in Greece, IFC provided other investors. Our clients helped €154 million to an international generate power for more than consortium that is modernizing and 79 million people in countries operating 14 airports. In a nation where such improvements are that has suffered a protracted desperately needed. recession, this work reenergizes the entire sector, boosting passenger Myanmar, for instance, has one of capacity by 20 percent and allow- the lowest electrification rates in ing the airports to serve 27.5 million the world: only a third of the coun- travelers in the next four years. try’s 50 million people have access to electricity. In Myingyan, in the To meet similar needs in Croatia, Mandalay region, IFC is supporting IFC supported the public-private the development of the country’s partnership that undertook a largest gas-fired power plant. The $450 million upgrade of the coun- $300 million, 225-megawatt proj- try’s Zagreb International Airport, ect is expected to supply electricity more than doubling the airport’s to more than 5 million people. passenger-handling capacity to 5 million a year. IFC Annual Report 2017 INFRASTRUCTURE Building a Strong Foundation for Prosperity CREATING MARKETS, CREATING OPPORTUNITIES Myanmar Power IFC is supporting the development of the country’s largest natural-​ gas-fired power plant. 28 – 29 Creating Markets Croatia’s $450 million terminal at Zagreb International Airport was built by an IFC-supported consortium. TECHNOLOGY Connecting Communities to Modern Solutions CREATING MARKETS, CREATING OPPORTUNITIES BlackBuck Our investment in an online truck- booking company is helping lower costs for shippers while raising drivers’ incomes. IFC Annual Report 2017 A text to a midwife. India’s BlackBuck — ​an online truck- booking company — s ​ hows how An Internet job search. technology drives development. A mobile money trans- Most Indian goods are shipped by road, but the $80 billion trucking action. An e-mailed industry is highly fragmented, with most trucks owned by drivers application for a small-​ or entrepreneurs who run less business loan. than five trucks each. Shippers, as a result, have difficulty finding Technology’s impact echoes trucks. BlackBuck, backed by a around the world in the sounds $10 million investment from IFC, is of millions of mobile-phone key- helping change that. BlackBuck’s strokes. But despite innovations online platform connects drivers that have enabled many com- of as many as 100,000 trucks with munities to leapfrog into the 21st shippers throughout the country, century, developing countries still increasing productivity, cutting trail developed nations in Internet logistics costs, reducing green­ and broadband penetration: as house emissions, and raising of 2016, more than half the global drivers’ incomes. population remained cut off from the Internet’s digital economy. In Mexico, we are helping reshape the telecommunications infra- Without technology, people in structure to bring technology remote, poverty-stricken regions to people in need. IFC provided have no access to bank accounts, advice on structuring a project health-care services, educational designed to reach remote areas opportunities, or small-business that are underserved by the loans — n​ o way to participate in three main mobile players today. the global marketplace. That’s why Subsequently, the China-Mexico IFC promotes progress through Fund, managed by IFC Asset 30 – 31 investments in the telecommunica- Management Company, partici- tions and information-technology pated in the creation of the new sector, in projects tailor-made for network, Red Compartida. The each area’s most pressing devel- new initiative will ultimately offer opment challenge. In FY17, we 4G LTE services to at least 92 per- invested $910 million in these ini- cent of the country. tiatives, including funds mobilized from other investors — e ​ xpanding We’re also eyeing Egyptian tech- our portfolio in this sector to more nology start-ups as a significant than $2.4 billion. source of jobs and innovation. This year we invested $10 million in Algebra Ventures, the country’s largest venture-capital fund, to help channel financing to technology start-ups. IFC’s equity investment will help Algebra provide funds for up to 25 up-and-coming businesses in e-commerce, financial services, and consumer Internet services. Creating Markets For more than a decade, To unlock opportunities for rural entrepreneurs in China, we teamed Damegul Abikhanova up with Ant Financial — a ​ n affili- ran a tailoring shop ate of the e-commerce company Alibaba — t ​ o invest $23 million in specializing in traditional one of the country’s largest micro- finance companies focused on Kazakh clothes — ​first in rural borrowers. With our support, rural Kazakhstan, then CFPA Microfinance aims to provide credit to 1 million borrowers over in the city of Almaty. the next three years. Business was good. But Abikhanova In Brazil, we arranged a $275 mil- saw the potential for more. lion financing package for Banco She applied for a loan from an IFC Daycoval to help the bank expand client — ​KazMicroFinance, or financing for SMEs — w​ ith 25 per- KMF, one of the few local lenders cent of the funds to be allocated focused on supporting female specifically to businesses headed entrepreneurs. KMF gave her the by women. $1,300 she needed to ramp up production and introduce new Housing finance is an important designs. “KMF helped me grow my area of our work. In the countries venture,” says Abikhanova. of the West African Economic and Monetary Union — B ​ enin, Burkina Access to basic financial services — ​ Faso, Côte d’Ivoire, Guinea-Bissau, a bank account, a mortgage, or an Mali, Niger, Senegal, and Togo — ​ insurance policy — i​s essential for banks issue few mortgages relative economic growth. It enables people to the estimated annual need and businesses to build assets, of 800,000 a year. This year, we increase income, and reduce finan- invested $2 million in the mortgage cial risks. Yet more than 2 billion company Caisse Régionale de adults lack a basic bank account. Refinancement Hypothécaire to More than 200 million small and help close the gap. medium enterprises can’t obtain the financing they need. IFC provides investment and advice to expand access to finance for millions of individuals and micro, small, and medium enterprises — ​ or SMEs. We work with a variety of partners — ​financial institutions as well as governments — t ​ o achieve wider impact than we could on our own. In FY17, our clients provided more than $351 billion in SME loans. We focus our efforts where the needs are greatest. IFC is also a leading investor in inclusive busi- nesses — ​those that offer goods, services, and job opportunities to low-income people. Since 2005, we have invested over $16 billion and worked with over 530 inclu- sive businesses in more than 90 countries. Damegul Abikhanova obtained financing from an IFC client to run a tailoring business. IFC Annual Report 2017 ACCESS TO FINANCE Helping Entrepreneurs Reshape Economies 32 – 33 CREATING MARKETS, CREATING OPPORTUNITIES Housing Finance Our investment in Caisse Régionale de Refinancement Hypothécaire is helping expand mortgages. Creating Markets More than three-quarters The result: Cambodia’s rice exports have grown tenfold since 2010, of the world’s poor live in reaching more than half a million rural areas, toiling on tiny metric tons last year and helping to lift millions out of poverty. plots of land that yield This year, we provided a barely enough to support $145 million financing package their family’s basic needs. to FrieslandCampina, one of the world’s largest dairy producers, Agriculture has the greatest poten- to help spur the development it tial to lift them out of poverty — ​ of Pakistan’s dairy industry. Our is much more effective than other investment enabled the company sectors in raising incomes among to acquire a majority stake in the very poor. But formidable Pakistan’s top dairy producer, Engro obstacles stand in the way of Foods, with the goal of expand- many small farmers: their techno- ing production. Our investment is logy is outdated, their seeds are expected to create opportunities low-yielding, and their access to for up to 200,000 farmers by 2020. finance is limited. We invested $35 million in IFC helps open new markets for Belagrícola, a Brazilian grain orig- farmers. We help agribusinesses inator and supplier of agricultural adopt sustainable methods, reduce inputs such as fertilizers, pesticides, waste, and boost productivity. and seeds. The financing will help We provide training and develop the company expand its operations products that protect farmers in southern Brazil, enabling it to against a variety of financial risks. provide inputs, pre-harvest finance, In FY17, our investments in agri- and technical assistance to around business and forestry totaled more 15,000 small and medium farmers. than $1.7 billion, including funds mobilized from other investors. In Kenya, our advice is helping Our investments in climate-smart introduce new approaches to agriculture totaled more than boost production and incomes. $800 million. Our clients created We agreed recently to finance the opportunities for more than 3 mil- construction of a series of small lion farmers. hydropower plants close to the tea-growing areas of the Kenya Our approach is comprehensive. Tea Development Agency, a For the past seven years, for co-operative consisting of more example, IFC has worked to help than 500,000 small farmers. The Cambodia regain its position as a run-of-river plants are cutting major exporter of high-quality fra- power costs and helping boost grant rice. Working with the World Rice harvest operations in progress in Cambodia’s Battambang Province. incomes for the co-op’s members. Bank, we advised the government on how to improve the investment climate for agribusinesses and small farmers. We helped boost industry standards, streamline export procedures, and improve the efficiency of rice millers and re-processors. We invested in local banks and microfinance institu- tions to increase financing options for rural enterprises and farmers. IFC Annual Report 2017 AGRIBUSINESS Opening New Markets for Farmers and Agribusinesses 34 – 35 CREATING MARKETS, CREATING OPPORTUNITIES Cambodia Rice IFC helped Cambodia achieve a tenfold increase in rice exports and regain its position as a major exporter. Creating Markets HUMAN CAPITAL Expanding Access to Health Care and Education CREATING MARKETS, CREATING OPPORTUNITIES TechEmerge This innovative IFC program helped introduce a cutting-edge app to improve diabetes care in India. IFC Annual Report 2017 At 33, Tatiana Megrelishvili In India, we invested in two pro- viders that are expanding health was told she needed a liver care to the remotest corners of transplant. Without it, the country. IFC and IFC Asset Management Company provided her life expectancy was $67 million to a subsidiary of Apollo Hospital Enterprise Limited 12 months. But she faced to help the company open nearly a daunting challenge: 1,000 medical facilities, labora- tories, and specimen-collection the procedure had never centers across India. We also been performed in her invested $9.1 million in Regency Hospital Limited to help the com- country, Georgia. pany open four new hospitals and install 15 new dialysis centers in the “I accepted my fate and assumed state of Uttar Pradesh. I would die,” says Megrelishvili, a librarian. In South Africa, we invested $22 million in ADvTECH, which Her life was saved by a chain of runs Rosebank College and hospitals backed by IFC — E​ VEX other institutions that provide Medical Corporation, Georgia’s education to underprivileged largest private health-care com- students. Our investment will pany. Over the past decade, EVEX allow ADvTECH to provide better has systematically introduced education to 30,000 additional sophisticated medical services students in South Africa while that previously were unavailable in expanding into new markets in the country. sub-Saharan Africa, starting with Botswana, Ghana, and Kenya. But this problem extends far beyond Georgia. Access to afford- Through TechEmerge — a ​ n inno- 36 – 37 able health care and education are vative IFC program that brings crucial to the global effort to end new technologies to emerging poverty and boost shared prosper- markets — ​we focused on improv- ity. Each year, the steep costs of ing health care in India. We linked health care drive 100 million people 17 technology companies with into poverty. Education offers a 15 Indian health-care providers — ​ reliable path out of poverty — ​yet together, these companies are 57 million children in developing now implementing a variety of countries remain out of school. technologies. IFC works to close these gaps. In For instance, IFC helped link FY17, we provided $929 million WellDoc, a U.S. technology com- in financing to businesses in the pany, with Max Healthcare, a local health and education sectors, health-care company, to provide including funds mobilized from diabetes patients with an app A consultation in progress at an EVEX Polyclinic in Tbilisi, Georgia. other investors. Our clients helped that monitors glucose levels and provide education for 4.9 million allows them to interact instantly students and delivered health care with doctors. By 2040, diabetes for 34 million patients. is expected to affect 123 million people in India. Creating Markets Sustainability is at the heart of everything we do — b ​ ecause the world’s future depends on it. Poverty cannot be eliminated — ​and climate change cannot be contained — ​ by pursuing profitability and growth at the expense of people and the environment. For decades, IFC has helped our clients conduct business in ways that protect the environment and benefit all segments of society. IFC Annual Report 2017 38 – 39 Creating Markets Sustainability Promoting Only a few decades ago, ​ anks of our financial clients — b and private-equity funds — ​ to environmentalism was integrate IFC’s standards into their less buzzword than bad operations. word — ​particularly in the Stock exchanges increasingly rely on these standards to boardroom. Profits took construct sustainability indexes — ​ priority when it came a trend that could influence how institutional investors allocate to financing projects. $120 trillion in assets. Our advice The impact on the local is helping exchanges in Mexico, Colombia, Peru, and Chile to build community and the sustainability indexes based on environment? That was the IFC environmental, social, and governance framework. We advise for others to manage. policymakers on best practices in governance, and environ- As emerging markets began mental and social sustainability. to flourish in the 1990s, IFC and We established — ​and led — ​the several international banks — ​ Sustainable Banking Network, Credit Suisse, Citigroup, and which brings together banking Barclays among them — r ​ ecognized associations and regulators in that development would become 32 developing countries to formu- unsustainable if it came at the late policies to boost green finance. expense of social and environmental Collectively, these countries needs. IFC was among the first account for more than $42 trillion to forge a path toward responsible in bank assets. growth — u​ sing the power of finance to do so. “If you were an investment analyst 10 years ago and pulled up a In 2006, we introduced the IFC Bloomberg or Reuters terminal Performance Standards (see looking for information on key envi- page 94) — ​which spell out how ronmental, social, and governance IFC and our clients can devise factors for major companies, solutions that are good for busi- you would get a blank screen,” said ness, good for investors, and Graham Sinclair, a principal at good for the environment and Sustainable Investment Consulting local communities. Since then, in Boston. an estimated $4.5 trillion in emerging-markets investments “Today, you can find data points have adhered to IFC’s standards, for environmental, social, and or principles inspired by them. governance criteria for companies all around the world,” he said. “This Today, our standards are a global is a real mark of how far we have benchmark for sustainability come collectively — ​ thanks in part practices. Ninety-one financial to the work of IFC and its partners. institutions in 37 countries adopted We can now invest using these the Equator Principles, which are data points and make decisions as based on these standards. Other if the future matters — c​ onsidering leading development institu- all factors, including the people tions — ​including the European and the planet.” Bank for Reconstruction and Development and the Asian Development Bank — ​adopted practices rooted in our standards. IFC’s framework for managing corporate-governance risks has been adopted by 34 development finance institutions for use in their investment processes. We also work to strengthen the capacity Workers at an organic farm in Lebanon. Sustainable farming is a focus area for IFC. IFC Annual Report 2017 SUSTAINABILITY A Decade of IFC Leadership 40 – 41 CREATING MARKETS, CREATING OPPORTUNITIES IFC Performance Standards $4.5 trillion in emerging-markets investments adhere to IFC’s standards or principles inspired by them. Creating Markets CLIMATE BUSINESS A $23 Trillion Opportunity for Sustainable Growth CREATING MARKETS, CREATING OPPORTUNITIES Argentina Electricity We helped the national government on an innovative initiative to expand the use of renewable energy. IFC is helping Argentina generate 20 percent of its electricity through renewable energy by 2025. IFC Annual Report 2017 Climate change is a In Argentina, we supported a government initiative called global threat. But as RenovAR — ​ which aims to generate temperatures rise, 20 percent of the national elec- tricity supply from renewable and cycles of flood and energy by 2025. Our involvement helped RenovAR projects meet drought intensify, international standards and attract developing countries financing. The World Bank pro- vided $480 million in guarantees to will be the worst hit. reduce risks for investors. The first renewable-energy auction, which The Paris Agreement and the aimed to attract 1,000 megawatts commitment of nations across worth of new projects, closed with the world to contain rising tem- bids for more than six times that peratures to 2 degrees Celsius has amount — a ​ signal of confidence opened up an enormous market from local and international for technologies that mitigate 42 – 43 developers. climate change. IFC’s Climate Investment Opportunities Report, In Turkey, we purchased the equiv- released in November 2016, iden- alent of $150 million of covered tified $23 trillion in investment mortgage bonds issued by Garanti opportunities in emerging markets Bank. Proceeds of the bonds — ​ the by 2030. first of their kind in the country — ​ are being used to support the IFC plays a key role in advancing development of energy-efficient climate solutions led by the pri- buildings in the residential sector. vate sector. Since 2005, we have provided advice and invested In China, we agreed to advise more than $18 billion in long-term Agricultural Bank of China — ​ the financing for renewable power, world’s third-largest bank by asset energy efficiency, sustainable ​ n its effort to expand its size — o agriculture, green buildings, and green-finance portfolio by at least private sector adaptation to cli- $23 billion by 2019. The program mate change. In FY17 alone, we is expected to reduce greenhouse provided more than $4.7 billion in emissions by 50 million metric tons climate-smart financing, including a year over the next three years — ​ more than $1.7 billion mobilized equivalent to taking more than from other investors. 10 million cars off the road. We are not stopping there. IFC In the Balkans, where banks, has pledged to step up our regulators, and local entre- climate investments to a goal of preneurs once lacked the 28 percent of annual commitments experience to expand production for our own account, while moving of renewable energy, we com- Creating Markets to mobilize an additional $13 billion pleted a seven-year advisory of financing from the private project that has facilitated more sector by 2020. than $1 billion in financing and developed 500 megawatts of Over the past year, we played sustainable power. a key role in several landmark climate-​smart projects. Women have the power We help businesses identify potentially transformative market to transform the global opportunities. By 2030, insur- economy. Yet, globally, ance companies could earn up to ​ alf of it in 10 emerg- $1.7 trillion — h only 55 percent of women ing economies — b ​ y focusing their efforts on women, according to a participate in the paid study we conducted with AXA and labor force. If they Accenture. Following the study, we developed projects in India and participated at the same Nigeria that are helping insurance rate as men, economic companies address the needs of women at different stages of their output could be boosted lives. The projects are expected to by as much as a third. lead to a 30 percent increase in female clients by 2019. Such participation would yield benefits stretching across gener- We help expand jobs for women ations. Women tend to allocate in nontraditional sectors. Our more of their income to food, Powered by Women initiative in health care, and education — ​with Myanmar is helping increase outcomes that benefit their chil- opportunities for women in sectors dren and whole communities. such as hydropower — i ​ncluding by opening up jobs for women That is why IFC works to promote in leadership positions. IFC also gender inclusion. We provide strives to appoint women as investment and advice to our directors of companies in which clients across the world, helping we invest. them by creating opportunities for women — a ​ s consumers, as We helped build a market for entrepreneurs, as employees, off-grid solar products by focus- and as business leaders. In FY17, ing on women as distributors in our clients provided 747,000 jobs our Lighting Asia/India program. for women and educated about Working with Frontier Markets, a 1.6 million female students. clean-energy distribution com- pany, we established an initial Expanding access to finance network of 250 women distrib- for women is key. Our Banking utors. Frontier Markets now on Women program — w ​ hich pro- plans to expand the network to vides financing and expertise 20,000 women by 2020. has to financial institutions — ​ invested more than $1.5 billion to support women-led small and medium enterprises in 26 emerg- ing markets. The program has been strengthened in recent years through partnerships we have formed with global financial insti- tutions — ​including the $600 million Women Entrepreneurs Opportunity Facility, which we established in partnership with the Goldman Sachs 10,000 Women initiative. A food vendor in Myanmar. Economic growth increases when more women enter the workforce. IFC Annual Report 2017 GENDER Expanding Women’s Economic Potential CREATING MARKETS, CREATING OPPORTUNITIES 44 – 45 Lighting Asia/India IFC helped Frontier Markets establish a network of women distributors for solar products. The company aims to expand the network to 20,000 women by 2020. Creating Markets Creating Opportunities IFC Annual Report 2017 We are concentrating our efforts 46 – 47 wherever poverty is most entrenched, and wherever our support can do the most good: in the poorest and most conflict-prone areas of the world, and in Africa, South Asia, and the Middle East. We create opportunities for people to ​ y gaining access improve their lives — b to good jobs, affordable credit, reliable power, and clean water. Creating Markets IDA AND CONFLICT-AFFECTED AREAS Ending Poverty in Challenging Conditions CREATING MARKETS, CREATING OPPORTUNITIES Bangladesh Power We provided financing to help support the country’s second- biggest power project. IFC Annual Report 2017 Around 1.3 billion We helped create the IDA Private Sector Window to expand private people — ​ nearly a fifth of investment in IDA countries — ​ with the world’s population — ​ an emphasis on conflict-affected areas. The $2.5 billion facility live in the poorest includes risk-mitigation tools to stimulate private capital flows. countries, those eligible It is expected to attract an to borrow from the World additional $6 billion to $8 billion in private investment in IDA and Bank’s International conflict-affected countries. We Development Association. also launched the Creating Markets Advisory Window to support By 2030, nearly half the implementation of the IDA Private world’s extremely poor Sector Window over the next three years and respond to the growing people will be in areas torn need for advisory solutions in by conflict and violence — ​ these countries. a threefold increase In Afghanistan, we helped broker over today. an agreement to build the coun- try’s first privately financed power These are places where poverty plant. The 50-megawatt plant, is hardest to eradicate. Public near the city of Mazar-e-Sharif, institutions are often ill-equipped will supply electricity to 1 million to deal with the challenge, and Afghans and boost domestic recurring cycles of conflict or insta- power generation by 20 to bility leave little opportunity for 30 percent. It will mark a major private enterprises to grow and achievement for Afghanistan, create jobs. which imported an estimated 80 percent of its electricity 48 – 49 It will take a systematic approach last year. to end poverty there. IFC is at the forefront of the effort to implement In Papua New Guinea, where the most promising strategies — ​ about 80 percent of the popula- those that help governments tion has no access to electricity, strengthen institutions, put in place IFC’s Lighting PNG program is the conditions for markets and helping global solar manufacturers private entrepreneurship to thrive, ​ y provid- enter the local market — b and mobilize every available dollar ing business connections, market of capital to accelerate sustainable information, and education for development. consumers. Since 2014, more than 1.3 million people have gained In FY17, IFC’s long-term investment access to energy services. commitments in IDA countries totaled nearly $4.6 billion, including In Bangladesh, where 40 percent funds mobilized from other of the population has no access investors. More than 60 percent to electricity, we arranged a of our advisory program is in $165 million financing package for these countries. In addition, Sembcorp Utilities, a subsidiary of IFC has contributed more than the Singapore-based Sembcorp $3.6 billion since 2007 to support Industries. The financing will help IDA’s work. Our investments in Sembcorp set up a 414-megawatt fragile and conflict-affected the second-biggest power plant — ​ areas totaled $886 million in FY17, project in Bangladesh. including funds mobilized from other investors. About 20 percent of IFC advisory programs was in Creating Markets such areas. SUB-SAHARAN AFRICA Bringing Progress to Half the World’s Poor IFC client CIPREL operates the largest thermal power station in Côte d’Ivoire. IFC Annual Report 2017 Janet Nangobi Suda has more than 250,000 jobs, created opportunities for more than a small chicken farm in 800,000 farmers, and treated Busembatia in eastern more than 560,000 patients. One-third of our global advisory Uganda. Until recently, program was in the region. contaminated water — ​ Amid one of the region’s worst drawn from swamps and famines since 1945, we provided an $11 million financing package boreholes — ​was killing to help Insta Products expand or sickening the chickens. production of a high-protein paste used to feed people suf- Even worse, children in fering from acute malnutrition. the town were falling sick, Close to 70 percent of Insta’s products are being used to treat and people were forced drought-related malnutrition in to walk great distances to Kenya, Somalia, South Sudan, and Uganda. IFC’s investment fetch clean water. will help Insta serve an additional 350,000 people annually. The situation improved when a small-scale public-private partner- We made an equity investment ship structured by IFC helped bring of €5.42 million in Mobisol, a clean piped water into the com- leading vendor of distributed off- munity. Today, the town’s residents grid solar systems. The money no longer depend on remote and will help the company’s growth unreliable water sources. About in Kenya, Rwanda, and Tanzania. 700 distribution stations provide Our investment and advice have an uninterrupted water supply to enabled Mobisol to install more thousands of people. than 67,000 solar lighting systems 50 – 51 throughout East Africa, delivering Sub-Saharan Africa is home to half clean and affordable energy to of all people in extreme poverty. 330,000 people. It also has the largest number of countries torn by conflict and In Zambia, IFC and the OPEC Fund instability, adding layers of com- for International Development plication to the fight against invested $10 million each in poverty. IFC helps address these Metalco Industries Company challenges by working with the Limited, which recycles scrap metal private sector to modernize infra- to manufacture copper cables, structure, strengthen local capital aluminum sheets, and utensils. markets, and promote sustainable We also helped Metalco become development. investment-ready and advised it on environmental and social issues, In FY17, our long-term investments energy efficiency, quality control, in sub-Saharan Africa totaled and corporate governance. In addi- about $3.5 billion, including nearly tion to Metalco, IFC has invested $1.2 billion mobilized from other over $80 million in Zambia’s private investors. Our clients supported sector, in projects that support agribusiness, financial services, infrastructure, and social services. In Ghana, we provided a $300 mil- lion financing package for the CREATING MARKETS, Sankofa natural-gas project, which CREATING OPPORTUNITIES will fuel up to 1,000 megawatts of Sankofa Natural Gas power — a ​ bout 40 percent of the country’s generation capacity. The Creating Markets In Ghana, we supported a project that will account for project is expected to make energy 40 percent of the country’s more affordable while creating power-generation capacity. 1,500 construction jobs, increasing government revenues, and lower- ing greenhouse emissions. For 15 years, Ravi Saini provided nearly 500,000 jobs, treated 22.5 million patients, and sold fruits from the created opportunities for more small pushcart he parks than 615,000 farmers. every day on the same This year, we invested $125 million in equity in Hero stretch of road in Jaipur, Future Energies, alongside the the capital city of India’s IFC Global Infrastructure Fund, which is managed by IFC Asset Rajasthan state. Management Company. Hero will set up 1 gigawatt of solar and Until recently, he wound up busi- wind plants across India in the ness at sundown. Now he stays next 12 months and aim for 2.7 GW open until 11 p.m. — ​and the extra of renewable-energy capacity income is changing his life. “There by 2020. is so much bright light on the streets,” Saini says. “I didn’t expect In Bangladesh, we helped organize it would make a difference to my a $175.5 million financing pack- business but it has. It is easier for age for Summit Group, a local people to spot me now and they independent power producer. stop their vehicles to buy my fruits.” The investment will enable the Summit Group to install several This improvement was made electricity-generation plants, possible by an IFC-facilitated including a 500-megawatt dual- project to modernize Jaipur’s fuel combined-cycle gas turbine streetlights. We helped the gov- power plant. ernment of Rajasthan structure a competitively bid public-private In Nepal, which is vulnerable to partnership that converted the earthquakes, we helped the gov- city’s dim and failure-prone street- ernment achieve reforms that are lights to modern energy-efficient strengthening entrepreneurship LED lighting. The result? Energy and bolstering resilience to nat- consumed by Jaipur’s streetlights ural disasters. We helped set up declined by 70 percent, and light- an online business-registration ing levels improved. system that made it easier to start a new business. We also helped South Asia, where a third of the the government move critical data world’s poor live, is an area of online — t ​ o that key ​ o the cloud — s great contrasts. Its economic information remains accessible in growth rate of 7 percent is among a crisis. Our efforts also helped the fastest in the world. Yet across cut the time needed to issue con- national boundaries power is struction permits to an average erratic, road and transport infra- of 41 days — ​ down from 240 days structure is poor, and health care in 2010. is inadequate. That’s why we are especially focused on the region. In FY17, we provided about $2.8 billion in financing for businesses in South Asia, including $817 million mobilized from other investors, expanding our portfolio in the region to more than $7.5 billion for our own account. Our clients dis- tributed gas to 1.5 million people, IFC's Lighting Asia/India initiative is bringing solar-powered lighting to some of India's most energy-poor states. IFC Annual Report 2017 SOUTH ASIA Bridging the Economic Divide 52 – 53 CREATING MARKETS, CREATING OPPORTUNITIES Jaipur Street Lighting An IFC-supported public-private partnership helped make this Indian city brighter by night — ​ and more energy-efficient. Creating Markets IFC client Hassan Allam is building one of the Middle East's largest water-treatment plants. Creation MIDDLE EAST AND NORTH AFRICA Ramping Up Growth and Job IFC Annual Report 2017 When her husband died We invested $1 million in the Ibtikar Fund, a Palestinian venture capital in 2014, Rana Mansour fund that focuses on technology worried about how to which play a key role in start-ups — ​ boosting productivity and driving support herself and her long-term economic growth. The investment will help Ibtikar attract six children in the Shatila an additional $12 million from refugee camp in northern other funds to finance 25 start-ups in the West Bank and Gaza over Lebanon. the next five years. “I needed to find a job,” says Mansour, In Jordan, we agreed to invest up who is 37. She decided to start a to $75 million in a 485-megawatt small embroidery business, which gas-fired power plant in the Zarqa she expanded quickly — ​ with help Industrial Zone. It is expected to from Al Majmoua, an IFC client serve 620,000 residential cus- that was one of the few micro­ tomers a year, delivering power finance institutions willing to lend to at about a third of the current women in the camp. The $500 loan average cost. Working along- Mansour received from Al Majmoua side the Multilateral Investment helped her expand into selling Guarantee Agency, we also mobi- clothes and scarves. Her increased lized $200 million in financing from income is now helping her take a consortium of lenders. care of her children’s education. In Egypt, our $20 million invest- IFC is committed to pursuing ment in Hassan Allam Holding is private-sector-led job creation and allowing one of the country’s larg- economic diversification through- est private construction companies out the Middle East and North to modernize infrastructure and Africa, where conflict and instabil- create jobs. Hassan Allam, which 54 – 55 ity have forced 15 million people employs more than 16,000 people, to flee their homes and given rise to specializes in large-scale infra- the biggest refugee crisis since structure projects such as power World War II. We invested more plants, roads, and water-treatment than $1.4 billion in the region in plants. Our support will help build FY17, including $490 million mobi- key infrastructure facilities and will lized from other investors. Our be an important source of con- clients provided jobs for nearly struction jobs. 119,000 people, health care for more than 2.3 million, and educa- To help address Pakistan’s severe tion for nearly 12,000 students. power shortages and spur growth, we provided $100 million for the 720-megawatt Karot run-of-river hydropower facility. The plant is expected to provide affordable and clean power to about 3 mil- lion residential customers. IFC’s support for the $1.7 billion project CREATING MARKETS, marks our first project-finance CREATING OPPORTUNITIES engagement with China Three Gorges Corporation, one of the Egypt Construction world’s largest renewable-power Our investment in Hassan Allam companies, which is develop- will help build key infrastructure ing projects that aim to provide and support thousands of jobs. electricity to more than 11 million Pakistanis. Creating Markets IFC Year in Review In FY17, IFC invested $19.3 billion, including nearly $7.5 billion mobilized from other investors. Our comprehensive approach helped businesses innovate, build internationally competitive industrial sectors, and create better jobs. EAST ASIA AND EUROPE AND LATIN AMERICA THE PACIFIC: CENTRAL ASIA: AND THE CARIBBEAN: $2.9 $3.3 BILLION BILLION $5.3 BILLION in long-term in long-term investment investment in long-term commitments commitments investment commitments 57.9 6.8 MILLION MILLION $115 MILLION people supplied people gained with gas access to power in financing facilitated for infrastructure 15 3.3 through public- private partnerships MILLION MILLION micro and SME loans provided, patients cared for 2 totaling nearly MILLION $205 million 31 students educated POLICY REFORMS $1 BILLION in 10 countries to support growth and $12.6 promote investments BILLION in financing facilitated in goods and through financial services purchased infrastructure from domestic development suppliers $55 IFC Annual Report 2017 BILLION Portfolio for IFC’s own account 56 – 57 MIDDLE EAST AND SOUTH ASIA: SUB-SAHARAN NORTH AFRICA: AFRICA: $2.8 $1.4 BILLION $3.5 BILLION BILLION in long-term in long-term investment in long-term investment commitments investment commitments commitments 65.2 $343 MILLION 811,000 MILLION non-cash retail farmers benefited in new financing transactions for firms with facilitated, totaling improved corporate governance $2.7 billion 40 practices MILLION 24 people gained 2.3 MILLION access to power MILLION people gained patients cared for access to power 73 POLICY REFORMS 23 $1.6 MILLION in 31 countries to Creating Markets support growth and BILLION promote investments patients cared for in tax payments to governments FY17 Long-Term Commitments FY17 Long-Term Dollar amounts in millions, for IFC’s own account as of June 30, 2017 Commitments by Total $ 11,854 100.00% Environmental and By Industry Social Category Financial Markets $ 5,862 49.45% Infrastructure $ 1,705 14.38% COMMITMENTS NUMBER OF CATEGORY ($ MILLIONS) PROJECTS Agribusiness & Forestry $ 1,155 9.75% Manufacturing $ 989 8.34% A 1,393 22 Health & Education $ 692 5.84% B 3,792 126 Oil, Gas, & Mining $ 435 3.67% C 245 40 Tourism, Retail & Property $ 429 3.62% Funds $ 356 3.00% FI* 48 5 Telecommunications & FI-1 614 7 Information Technology $ 232 1.96% FI-2 4,262 100 By Region $ millions1 FI-3 1,500 42 Latin America and the Total 11,854 342 Caribbean $ 2,693 22.72% Sub-Saharan Africa $ 2,323 19.59% FI category applies to new commitments * on previously existing projects. Visit Europe and Central Asia $ 2,084 17.58% www.ifc.org/escategories for information South Asia $ 1,982 16.72% on category definitions. East Asia and the Pacific $ 1,738 14.66% Middle East and North Africa $ 951 8.03% Global $ 84 0.71% IFC’s Largest 1. Some amounts include regional shares of investments that are officially classified as Country Exposures1 global projects. June 30, 2017 (Based on IFC’s Account) By Product GLOBAL COMMITTED % OF RANK PORTFOLIO GLOBAL Loans1 $ 9,643 81.34% COUNTRY ($ MILLIONS) PORTFOLIO Equity2 $ 1,601 13.50% Guarantees $ 540 4.56% 1 India 5,602 10.18% Risk-management products $ 71 0.60% 2 Turkey 4,405 8.01% 1. Includes loan-type, quasi-loan products. 3 China 3,211 5.84% 2. Includes equity-type, quasi-equity products. 4 Brazil 2,689 4.89% 5 Nigeria 1,558 2.83% FY17 Committed Portfolio 6 Pakistan 1,294 2.35% Dollar amounts in millions, for IFC’s own account as of June 30, 2017 7 Mexico 1,293 2.35% Total $ 55,015 100% 8 Indonesia 1,280 2.33% 9 Bangladesh 1,188 2.16% By Industry 10 Colombia 1,111 2.02% Financial Markets $ 18,615 34% 1. Excludes individual country shares of Infrastructure $ 10,691 19% regional and global projects. Manufacturing $ 5,319 10% Funds $ 4,412 8% Agribusiness & Forestry $ 3,802 7% Trade Finance $ 3,215 6% Health & Education $ 2,564 5% Oil, Gas, & Mining $ 2,469 4% Tourism, Retail & Property $ 2,041 4% Telecommunications & Information Technology $ 1,888 3% By Region Latin America and the Caribbean $ 12,023 22% Europe and Central Asia $ 9,881 18% Sub-Saharan Africa $ 9,081 17% East Asia and the Pacific $ 8,801 16% South Asia $ 7,553 14% Middle East and North Africa $ 5,935 11% Global $ 1,741 3% Amounts include regional shares of investments that are officially classified as global projects. Weighted FY17 Investment Services DOTS Score IFC Annual Report 2017 and Unweighted by Industry Investment IFC Total 828 (31,526) 55% Services DOTS Health & Education Funds 53 (1,529) 104 (1,763) 60% 60% Scores Agribusiness & Forestry 95 (2,642) 59% Financial Markets 240 (12,118) 58% FY17 Manufacturing 83 (3,425) 54% Infrastructure 144 (6,422) 54% 828 55% Oil, Gas & Mining 21 (1,621) 48% $31,526 69% Telecommunications & FY16 Information Technology 38 (842) 37% 834 58% Tourism, Retail & Property 50 (1,165) 34% $32,751 68% Numbers at the left end of each bar are the total number of companies rated and the FY15 total IFC investment (US$ millions) in those projects at the end of FY17. 820 63% $30,973 72%    Unweighted    Weighted FY17 Investment Services DOTS Score Numbers at the left end of each bar by Region for unweighted DOTS score are the total number of companies rated. Numbers IFC Total 828 (31,526) 55% at the left end of each bar for weighted East Asia and the Pacific 109 (5,504) 59% DOTS score represent total IFC investment Europe and Central Asia 159 (7,361) 56% (US$ millions) in those projects Latin America and the Caribbean 173 (6,807) 54% South Asia 118 (3,567) 54% Sub-Saharan Africa 166 (4,456) 53% Middle East and North Africa 83 (3,191) 51% Numbers at the left end of each bar are the total number of companies rated and the 58 – 59 total IFC investment (US$ millions) in those projects at the end of FY17. FY17 Advisory Services Program Expenditures Dollar amounts in millions Total 245.7 100.0% By Region Sub-Saharan Africa 82.2 33.5% East Asia and the Pacific 40.6 16.5% Europe and Central Asia 35.0 14.3% South Asia 27.2 11.1% Latin America and the Caribbean 24.9 10.1% Middle East and North Africa 21.6 8.8% Global 14.2 5.8% By Business Area Financial Sector 70.1 28.6% Investment Climate 63.3 25.7% Cross-Industry Areas 43.5 17.7% Public-Private Partnerships 33.5 13.6% Energy & Resource Efficiency 20.3 8.3% Agribusiness 15.0 6.1% Creating Markets World Bank Group 2017 Summary Results The Institutions of the World Bank Group IFC Annual Report 2017 The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries, consisting of five institutions with a common commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD) Lends to governments of middle-income and creditworthy low-income countries. INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA) Provides interest-free loans, or credits, and grants to governments of the poorest countries. INTERNATIONAL FINANCE CORPORATION (IFC) Provides loans, equity, and advisory services 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. 60 – 61 World Bank Group Financing for Partner Countries By fiscal year, millions of dollars World Bank Group 2013 2014 2015 2016 2017 Commitmentsa 50,232 58,190 59,776 64,185 61,783 Disbursements b 40,570 44,398 44,582 49,039 43,853 IBRD Commitments 15,249 18,604 23,528 29,729 22,611 Disbursements 16,030 18,761 19,012 22,532 17,861 IDA Commitments 16,298 22,239 18,966 16,171 19,513c Disbursements 11,228 13,432 12,905 13,191 12,718c IFC Commitmentsd 11,008 9,967 10,539 11,117 11,854 Disbursements 9,971 8,904 9,264 9,953 10,355 MIGA Gross issuance 2,781 3,155 2,828 4,258 4,842 Recipient-Executed Trust Funds Commitments 4,897 4,225 3,914 2,910 2,962 Disbursements 3,341 3,301 3,401 3,363 2,919 Creating Markets 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. Figures include the commitment and disbursement of a $50 million grant for the Pandemic Emergency Financing Facility. d. Long-term commitments for IFC’s own account. Does not include short-term finance or funds mobilized from other investors. World Bank Group Global Commitments The World Bank Group maintained its support for developing countries over the past year as the organization focused on delivering results more quickly, increasing its relevance for its clients and partners, and bringing global solutions to local challenges. $61.8 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. $9.7 IFC Annual Report 2017 BILLION LATIN AMERICA AND THE CARIBBEAN $9.5 BILLION EUROPE & CENTRAL ASIA $9.7 BILLION EAST ASIA & THE PACIFIC 62 – 63 $16.2 BILLION SUB-SAHARAN AFRICA $7.1 BILLION MIDDLE EAST & NORTH AFRICA $9.6 Creating Markets BILLION SOUTH ASIA About Us IFC strives to deliver what cannot be obtained elsewhere. We call that special edge our “additionality.” Using it to maximize our development impact is a cornerstone of our strategy. 65 Measuring Up 84 Our Staff 66 How We Help End Poverty 86 Our Governance and Boost Shared Prosperity 88 Accountability 67 IFC’s Performance in Key Areas 89 Partnerships 68 Our Expertise 91 Portfolio Management 69 Where We Work 92 Managing Risks 70 What We Do 94 Our Sustainability Framework 74 Our Industry Expertise 96 Independent Assurance Report 76 Our People & Practices on a Selection of Sustainable Development Information 77 Understanding our Development Impact 100 Financial Performance Summary IFC Annual Report 2017 Measuring Up We measure our success by the 64 – 65 difference we make in the lives of people in developing countries — ​ and the advances we make in addressing the world’s toughest development challenges. Creating Markets How We Help End Poverty and Boost Shared Prosperity Our activities are guided by our determination to create markets and mobilize private capital wherever they are needed most. 1 2 Expand our activities in focus regions — ​wherever Strengthen industries linked to productivity poverty and fragility growth, job creation, is greatest. and inclusion. 3 4 Help address climate change and promote Strengthen local capital markets and mobilize environmental and social private capital. sustainability. IFC’s Performance in Key Areas IFC Annual Report 2017 Focus Regions INDICATOR FY17 FY16 Middle East and North Africa Long-Term Investment Total Commitments (millions) $1,442 $1,286 South Asia Long-Term Investment Total Commitments (millions) $2,799 $1,971 Sub-Saharan Africa Long-Term Investment Total Commitments (millions) $3,513 $2,389 IDA and Conflict-Affected Areas IDA Long-Term Investment Total Commitments (millions) $4,590 $5,479 IDA % Share of Advisory Services Program 63% 62% FCS1 Long-Term Investment Total Commitments (millions) $886 $989 FCS % Share of Advisory Services Program 20% 21% Infrastructure, Health, Education, Agribusiness & Forestry, and Financial Markets Infrastructure2 Long-Term Investment Total Commitments (millions) $3,122 $3,743 Health & Education Long-Term Investment Total Commitments (millions) $929 $535 Agribusiness, Forestry, Fertilizers Long-Term Investment Total Commitments (millions) $2,121 $1,538 Financial Markets Long-Term Investment Total Commitments (millions) $8,576 $6,125 Climate Change, Environmental and Social Sustainability Climate-Related Investment Commitments (millions)3 $4,776 $3,296 % Share of Advisory Services Program 26% 25% Mobilization Core Mobilization $7,461 $7,739 1. FCS (Fragile and Conflict Situations). Since FY15, IFC’s data on FCS investments has included projects in countries that have been on the World Bank’s Harmonized list of FCS at any time during the previous three fiscal years. This is designed to reflect the long gestation period for investment projects and to encourage a longer-term organizational focus on these countries. 66 – 67 2. E xcludes oil, gas and mining, and telecom, media, and communications. F Y17 data reflect updated IFC definitions and metrics for climate-related activities, which in 2017 added a new category for climate- 3. smart agriculture. This change accounted for $837 million of the FY17 total. IFC periodically updates these definitions and metrics to reflect improved accounting of climate-smart investments and align with harmonized definitions and metrics agreed by multilateral development banks. Creating Markets Our Expertise IFC blends investment with advice and resource mobilization to help the private sector advance development. Where We Work IFC Annual Report 2017 As the largest global development institution focused on the private sector, IFC operates in nearly 100 countries. We apply lessons learned in one region to solve problems in another. We help local companies make better use of their own knowledge, by matching it to opportunities in other developing countries. 68 – 69 Creating Markets What We Do INVESTMENT Our financial products enable companies to manage risk and expand their access to foreign and domestic IFC provides investment, advice, and capital markets. IFC operates on a commercial basis. asset management. These are mutually We invest exclusively in for-profit projects in devel- reinforcing, delivering financing and global oping countries, and we charge market rates for our products and services. expertise to clients in developing countries. Our offerings are designed to meet the specific needs with a special of IFC clients in different industries — ​ Together, they give us a special focus on infrastructure, manufacturing, agribusiness, advantage in helping the private sector services, and financial markets. create opportunity — ​ our investment and In FY17, we made nearly $11.9 billion in long-term advice can be tailored to a client’s specific investments in 342 projects. In addition, we mobilized nearly $7.5 billion to support the private sector in needs, and in ways that add value. Our developing countries. ability to attract other investors brings PRODUCT LINES additional benefits, introducing our clients to new sources of capital and better ways Loans of doing business. IFC finances projects and companies through loans from our own account, typically for seven to 12 years. We also make loans to intermediary banks, leasing companies, and other financial institutions for on-lending. While IFC loans traditionally have been denominated in the currencies of major industrial nations, we have made it a priority to structure local-currency prod- ucts. IFC has provided financing in 73 local currencies. In FY17, we made commitments for $9.6 billion in new loans. Equity Equity investments provide developmental support and long-term growth capital that private enterprises need. We invest directly in companies’ equity, and also through private-equity funds. In FY17, equity invest- ments accounted for about $1.6 billion of commitments we made for our own account. IFC generally invests between 5 percent and 20 percent of a company’s equity. We encourage the companies we invest in to broaden share ownership through public listings, thereby deepening local capital markets. We also invest through profit-participating loans, convertible loans, and preferred shares. Trade and Commodity Finance The IFC Global Trade Finance Program guarantees trade-related payment obligations of approved financial institutions. The program extends and complements the capacity of banks to deliver trade finance by providing risk mitigation on a per-­ transaction basis for more than 286 banks across 86 countries. In FY17, IFC had an average outstanding balance of nearly $3.2 billion in trade finance. Syndications ADVICE IFC Annual Report 2017 IFC’s Syndicated Loan Program is the oldest and Providing advice is now more than ever a critical largest among multilateral development banks. part of IFC’s strategy to create markets and mobilize In FY17, it accounted for 47 percent of the funds private investment. Through this work, we help estab- mobilized by IFC. lish the necessary conditions that will attract the most private capital, enabling the private sector to grow. In FY17, IFC syndicated $3.5 billion in B-loans, parallel loans, MCPP loans, structured A-loan participa- That’s why we are shifting to a more strategic tions, and unfunded risk participations provided by approach, systematically linking our advisory 60 financial institutions. These included commercial programs to the greatest needs identified in World banks, institutional investors, development finance Bank Group country and sector strategies. We will institutions, and an emerging-markets central bank. increasingly focus on developing high-­ impact projects Emerging-market financial institutions provided that can help our clients attract the financing they $1.4 billion in new syndicated loans. The syndicated need — ​particularly in the poorest and most ­conflict-­ loan portfolio totaled $16 billion at the end of FY17. affected areas of the world. Borrowers in the infrastructure sector received 37 percent of the total volume. Nearly one-third of ••We help companies attract private investors and partners, enter new markets, and increase their the financing we provided through syndications — ​ impact. We provide tailored market insights as well went to borrowers in IDA countries. $1.1 billion in all — ​ as advice on how to improve companies’ operational performance and sustainability. Derivatives and Structured Finance ••We help industries adopt good practices and stan- dards to increase competitiveness and productivity. IFC makes derivatives products available to our clients, solely for hedging purposes. By allowing ••We help governments structure public-­ private part- nerships to improve people’s access to high-­quality these companies to access international derivatives infrastructure and basic services. We help govern- markets to hedge currency, interest-rate, or ments implement reforms that encourage private commodity-price risks, we enable them to enhance investment. their creditworthiness and improve their profitability. In offering risk-management products, IFC acts IFC’s advisory platform consists of seasoned experts, generally as an intermediary between the market and 80 percent of our advisory staff are based in 70 – 71 and private companies in emerging markets. IFC the field. In FY17, we increased our advisory portfolio also provides structured-finance products for clients by 10 percent to $1.5 billion, encompassing more seeking to raise funds on global and local capital than 700 advisory projects in about 100 countries. markets and manage financial risk. IFC has assisted More than 60 percent of IFC’s advisory program was first-time client issuers in accessing the markets in IDA countries, and 20 percent was in fragile and through partial credit guarantees. We also assist affected areas. More than a quarter of our conflict-­ clients in structuring and placing securitizations with advisory program was climate-­ related. capital-markets investors. HOW WE WORK WITH COMPANIES Blended Finance Agribusiness: We help companies improve IFC uses several tools to crowd in private financing productivity and standards — ​ among other things, by that would otherwise not be available for high-­ creating efficient value chains, ensuring food security, impact development projects. We blend concessional and providing strong economic, social, and environ- funds — t​ ypically from development partners — ​ with mental benefits for smaller farming enterprises and our own financing and that of our co-­ investors. communities. Blended finance can help mitigate early-­ entrant costs or project risks, enabling pioneering investments Infrastructure and Natural Resources: We help and creating a track record that paves the way for companies increase benefits to local communities commercial investments. IFC applies this approach in and mitigate local risks in projects. climate change, agribusiness and food security, and SME financing. Our approach to blended finance is Corporate Finance Services: We help companies principled and judicious — d​ esigned to address market enter new markets, attract investors, and structure failures, avoid market distortions, uphold transpar- complex projects, offering advice on the design and ency, and enhance development impact. In FY17, we execution of mergers, acquisitions, and partnerships. committed more than $188 million of concessional donor funds, catalyzing more than $405 million in Energy and Water Advisory: We help companies IFC financing and $321 million from other private use energy and water more efficiently to enhance Creating Markets sector sources. performance and environmental sustainability. We also accelerate the development of renewable-­energy markets and improve people’s access to modern energy services. Green Buildings: We help companies construct HOW WE WORK WITH GOVERNMENTS buildings that use energy, water, and materials more efficiently by offering tools and training. We also help Public-Private Partnerships: We help governments governments establish related policy frameworks and design and implement PPPs that are tailored to local work with banks to launch green-­ finance products. needs, help solve infrastructure bottlenecks, and achieve national development goals. Small and Medium Enterprises and Value Chains: We help SMEs strengthen their skills and performance, Financial Sector: We work with governments and improving their ability to participate in the supply the private sector to build resilient, transparent, and distribution networks of larger firms. We advise and smooth-­ functioning financial systems and companies and governments on how to improve capital markets. working conditions and boost the competitiveness of the textile sector’s supply chain. Investment Climate: We help improve the business environment through reforms that promote invest- Gender Equality: We work with companies to ment, spur growth, and create jobs. enhance the recruitment, retention, and promotion of women. We also help them increase women’s 2030 Water Resources Group: We bring together access to financial services, technology, information, governments, civil society, and the private sector to and markets. identify investment needs and drive reform to address water scarcity. Strategic Business Solutions: We help companies resolve complex business challenges, structure innova- tive programs, and create new market opportunities. IFC ASSET MANAGEMENT Corporate Governance: We help companies improve COMPANY access to capital, mitigate risk, and safeguard against IFC Asset Management Company, LLC, a wholly mismanagement by improving their corporate owned subsidiary of IFC, mobilizes and manages governance. capital for investment in developing and frontier markets. It was created in 2009 to provide investors Environmental and Social Risk Management: with access to IFC’s emerging-­markets investment We help integrate environmental and social risk-­ pipeline and to expand the supply of long-term management considerations into companies’ capital to these markets, enhancing our development operations to achieve long-term success. impact and generating profits for investors by lever- aging our global platform and investment standards HOW WE WORK WITH FINANCIAL INSTITUTIONS and approaches. AND FUNDS As of June 30, 2017, AMC had raised approximately Financial Institutions: We help clients strengthen risk $9.8 billion, including $2.3 billion from IFC. It manages management and diversify product offerings in cate- 13 investment funds covering equity, debt, and fund- gories such as SME finance, gender, housing finance, of-fund products on behalf of a wide variety of and sustainable energy. We also promote universal institutional investors, including sovereign wealth funds, access to finance, strengthen capital markets, and pension funds, and development-­ finance institutions. establish credit bureaus and collateral registries. AMC FUNDS Fund Managers: We help develop the private equity industry in frontier markets and provide advice to IFC Capitalization Funds fund managers and SMEs in which the funds invest. The $3 billion IFC Capitalization Funds consist of an equity fund of $1.3 billion and a subordinated debt fund of $1.7 billion. Launched in 2009, the fund helped strengthen systemically important banks in emerging markets, bolstering their ability to cope with financial and economic downturns. As of June 30, 2017, the fund was fully invested, with 41 investment commit- ments totaling $2.8 billion. IFC African, Latin American, and Caribbean Fund IFC Financial Institutions Growth Fund IFC Annual Report 2017 The $1 billion IFC African, Latin American, and The $505 million IFC Financial Institutions Growth Caribbean Fund was launched in 2010. The fund ­ ollow-on fund to the IFC Capitalization Fund is a f invests in equity and equity-­related investments Fund and makes equity and e related invest- ­ quity-­ across a range of sectors in Sub-­ Saharan Africa and ments in financial institutions in emerging markets. As in Latin America and the Caribbean. As of June 30, of June 30, 2017, the fund had made four investment 2017, the fund had made 37 investment commitments commitments totaling $133 million. totaling $879 million. IFC Global Emerging Markets Fund of Funds Africa Capitalization Fund The $800 million IFC Global Emerging Markets The $182 million Africa Capitalization Fund was Fund of Funds invests mainly in private equity funds launched in 2010 to invest in systemically impor- that are focused on growth companies in various commercial-­ tant ­ banking institutions in Africa. As of sectors across emerging and frontier markets. The June 30, 2017, the fund had made eight investment fund also invests directly in such companies, as well commitments totaling $130 million. as secondary interests in e market private ­ merging-­ equity funds. As of June 30, 2017, the fund had made IFC Russian Bank Capitalization Fund 11 investment commitments totaling $207 million. The $550 million IFC Russian Bank Capitalization IFC Middle East and North Africa Fund Fund was launched in 2012 to invest in c ­ ommercial-​ banking institutions in Russia. As of June 30, 2017, ­ The $162 million IFC Middle East and North Africa the fund had made three investment commitments Fund makes equity and ­ related investments equity-­ totaling $82 million. in the MENA region. As of June 30, 2017, the fund had made two investment commitments totaling IFC Catalyst Fund $27 million. The $418 million IFC Catalyst Fund was launched in Women Entrepreneurs Debt Fund 2012 and invests in funds that provide growth capital to companies developing innovative ways to address The Women Entrepreneurs Debt Fund extends senior climate change in emerging markets. It also may loans to commercial banks for on-­ lending to women- 72 – 73 invest directly in those companies. As of June 30, 2017, owned small and medium enterprises in emerging the fund had made 13 fund commitments totaling markets. This is a component of the $600 million $306 million. Women Entrepreneurs Opportunity Facility, a part- nership established in March 2014 between IFC and IFC Global Infrastructure Fund Goldman Sachs’ 10,000 Women initiative. As of June 30, 2017, the fund had raised $110 million and made The $1.2 billion IFC Global Infrastructure Fund investment commitments to six banks amounting to was launched in 2013 and invests in equity and $70 million. ­ equity-­related investments in the infrastructure sector in emerging markets. As of June 30, 2017, the IFC Emerging Asia Fund fund had made 20 investment commitments totaling $639 million. The IFC Emerging Asia Fund­makes equity and ­ equity-like investments across all sectors in emerging China-­Mexico Fund markets in Asia. As of June 30, 2017, the fund had raised $440 million and made two investment The $1.2 billion China-­Mexico Fund is a c­ ountry-​ commitments of $70 million. ­ pecific fund that makes equity, e s ­ quity-like, and mezzanine investments in Mexico. It focuses on infrastructure, oil and gas, and other sectors, including manufacturing, agribusiness, services, and banking. As of June 30, 2017, the fund had made two invest- ment commitments totaling $320 million. Creating Markets Our Industry Expertise AGRIBUSINESS AND FORESTRY Agribusiness has an important role to play in poverty reduction. The agricultural sector often accounts IFC’s leadership role in sustainable private for at least half of GDP and employment in many sector development reflects a special developing countries, making it a priority for IFC. advantage — ​the depth and breadth of IFC provides support for the private sector to address expertise we have acquired over 60 years rising demand in an environmentally sustainable and socially inclusive way. To help clients finance invento- ­ merging-­ of helping e market firms succeed ries, seeds, fertilizers, chemicals, and fuel for farmers, and grow. IFC offers ­working-­ capital facilities. To facilitate trade and lower costs, we pursue investments in infrastruc- ture such as warehouses and cold-­ storage facilities. We have moved to leverage our global To bring land into sustainable production, we work to improve productivity by transferring technologies and industry knowledge to tackle the biggest making the best use of resources. development challenges of the coming years — ​including unemployment, climate In FY17, our new long-term commitments for our own account in agribusiness and forestry totaled about change, and food and water security. $1.1 billion. FINANCIAL INSTITUTIONS Sound, inclusive, and sustainable financial markets are vital to development because they ensure efficient resource allocation. IFC’s work with financial intermediaries has helped strengthen financial institutions and overall financial systems. It has also allowed us to support far more micro, small, and medium enterprises than we would be able to on our own. Working through financial intermediaries enables IFC to encourage them to become more involved in sectors such as women-owned that are strategic priorities — ​ businesses and climate change — a ​ nd in underserved regions such as fragile and c affected states ­ onflict-­ as well as in housing, infrastructure, and social services. In FY17, our new long-term commitments for our own account in financial markets totaled about $5.9 billion. HEALTH AND EDUCATION but Health and education are basic human needs — ​ they remain beyond the reach of many people in developing countries. Expanding access to health and education is a central element for any strategy to end poverty and boost prosperity. IFC supports health care and life-­ sciences companies — b ​ y providing financing, sharing industry knowledge, raising management and clinical standards, helping shape government policy, and supporting ­ private collaboration. In education, public-­ we help private enterprises complement the work of the public sector and create more opportunities for children, youth, and working adults. IFC is the world’s largest multilateral investor in IFC’s mission in the oil, gas, and mining sector is to IFC Annual Report 2017 private health care and education. In FY17, our new help developing countries realize these benefits, while long-term commitments for our own account in helping promote sustainable energy sources. We health and education totaled $692 million. provide financing and advice for private sector clients, and also help governments adopt effective regula- INFRASTRUCTURE tions and strengthen their capacity to manage these industries across the value chain. Modern infrastructure spurs economic growth, improves living standards, and can represent an We support private investment in these industries, opportunity to address emerging development and we work to ensure that local communities enjoy challenges, including rapid urbanization and tangible benefits. In FY17, our new long-term commit- climate change. ments for our own account in the sector totaled $435 million. It is also an area in which the private sector can make a significant contribution, providing essential services TELECOMMUNICATIONS AND INFORMATION to large numbers of people efficiently, affordably, TECHNOLOGY and profitably. This is IFC’s focus: supporting private infrastructure projects whose innovative, high-­ impact Modern information and communication technolo- business models can be widely replicated. gies make it easier for the poor to obtain access to services and resources. They expand opportunity and We help increase access to power, transport, and make markets and institutions more efficient. IFC water by financing infrastructure projects and advising works to extend the availability of such technologies. client governments on ­public-­ private partnerships. We channel investments toward private companies We mitigate risk and leverage specialized financial that build modern communications infrastructure structuring and other capabilities. In FY17, our new and ­information-­ technology businesses, and develop long-term commitments for our own account in this ­climate-­friendly technologies. sector totaled about $1.7 billion. IFC increasingly helps clients move beyond their own MANUFACTURING national borders and into other developing markets. In FY17, our new commitments for our own account in The manufacturing sector plays a vital role in creating this sector totaled $232 million. opportunity and reducing poverty in developing TOURISM, RETAIL, AND PROPERTY 74 – 75 countries. IFC’s manufacturing clients tend to create or maintain more employment than those in any other sector. The tourism, retail, and property sectors contribute significantly to job creation, tax revenues, and We have increased our activities in the sector, economic growth for developing countries. which includes chemicals, construction materials, energy-­ ­ efficient machinery, and transportation IFC works to strengthen all three in developing machinery. We invest in and advise companies countries. Our investments promote the development that are developing new products and markets, in places where there is of critical infrastructure — ​ and restructuring and modernizing to become often a shortage of high-­ quality hotels for tourists internationally competitive. and business visitors. We work with our retail clients to create jobs, contribute to the tax base, build As these industries represent some of the most carbon-­ local banking capacity, improve infrastructure, and intensive sectors, we are helping clients develop raise labor standards. We also invest in property and undertake investments that help reduce carbon companies to expand affordable housing and emissions and energy consumption. commercial real estate. In FY17, our new long-term commitments for our In FY17, our new long-term commitments for our own account in the manufacturing sector totaled own account in tourism, retail, and property totaled $989 million. $429 million. OIL, GAS, AND MINING Industries that can harness natural resources are vital for many of the world’s poorest countries. They are a key source of jobs, energy, government revenues, and a wide array of other benefits for local economies. In Africa, in particular, large-scale sustainable investments Creating Markets in these industries can create equally large-scale gains in economic development. Our People & Practices IFC’s commitment to alleviating poverty and creating opportunities for the developing world’s most vulnerable people is reflected in our corporate culture. Understanding our IFC Annual Report 2017 Development Impact Measuring the results of our work is critical to understanding how well our strategy is working — ​and whether IFC and our clients are reaching people and markets that most need our help. IFC has been at the forefront of results measurement among multilateral development banks and development finance institutions for private sector operations. We are one of the few international financial institutions that set corporate targets — ​not only for investment volume but also for direct development impact. IFC’S ­RESULTS-­M EASUREMENT SYSTEM IFC constantly refines and upgrades our ­ results-​ ­ measurement framework to support our strategy 76 – 77 and better articulate the impact of our work. We continue to develop new tools to assess the full range of our impact — g​ oing far beyond the direct impact of our projects. results-­ IFC’s ­ measurement system features three mutually reinforcing components: ••The IFC Development Goals (IDGs), which provide ­ orporate-level targets to reflect IFC’s strategy and c areas of greatest development need. ••A monitoring system tracking project performance and development impact of IFC interventions. ••Sector, program, and c ­ ountry-level results measurements. IFC’s strategy firmly places development impact at the heart of what we do. We are now introducing a new framework that will enable us to design and select projects with the greatest potential for development impact. The new Anticipated Impact Measurement and Monitoring (AIMM) framework, is designed to assess the anticipated — ​ or “ex ante” — ​ impact of our work at two levels: what the specific project is expected to achieve and how it is expected to contribute to the creation or development of markets. At the project level, the AIMM framework Creating Markets ​ ystematically and will help IFC staff articulate — s comprehensively — h ​ ow projects promote develop- ment. The AIMM approach will be integrated with results-­ IFC’s existing ­ measurement framework and monitoring system. It will help IFC apply a stronger portfolio approach to our interventions. THE IFC DEVELOPMENT GOALS: SUPPORTING With each investment and advisory commitment we THE IFC STRATEGY make, we work with our clients to estimate specific development impacts we will achieve over time. At The IFC Development Goals identify what we expect the start of the current three-year cycle (FY17–19), our development work to accomplish over cycles substantial gains were made towards the IDGs in FY17. of three years. They help us communicate with our We exceeded the target for increasing or improving shareholders and the public about how IFC’s work infrastructure services, mostly because of a broad- is expected to contribute to the World Bank Group’s band investment project in Mexico that is expected to goals of ending poverty and boosting shared pros- benefit 9 million people by 2021. perity. The IDGs set targets for five areas that have a direct impact on people’s lives and are aligned with our strategy: ••Increase or improve sustainable farming opportunities ••Improve health and education services ••Increase access to financial services for microfinance and SME clients ••Increase or improve infrastructure services ••Reduce greenhouse emissions IFC Development Goals PERCENT OF FY17–19 FY17 FY17 FY17 TARGET GOAL TARGETS TARGETS COMMITMENTS ACHIEVED Increase or improve Benefit Benefit 0.72 million 68% sustainable farming 3.32 million 1.05 million people opportunities people people Improve health and Benefit Benefit 8.60 million 101% education services 26.14 million 8.54 million people people people Increase access to financial Benefit Benefit 28.99 million 94% services for microfinance 98.28 million 30.89 million clients clients clients clients Increase access to financial Benefit Benefit 0.61 million 69% services for SME clients 2.87 million 0.88 million clients clients clients Increase or improve Benefit Benefit 33.01 million 138% infrastructure services 68.08 million 23.86 million people people people Reduce greenhouse- Reduce by Reduce by 6.68 million 97% gas emissions 21.79 million 6.91 million metric tons metric tons metric tons of CO2 equivalent of CO2 equivalent per year per year THE MONITORING SYSTEM: TRACKING THE The review also identified key lessons: IFC Annual Report 2017 PERFORMANCE AND DIRECT RESULTS OF IFC OPERATIONS ••It is wise to work with local partners, investors, or donors who have a stake in the project. The Development Outcome Tracking System (DOTS) ••It is best to start with small projects that can provides a framework to monitor the performance demonstrate to local entrepreneurs the potential of and track the direct development outcomes of IFC’s new approaches to business. client companies. DOTS ratings, in the case of invest- ••It is essential to factor in the time it takes to build ment operations, is a synthesis of four performance the necessary capacity to ensure the success of areas: financial, economic, environmental and social, projects. In addition, the specific local context of and broader private sector development impacts. conflict should be factored into project design and implementation. The FY17 DOTS rating scores are based on a cohort of 828 investments approved between 2008 and 2013 IFC works closely with the World Bank and the that were mature enough to be rated. DOTS also tracks Multilateral Investment Guarantee Agency to indicators such as the number of people reached by develop common results frameworks for the World IFC’s investment clients, or the dollar benefit to partic- Bank Group’s country engagements. In FY17, IFC ular stakeholders during the reporting year. contributed to the design of results frameworks country-­ for 14 ­ partnership frameworks, or country Results measurement of advisory services has strategies, as well as provided input for 15 perfor- been integrated into the project’s life cycle — ​ from mance and learning reviews. conception to completion. The overall DOTS score for advisory services, also known as the develop- In addition, IFC worked on reporting on results for ment effectiveness rating, is a synthesis assessment 18 World Bank and IFC joint implementation plans of the project’s strategic relevance, effectiveness, for key areas such as cities, power, agribusiness, and efficiency performances, and is rated at project and health. completion. In FY17, the advisory DOTS score represented the performance of 88 completed ALIGNING IFC’S RESULTS MEASUREMENT TO ­advisory projects. THE SUSTAINABLE DEVELOPMENT GOALS EVALUATING DEVELOPMENT IMPACT AT THE Since the approval of the United Nations’ Sustainable PROGRAM, SECTORAL, AND COUNTRY LEVEL Development Goals (SDGs) in September 2015, IFC 78 – 79 has mapped how our strategies and operations are IFC has been conducting evaluations to understand aligned with these goals. In parallel, IFC has also the impact of IFC investments on the World Bank taken the lead among international finance institu- Group’s twin goals. These evaluations also estimate tions in reporting how we and our clients contribute to IFC’s contribution to job creation. achieving the SDGs. In FY17, IFC adopted a more strategic approach to MAINTAINING THOUGHT LEADERSHIP IN evaluations — ​designed to fill critical knowledge gaps. PRIVATE SECTOR DEVELOPMENT RESULTS We undertook six e ­ conomic-­ impact assessments MEASUREMENT at the sectoral level and four large i ­mpact-­evaluation programs. These efforts provide evidence of IFC In March 2017, IFC held the first annual Evaluating impact beyond the individual projects at the sector Private Sector Development Impact Conference, which level. They also generate useful lessons that inform featured 24 donor partners, multilateral development industry strategies. banks, and international finance institutions. The conference highlighted the importance of evaluations, For example, in Jamaica, we conducted an ­ economic-​ specifically in the areas of economic growth and impact assessment of IFC investments related to ­ jobs. It also underlined the need to refine and share the expansion of an airport. Our assessment showed methodologies, and work together to find innovative that by enabling an increased capacity, IFC invest- ways to evaluate development impact. ments helped contribute about $288 million to the economy and supported about 29,000 jobs — d ​ irectly MONITORING DEVELOPMENT OUTCOMES and indirectly. In FY17, 55 percent of our investments were positively To inform our work in fragile and c affected ­ onflict-­ rated — d​ own three percentage points from FY16. countries, we also conducted a systematic review of The decline largely reflected slower economic growth, 56 published evaluations of private sector develop- depressed commodity prices, market volatility, and ment projects carried out between 2005 and 2014 in political turmoil in many countries. At the same time, 23 such countries. Our findings showed that invest- IFC has increasingly ventured into some of the world’s Creating Markets ments supporting large infrastructure projects or the most challenging areas, where financial and other development of small and medium enterprises tend risks tend to be higher. to yield the strongest development results. Larger IFC investments tended to perform better. ••We supported our partners in digital financial When weighted for investment volume, 69 percent of services to facilitate 572 million non-cash retail our investments were rated positively. transactions, totaling over $3.7 billion. ••We helped strengthen country financial markets by Among industry groups, investments in health and working with collateral registries and credit bureaus education, and in funds performed the best — ​ that facilitated more than $250.6 billion in financing. with 60 percent of investments rated positively. More than 679,900 micro, small and medium enter- Investments in the manufacturing sector registered prises were able to receive loans secured with the biggest performance increase — ​ showing movable property. In addition, we helped create or a 54 percent DOTS score, up seven points from enhance eight credit-bureau operators. FY16. The improvement was driven principally by investments in the industrial and commercial Providing Solutions and Services: products sector. ••Nearly 20 million people have benefited from DOTS scores of investments in most other industry using Lighting Global ­quality-­verified solar lighting sectors declined. The lowest ratings were for invest- products, mostly in Sub-­ Saharan Africa and in ments in the tourism, retail, construction, and IDA countries. real-­ estate sectors and in the telecommunications, ••Our clients generated and distributed power to media, and technology sectors. Many of these 104.2 million people, many of them in Sub-­ Saharan projects were primarily early-stage investments that Africa and South Asia. They provided phone connec- experienced delays in planned expansion. tions to 345 million people, mostly in South Asia. They distributed gas to 60 million people, mostly in DOTS scores declined in all regions except Europe East Asia and the Pacific. and Central Asia, where the score rose five points to ••Our clients helped educate 4.9 million students. 56 percent. The performance of investments in Latin Our agribusiness clients supported 3 million farmers America and the Caribbean declined nine points through improved access to finance and markets to 54 percent, largely because of the unsatisfactory and through sustainable farming practices. These performance of investments in financial markets, benefits are expected to improve farmers’ produc- funds, and infrastructure. Investments in Sub-­Saharan tivity and income and enhance their ability to cope Africa and in the Middle East and North Africa with unexpected events. regions were partly affected by the political instability ••We worked with firms to adopt new p ­ ractices and and the fragile status of many countries in which technologies that attracted financing of $1.7 billion, IFC operated. including $1.4 billion through ­ corporate-­​governance-­ reform projects and $300 million through projects Among advisory projects, 70 percent of projects that involving ­resource-­efficient technologies. closed during the year and could be assessed for ••IFC helped governments sign six contracts with development effectiveness were rated positively — ​ private operators. These transactions are expected above our target of 65 percent. South Asia was the to create or improve access to infrastructure and strongest performer, with 92 percent of projects rated health services for 1.5 million people and facilitate positively on development effectiveness. Projects in $341 million in private investment in infrastructure. East Asia and the Pacific demonstrated the largest improvement from the last year — ​a gain of 28 points. Improving the Business Environment: Projects in the Middle East and North Africa expe- rienced a performance decline, partly reflecting the ••In collaboration with the World Bank, IFC supported challenges of implementing projects in fragile and 50 national and local governments to implement ­conflict-­affected areas. 116 reforms that helped improve the regulatory and policy environment for private sector development CLIENTS’ DEVELOPMENT REACH AND RESULTS and foster competitive markets and job creation. Ninety-six reforms were in IDA countries, including 26 ­ Across the globe, IFC investment and advisory clients ­ onflict-­ in fragile and c affected areas. were able to reach many people and record some ••These reforms led to $22 million in private sector remarkable achievements (see page 81). Here are a savings and contributed to an estimated $168 million few highlights: in new investments. Improving Access to Finance: ••IFC provides investment and advice to financial institutions that serve individuals and micro, small, and medium enterprises. These institutions provided about 53.7 million micro and 8.3 million small and medium loans totaling $412 billion. They also provided 1 million housing finance loans totaling $29 billion. Development reach by IFC’s clients IFC Annual Report 2017 PORTFOLIO PORTFOLIO Jobs CY15 CY16 Employment (millions of jobs)1 2.4 2.4 Microfinance loans2 Number (million) 51.2 53.7 Amount ($ billions) 59.5 60.7 SME loans2 Number (million) 7.6 8.3 Amount ($ billions) 343.7 351.1 Trade finance3 Number (million) 1.8 1.8 Amount ($ billions) 255 270 People reached with services Power generation (millions of people) 48.0 79.4 Power distribution (millions of people) 50.1 24.8 Water distribution (millions of people) 21.8 14.3 Gas distribution (millions of people) 4 51.2 59.9 Phone connections (millions of people) 262.8 345.3 Patients served (millions)5 31.7 34.0 Students reached (millions) 4.6 4.9 Farmers reached (millions) 3.5 3.0 Payments to suppliers and governments 80 – 81 Domestic purchases of goods and services ($ billions)6 46.8 36.6 Contribution to government revenues or savings ($ billions) 16.6 14.6 These figures represent the total reach of IFC clients as of the end of CY15 and CY16. CY15 and CY16 portfolio data are not strictly comparable because they are based on a changed portfolio of IFC clients. For microfinance and SME loans, results also reflect contributions from Advisory Services. While numerous controls are performed on the data provided by clients, they are sometimes based on estimates, and the understanding of the indicator definitions may vary slightly between clients. 1. Portfolio figures for employment include jobs provided by Funds. 2. Portfolio reach figures represent the micro, small, and medium outstanding loan portfolio of IFC clients as of end CY15 and CY16, for MSME-­ oriented financial institutions/projects. CY16 includes the data from 304 MSME clients, including nine clients for which the data were extrapolated. The total number and dollar volume of trade transactions financed by the Global Trade Finance Program’s network of e 3. market ­ merging-­ banks are based on actual data from 68% (number) and 72% (dollar volume) of the network’s active banks in CY16. The figures are not directly comparable to last year’s due to variance in the number of active banks who submitted survey responses. Numbers reflect transactions directly guaranteed by IFC as well as those executed by network banks that have been supported by the program. CY15 data has been updated to reflect prior-year data corrections from survey participants. One client in East Asia and the Pacific accounted for 56.6 million people reached through gas distribution in CY16. 4. CY15 total patients served revised due to the restatement of one client value in South Asia. 5. CY15 total domestic purchases of goods and services revised due to the restatement of one client in Sub-­ 6. Saharan Africa. Creating Markets Investment services DOTS Investment services DOTS score by performance area, score by region, FY16 vs. FY17 FY16 vs. FY17 % Rated Positively % Rated Positively IFC Total 55% Development Outcome 58% 55% Middle East and North Africa 58% 51% Financial Performance 57% 39% Sub-Saharan Africa 43% 53% Economic Performance 59% 49% South Asia 51% 54% Environmental & Social Performance 57% 69% Latin America and the Caribbean 67% 54% Private Sector Development Impact 63% 67% Europe and Central Asia 70% 56%    FY17    FY16 51% East Asia and the Pacific 59% Investment services DOTS 62%    FY17    FY16 score by industry, FY16 vs. FY17 % Rated Positively IFC Total 55% 58% Tourism, Retail, Property 34% 41% Telecoms & IT 37% 42% Oil, Gas & Mining 48% 43% Infrastructure 54% 57% Manufacturing 54% 47% Financial Markets 58% 62% Agribusiness & Forestry 59% 58% Funds 60% 75% Health, Education, Life Sciences 60% 67%    FY17    FY16 Advisory services DOTS Advisory services DOTS score IFC Annual Report 2017 score by performance area, by region, FY16 vs. FY17 FY16 vs. FY17 % Rated Positively % Rated Positively IFC Total 70% Development Effectiveness 68% 70% South Asia 68% 92% Strategic Relevance 76% 91% Latin America and the Caribbean 88% 75% Output Achievement 71% 92% Sub-Saharan Africa 91% 74% Outcome Achievement 61% 66% Europe and Central Asia 67% 70% Impact Achievement 80% 60% East Asia and the Pacific 55% 57% Efficiency 29% 73% Middle East and North Africa 70% 50%    FY17    FY16 80%    FY17    FY16 Advisory services DOTS score 82 – 83 by business area, FY16 vs. FY17* % Rated Positively IFC Total 70% 68% Financial Sector** 77% 87% Investment Climate 71% 79% Cross-Industry Advisory Services 70% 75% Public-Private Partnerships 69% 41% Agribusiness 67% 50% Energy & Resource Efficiency 43% 40%    FY17    FY16 Creating Markets In FY17, IFC reporting on development-effectiveness ratings *  switched from calendar year to fiscal year. The FY16 development-effectiveness ratings presented in the 2016 annual report are therefore not comparable to the FY16 development-­ effectiveness rating shown here. **  “ Financial Sector” also includes projects undertaken by the integrated World Bank Group team in the Finance & Markets Global Practice. Our Staff IFC’s employees are diverse. They are our most important asset. Representing more than 140 countries, they bring innovative solutions and global best practices to our clients. Fifty-six percent of our staff are stationed in 98 field locations, reflecting our commitment to decentralization. Where we work STAFF AT ALL GRADE LEVELS United States 1,703 (44%) Other Countries 2,157 (56%) Total IFC Staff 3,860 National origin STAFF AT OFFICER LEVEL AND HIGHER MANAGERIAL CADRE Part 1 Countries1 1,155 (44%) 130 (61%) Part 2 Countries 2 1,477 (56%) 82 (39%) Total 2,632 212 Gender STAFF AT OFFICER LEVEL AND HIGHER MANAGERIAL CADRE Female 1,194 (45%) 75 (35%) Male 1,438 (55%) 137 (65%) Total 2,632 212 1. Staff with primary nationality from countries that declared themselves as IDA donors at the time of joining the World Bank Group. 2. Staff of all other nationalities. COMPENSATION BENEFITS PROGRAMS IFC Annual Report 2017 IFC applies the World Bank Group’s compensation IFC provides a competitive package of benefits, framework. Competitive compensation is essential to including a retirement plan, medical, life, accidental attract and retain highly qualified, diverse staff. The death, workers’ compensation, and disability insur- salary structure for staff recruited in Washington, D.C., ance. Medical insurance costs are shared — 7 ​ 5 percent is based on the U.S. market. Salaries for staff hired paid by IFC and 25 percent by the insured. outside the United States are based upon local competitiveness, determined by independent local IFC’s pension is part of the World Bank Group plan, market surveys. Given the World Bank Group’s status and includes two components: first, a ­ benefit defined-­ as a multilateral organization, staff salaries are deter- component fully funded by IFC based on years of mined on a net-of-tax basis. service, salary, and retirement age; second, a cash-­ balance component — a ​ mandatory contribution of VARIABLE PAY PROGRAMS 5 percent of salary plus an optional staff contribution of up to 6 percent of salary, to which IFC adds IFC’s variable pay programs consist of several compo- 10 percent annually. IFC also sponsors an optional nents, including recognition programs and performance Washington-based staff and U.S.-style 401(k) plan for ­ awards that support IFC’s high-­ performance culture. an optional savings plan for ­ office staff. country-­ These awards are designed to encourage teamwork, reward top performance, and support IFC’s strategic conflict-­ priorities, such as projects in fragile and ­ affected states. Variable pay is available to all staff at the grades GA through GI. There is no variable pay for senior executives at the GJ and GK levels. Staff salary structure (Washington, D.C.) As of June 30, 2017, the salary structure (net of tax) and annual average net salaries/benefits for World Bank Group staff were as follows: 84 – 85 STAFF AT AVERAGE MARKET GRADE SALARY/ AVERAGE REPRESENTATIVE MINIMUM REFERENCE MAXIMUM LEVEL GRADE BENEFIT a GRADE JOB TITLE (US$) (US$) (US$) (%) (US$) (US$) GA Office Assistant 26,300 37,600 48,900 0.03 38,000 21,078 GB Team Assistant, Information Technician 32,200 46,000 59,800 0.31 45,738 25,370 GC Program Assistant, Information Assistant 39,300 56,100 72,900 8.03 58,206 32,286 GD Senior Program Assistant, Information Specialist, Budget Assistant 46,500 66,400 86,300 7.06 71,825 39,840 GE Analyst 63,000 90,000 117,000 12.19 82,566 45,798 GF Professional 83,200 118,900 154,600 23.19 108,117 59,971 GG Senior Professional 110,700 158,200 205,700 30.59 149,923 83,160 GH Manager, Lead Professional 151,200 216,000 280,800 15.89 212,482 117,860 GI Director, Senior Advisor 229,900 287,400 344,900 2.17 281,686 156,246 GJ Vice President 276,900 325,800 374,700 0.42 349,688 193,965 Creating Markets GK Managing Director, Executive Vice President 307,900 362,200 416,500 0.10 396,574 286,607 Note: Because World Bank Group staff, other than U.S. citizens, usually are not required to pay income taxes on their World Bank Group 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 World Bank Group salaries are derived. Only a relatively small minority of staff will reach the upper third of the salary range. salary benefits. Excludes tax allowances. a. Includes medical, life and disability insurance; accrued termination benefits; and other non-­ Our Governance OUR PLACE IN THE WORLD BANK GROUP The World Bank Group is a vital source of financial and technical assistance to developing countries. Its mission is to fight poverty with passion and professionalism, for lasting results. IFC is one of five members of the Bank Group, though it is a separate legal entity with separate Articles of Agreement, share capital, financial structure, manage- ment, and staff. Membership in IFC is open only to member countries of the World Bank. As of June 30, 2017, IFC’s paid-in capital of about $2.56 billion was held by 184 member countries. These countries guide IFC’s programs and activities. IFC works with the private sector to create oppor- tunity where it’s needed most. Since our founding in 1956, we have committed more than $215 billion of our own funds for private sector investments in developing countries, and we have mobilized nearly $50 billion more from others. In working to end extreme poverty and boost shared prosperity, we collaborate closely with other members of the Bank Group. OUR BOARD Each of our member countries appoints one governor and one alternate. Corporate powers are vested in the Board of Governors, which delegates most powers to a Board of 25 directors. Voting power on issues brought before them is weighted according to the share capital each director represents. The directors meet regularly at World Bank Group headquarters in Washington, D.C., where they review and decide on investments and provide overall stra- tegic guidance to IFC management. The President of the World Bank Group is also President of IFC. IFC Annual Report 2017 Standing (left to right): Andrei Lushin, Russian Federation; Hervé de Villeroché, France; Omar Bougara, Algeria; Frank Heemskerk, The Netherlands; Subhash Chandra Garg, India; Daniel Pierini, Argentina (Alternate); Otaviano Canuto, Brazil; Jean-Claude Tchatchouang, Cameroon (Alternate); Andin Hadiyanto, Indonesia; Werner Gruber, Switzerland; Fernando Jimenez Latorre, Spain; Juergen Zattler, Germany; David Kinder, United Kingdom (Alternate); Christine Hogan, Canada; Patrizio Pagano, Italy. Seated (left to right): Bongi Kunene, South Africa; Jason Allford, Australia; Andrew N. Bvumbe, Zimbabwe; Khalid Alkhudairy, Saudi Arabia; Merza Hasan, Kuwait (Dean); Susan Ulbaek, Denmark; Kazuhiko Koguchi, Japan; Yingming Yang, China; Karen Mathiasen, United States; Franciscus Godts, Belgium. ​ TRONG OUR MEMBER COUNTRIES — S EXECUTIVE COMPENSATION SHAREHOLDER SUPPORT The salary of the President of the World Bank Group GRAND TOTAL 100% is determined by the Board of Directors. The salary United States 22.19 structure for IFC’s CEO is determined by positioning a 86 – 87 Japan 6.33 midpoint between the salary structure of staff at the highest level, as determined annually by independent Germany 5.02 U.S. compensation market surveys, and the salary of France 4.72 the World Bank Group President. The compensation United Kingdom 4.72 of our executive leadership is transparent. India 4.01 IFC’s CEO, Philippe Le Houérou, receives an annual Russian Federation 4.01 salary of $411,000, net of taxes. Canada 3.17 Italy 3.17 China 2.41 174 OTHER COUNTRIES 40.25 Creating Markets Accountability INDEPENDENT EVALUATION GROUP The Independent Evaluation Group (IEG) is an inde- pendent unit that reports directly to IFC’s Board of Directors. IEG’s mission is to strengthen the develop- ment effectiveness of World Bank Group institutions through evaluations that inform strategies and future work. IEG assesses the results of IFC operations and offers recommendations for improvement. Through its recommendations, IEG also contributes to internal learning and improvements by informing new direc- tions, policies and procedures, and country and sector strategies for IFC work. IEG’s most recent annual review of World Bank Group results and performance assesses develop­ ment outcome trends for IFC at a corporate level, and by region and industry sector. This and other major reports are available on IEG’s website, http://ieg.worldbankgroup.org. OFFICE OF THE COMPLIANCE ADVISOR OMBUDSMAN Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC. CAO is mandated to address complaints from people affected by IFC-­supported business activities in a with manner that is fair, objective, and constructive — ​ the goal of improving environmental and social project outcomes and fostering greater public accountability of IFC. Independent of IFC and MIGA management and reporting directly to the President of the World Bank Group, CAO works to resolve complaints using ­ roblem-­ a flexible, p solving approach through its dispute-­ ­ resolution arm and oversees investigations of IFC’s environmental and social performance through its compliance arm. CAO’s advisory arm provides independent advice on broader environmental and social concerns with the goal of systemic improve- ments in IFC performance. During FY17, CAO addressed 51 cases related to IFC projects in 28 countries. More information about how IFC is engaging with CAO’s work is available at www.cao-­ombudsman.org. Partnerships Australia IFC Annual Report 2017 Australia committed $63 million — a ​ record high — t ​o IFC’s advisory programs in Asia. A longtime supporter IFC develops innovative and multifaceted of IFC’s activities in the Pacific, Australia is an increas- partnerships that allow us to scale up our ingly important partner in South Asia through its support of the Sustainable Development Investment work in priority areas and focus on markets Portfolio, which aims to address issues of water, food, with the greatest development needs. Our and energy security. Focusing on gender, Australia contributed $11 million to a program in Sri Lanka to partners provide instrumental support — ​ increase the share and retention of women employees by making financial contributions, providing in participating companies. co-­financing, and creating solutions BHP Billiton Foundation alongside us. Together, we share our global IFC and the World Bank signed an agreement with knowledge and experience by convening BHP Billiton Foundation for the first time, committing the development community and the nearly $2.6 million to enhance information disclosure private sector. and improve development outcomes in the extractives sector. The World Bank Group has identified gover- nance in this sector as a key development issue. WORKING WITH DEVELOPMENT PARTNERS The new partnership will work to improve transpar- ency, analysis, and dialogue to deliver benefits for IFC collaborates with more than 30  governments, broader communities. 20 foundations and corporations, and a variety of multilateral and institutional partners. In FY17, Denmark our development partners committed more than $268 million to support IFC’s work, demonstrating Denmark pledged its largest commitment to date, their strong belief in the importance of the private providing $9 million for a global partnership to sector in development. scale up new technological solutions and potentially game-­ changing business models to address climate IFC and the World Bank held joint consultations change. Through this partnership, IFC aims to support with a variety of partners to deepen our engage- 88 – 89 ​ ith a focus on energy, first-of-their-kind projects — w ment. Our cornerstone event was the Development manufacturing, agriculture, and small and medium Finance Forum, which was held this year in Accra, enterprises. At least half the projects supported by the alongside pre-­events in Freetown and Abidjan. partnership will be in IDA countries and in fragile and These events showcased IFC’s thought leadership ­conflict-­affected areas. on unlocking private sector investment to achieve strong development. Japan We work closely with our partners to stimulate Japan committed $15 million for the new Partnership investment in the most challenging markets. In FY17, for Quality Infrastructure — a ​ global initiative that we spearheaded several substantial engagements — ​ will provide vital support for infrastructure activities, including the Transforming Investment Risk conference, including for ­public-­private-­partnership transactions. a first-of-its-kind event organized jointly by the World With Japan’s support, IFC will promote specific objec- Bank Group and the U.K. Department for International tives in infrastructure — ​including improving economic Development. The event focused on unlocking efficiency, reducing lifecycle costs, strengthening safety investment opportunities in high-­ potential markets — ​ and resilience, addressing social and environmental by bringing together U.K. particularly in Africa — ​ impacts, and ensuring local economic development business leaders and development specialists. and knowledge transfer. Through trust funds, IFC and our partners continued Switzerland to provide financing and knowledge for private sector development. In FY17 the following initiatives high- Switzerland committed $45 million to the Multi-­ lighted the concerted efforts of IFC and our partners Country Investment Climate Program to enhance to collaborate in innovative ways: trade and competitiveness and improve investment climate reforms in 20 priority countries over the next eight years. Switzerland also committed an addi- tional $11 million to the EDGE Green Building Market Transformation program, focusing on projects in Latin Creating Markets America and the Caribbean, Sub-­ Saharan Africa, and East Asia and the Pacific. Development partner commitments FINANCIAL COMMITMENTS TO IFC ADVISORY SERVICES (US$ MILLION EQUIVALENT) Summary FY16 FY 17 Governments 201.69 256.76 Institutional/Multilateral Partners 12.25 8.32 Corporations, Foundations, and NGOs 5.19 3.07 Total 219.13 268.15 Governments FY16 FY17 Australia 7.74 62.92 Austria 11.06 6.47 Canada 36.99 0.00 Denmark 2.86 9.17 France 0.00 2.12 Germany 0.22 2.62 Ireland 1.01 0.96 Israel 1.00 0.00 Italy 15.00 5.09 Japan 4.78 21.17 Luxembourg 3.90 3.98 The Netherlands 11.00 11.00 New Zealand 3.56 4.82 Norway 5.68 0.94 Slovak Republic 1.09 0.00 Sweden 5.66 0.00 Switzerland 45.28 68.68 United Kingdom 38.17 38.74 United States 6.69 18.08 Total 201.69 256.76 Institutional/Multilateral Partners FY16 FY17 Climate Investment Funds 1.39 4.70 European Commission 10.61 3.08 MENA Transition Fund 0.00 0.54 SG Hambros Trust Co. Ltd. (for and on behalf of the PIDG Trust) 0.25 0.00 Total 12.25 8.32 Corporations, Foundations, and NGOs FY16 FY17 Bill & Melinda Gates Foundation 2.30 0.00 BHP Billiton Foundation 0.00 2.57 Dow Chemical Company* 0.50 0.00 Grundfos Holding A/S* 1.00 0.00 Marie Stopes International 0.89 0.00 The William and Flora Hewlett Foundation 0.50 0.50 Total 5.19 3.07 *Contributor to the 2030 Water Resource Group. Portfolio Management Our equity portfolio has grown significantly over IFC Annual Report 2017 the last few years. To rebalance our asset allocation, we are implementing a new approach that calls for At the core of IFC’s approach to portfolio manage- more moderate growth and greater selectivity for our ment is the aim to build and manage a portfolio that equity investments. This rebalancing is the result of produces strong financial and development perfor- an analysis that takes into account market conditions, mance. We achieve this through our strong presence opportunities, expected returns, and risks — ​and will on the ground — ​a network of offices in 101 cities — ​ that be adjusted periodically as required. This new approach enables us to stay close to our clients and markets, further acknowledges the greater resource needs for and anticipate and monitor trends. As a result, we are equity relative to debt, and, therefore, we are forming able to engage with clients and manage our assets specialized equity teams. proactively. For projects in financial distress, our Special Operations Twice a year, Management reviews the entire portfolio Department determines the appropriate remedial of $55 billion for IFC’s own account, looking both at actions. It seeks to keep the project operational to broad trends as well as select individual assets, and achieve the development impact intended at its provides an in-depth review of portfolio results to the onset. It also negotiates agreements with creditors Board semi-­ annually. Our investment teams, largely and shareholders to share the burden of restructuring. based in field offices, complement global reviews with asset-by-asset quarterly assessments, for both debt Investors and other partners participating in IFC’s and equity investments. operations are kept regularly informed on project developments. IFC consults or seeks their consent At the corporate level, IFC combines the analysis as appropriate. of our portfolio performance with local market intel- ligence, and projections of global macroeconomic At the core of active portfolio management is the and market trends to inform decisions about future need to have timely and accurate information to investments. We also regularly conduct stress tests drive business decisions. IFC continues to invest in to assess the performance of the portfolio against ­ information-technology systems to better support the possible macroeconomic developments, and to iden- management of our portfolio. tify and address risks. In FY17, in light of substantial volatility in emerging markets, IFC’s senior manage- ment convened in-depth reviews for each of our 90 – 91 industry sectors and regions. At the project level, our multidisciplinary teams, including investment and sector specialists with deep industry expertise, closely monitor investment perfor- mance and compliance with investment agreements. We do this, among other things, through site visits to evaluate project implementation and through active engagement with sponsors to identify potential prob- lems early on and formulate appropriate solutions. In addition, we systematically and timely track environ- mental and social performance, and measure financial and development results. Creating Markets Managing Risks In FY17, IFC continued the transition to the Investment Risk Platform, our new ­credit-risk rating system and economic capital engine. The new systems are aimed ENTERPRISE RISK MANAGEMENT at better aligning IFC’s practice to internationally recognized standards, where they make sense given IFC provides long-term investments to the private our portfolio. The new risk rating system allows for sector in emerging markets, which includes expanding easier comparison between outside ratings and IFC’s the investment frontier into the most challenging internal ratings. More granular ratings lead to better markets. In doing so, IFC is exposed to a variety of differentiation and a better understanding of client financial and nonfinancial risks. Sound risk manage- credit standing, which allows for more focus on those ment is crucial in fulfilling IFC’s mission. credits that most warrant additional scrutiny. The improved predictive power for probability of default IFC’s ­ enterprise-risk-­ management framework is and loss-given default lead to more informed invest- designed to enable the prudent management of ment decisions. financial and reputational impacts that originate from our business activities. In this context, IFC’s risk-­ TREASURY SERVICES management efforts are designed specifically to help align our performance with our strategic direction. IFC raises funds in the international capital markets for private sector lending and to ensure sufficient IFC has developed risk-­ appetite statements that set triple-A credit ratings. liquidity to safeguard IFC’s ­ the direction for our willingness to take on risks in fulfillment of our development goals. These statements Issuances include benchmark bonds in core currencies reflect our core values of maximizing development such as U.S. dollars, thematic issuances to support impact, preserving our financial sustainability, and strategic priorities such as climate change, and issu- safeguarding our brand. ances in e­ merging-­ market currencies to support ­ market development. Most of IFC’s lending is capital-­ denominated in U.S. dollars, but we borrow in many currencies to diversify access to funding, reduce borrowing costs, and support local capital markets. Over the years, IFC’s funding program has grown to keep pace with our lending — ​in FY17, new core and short-term borrowings totaled the equivalent of about $16.2 billion. FY17 borrowing in international markets AMOUNT CURRENCY (US$ EQUIVALENT) PERCENT U.S. dollar USD 10,736,886,766.00 66.4% Australian dollar AUD 1,338,424,500.00 8.3% Japanese yen JPY 787,304,000.00 4.9% Russian ruble RUB 647,034,012.90 4.0% Brazilian real BRL 640,375,075.70 4.0% Turkish lira TRY 499,593,694.20 3.1% Indian rupee INR 477,162,653.40 3.0% Other 1,047,283,816.22 6.5% Total 16,174,064,518.42 100.0% LIQUIDITY MANAGEMENT CAPITAL ADEQUACY AND FINANCIAL CAPACITY IFC Annual Report 2017 Liquid assets on IFC’s balance sheet totaled Sound risk management plays a crucial role in $39.2 billion as of June 30, 2017, compared with ensuring IFC’s ability to fulfill our development $41.4 billion a year earlier. Most liquid assets are mandate. The very nature of IFC’s business, as a held in U.S. dollars. The exposure arising from assets long-term investor in dynamic yet volatile emerging denominated in currencies other than U.S. dollars are markets, exposes us to financial and operational risks. hedged into U.S. dollars or matched by liabilities in the same currency to eliminate overall currency risk. Prudent risk management and a solid capital posi- The level of these assets is determined with a view tion enable us to preserve our financial strength and to ensure sufficient resources to meet commitments maintain our lending during times of economic and even during times of market stress. IFC maintains financial turmoil. IFC’s financial strength results in low interest-­ liquid assets in ­ bearing instruments managed borrowing costs, allowing us to provide affordable actively against stated benchmarks. financing to our clients. In FY17, IFC made substantial enhancements to our The soundness and quality of IFC’s risk management internal funding and liquidity policies in the form of triple-A and financial position can be seen in our ­ adding stressed liquidity coverage ratios, a require- credit rating, which has been maintained since ment for core liquidity, and making adjustments for coverage began in 1989. encumbered assets. The stressed liquidity coverage ratios are designed to ensure IFC will have sufficient We assess IFC’s minimum capital requirement in liquid assets in a period of extensive market and oper- accordance with our economic capital framework, ational stress for up to a one-year period to cover which is aligned with the Basel framework and leading both existing cash needs and new growth aspirations. industry practice. Economic capital acts as a common IFC enhanced our liquidity framework to provide currency of risk, allowing us to model and aggregate additional quantitative metrics for matched funding. the risk of losses from a range of different investment products as well as other risks. TREASURY RISK MANAGEMENT Consistent with industry and regulatory practice, Treasury risks are managed through a two-tier risk IFC calculates economic capital for the following framework: (1) a comprehensive policy framework; and risk types: ­ conomic-­ (2) a hard e capital limit for treasury activi- ••Credit risk: the potential loss due to a client’s default 92 – 93 ties. The policy framework is based on four principles: or downgrade (1) Investment in high-­ quality assets ••Market risk: the potential loss due to changes in (2) Diversification via position size/concentration limits market variables (such as interest rates, currency, (3) Tight limits on market risks (credit spread, interest equity, or commodity prices) rate, and f ­ oreign-­ exchange risk) ••Operational risk: the potential loss resulting from (4) Proactive portfolio surveillance inadequate or failed internal processes, people, and systems, or from external events; operational risk In line with the changes that are occurring in the attends all IFC activities, including Advisory Services global financial markets, IFC enhanced our Treasury and the Asset Management Company. policy framework in FY17. Key initiatives include: development of an expanded framework for stress IFC’s total resources available consist of paid-in testing and contingency planning; enhancements capital, retained earnings net of designations and to IFC’s approach to monitoring of counterparty certain unrealized gains, and total loan-loss reserves. risk and structured product credit; bilateral collat- The excess available capital, beyond what is required eral exchanges with derivatives counterparties; and to support existing business, allows for future growth enhancements to IFC’s model validation framework. of our portfolio while also providing a buffer against unexpected external shocks. As of June 2017, total resources available stood at $23.6 billion, while the minimum capital requirement totaled $19.4 billion. Creating Markets Our Sustainability IFC PERFORMANCE STANDARDS Framework At the core of our Sustainability Framework are IFC Performance Standards — w ​ hich help our clients avoid, mitigate, and manage risk as a way of doing business sustainably. They help clients devise solutions that are Sustainability is critical to companies’ good for business, good for investors, and good for the environment and communities. business success. It’s critical, too, for their customers, surrounding communities, and Our Performance Standards have become a global broader stakeholders. benchmark of sustainability practices. The Equator Principles, which are modeled on these standards, have been adopted by 91 financial institutions in IFC research shows that companies perform better 37 countries. In addition, other financial institutions ​ n returns on equity as well as returns on financially — o reference IFC’s Performance Standards — ​ including when their environmental and social perfor- assets — ​ export-­ ­ import banks and export credit agencies. mance is strong. Nearly 90 percent of our clients IFC also serves as the Secretariat for the Sustainable believe that our work is key in helping them reach their Banking Network, a global k ­ nowledge-­sharing group long-term business goals, improve their relations with of banking regulators and banking associations, stakeholders and local communities, and boost their to help develop guidance and capacity for banks to brand value and recognition. IFC’s Sustainability Frame- incorporate environmental and social risk manage- work and our Corporate Governance methodology are ment into credit decision making. designed to help our clients achieve those objectives. The Performance Standards guide our environmental IFC helps clients understand and manage the risks they and social due-­ diligence process, which integrates the face, partnering with industry and other stakeholders client’s assessment of environmental and social risks to find innovative solutions that open up opportunities with an understanding of the client’s commitment for economically, socially, and environmentally sustain- and capacity to mitigate and manage these risks. This able private investment — w ​ hich contribute in turn review identifies any gaps between client practice and to jobs and inclusive growth. This may include lever- IFC Performance Standards in order to agree on a aging the capacity of other institutions of the World plan of action to ensure compliance. We supervise our Bank Group to address environmental, social, and projects throughout the life of our investment. governance challenges that are beyond the ability or responsibility of a company to solve alone. INTEGRATED GOVERNANCE In all of our investment decisions, IFC gives the same Corporate governance is a paramount consideration weight and attention to environmental, social, and in investors’ decision making. But investors are increas- governance risks as we do to credit and financial risks. ingly paying equal attention to the way companies This enables us to take informed risks to achieve both behave on a variety of environmental and social development impact and financial sustainability. indicators. Investors see businesses’ management of environmental and social issues as a test of how they would handle all strategic and operational challenges. It’s essential, therefore, to assess environmental, social and governance practices in an integrated fashion. The IFC Performance Standards 1 RISK MANAGEMENT 2 LABOR 3 RESOURCE EFFICIENCY 4 COMMUNITY Anticipate risks, avoid, Treat workers fairly and Promote energy Protect local commu- minimize and compen- provide safe and healthy ­ efficiency, use resources nities from worksite sate for any impacts. working conditions. sustainably, and cut accidents and other greenhouse emissions. ­project-­related dangers. In FY17, IFC developed comprehensive market guid- 43 percent of IFC’s f related carbon emissions ­ acility-­ IFC Annual Report 2017 ance and practical tools to do this in the context of (emissions from electricity, stationary combustion, emerging markets, drawing on our track record in refrigerants, water-­ chiller electricity, and purchased applying our Performance Standards and Corporate steam) and 12 percent of IFC’s total carbon footprint. Governance Methodology. In addition, emissions just from headquarters elec- tricity consumption account for 51 percent of IFC’s One tool — o​ ur ESG Progression Matrix — ​ guides com- ­electricity-­related emissions. ­ orporate-­ panies, investors, regulators, c governance evaluators, and other stakeholders in assessing and Projects included raising the c ­ hilled-water set point improving a company’s environmental, social, and for the heating season, raising the data-­ center governance framework. It emphasizes the importance cooling set points, and converting compact fluores- of continuing progress — ​rather than static minimum cent lighting to LED lighting in several locations in standards — i ​n the governance practices of a company. the building. In total, these efforts are expected to conserve about 545,000 kilowatt hours of energy The matrix focuses the assessment along six and save IFC more than $64,000 each year. They ­corporate-​­governance parameters — ​key environ- also contributed to a continuing reduction of IFC’s mental and social policies and practices, the structure headquarters electricity consumption, which fell by and functioning of the board of directors, the control 18 percent between FY08 and FY16. environment, disclosure and transparency, treatment of minority shareholders, and stakeholder engage- IFC continues to be ­ carbon-­neutral for global busi- ment (which includes civil society and communities ness operations. In FY16, the latest year for which affected by a company’s operations). data are available, carbon emissions from our global business operations totaled about 48,279 metric tons Another tool is the IFC Transparency and Disclosure of c­ arbon-­dioxide equivalent. We purchased carbon Toolkit and Guidance — ​ which helps companies credits from a portfolio of six projects, including wind in emerging markets prepare comprehensive and power and small hydropower in India, clean cookstoves best-in-class annual reports that are appropriate in Uganda, household biodigester energy in Cambodia, for their size and organizational complexity and and clean stoves and water treatment in Rwanda. IFC adapted to the context of operation. The objective chose projects that bring tangible development bene- is to provide useful information for investors and fits to the communities in which they take place. other stakeholders. FY16 carbon emissions inventory 94 – 95 We apply this integrated approach beyond the companies we invest in. We also use it in our advisory work with regulators and stock exchanges — ​ to help for IFC’s global operations them apply higher disclosure standards to corporate METRIC TONS OF CARBON-DIOXIDE EQUIVALENT listings, reporting requirements, and other dis­ closure obligations. Business Travel 34,555 HQ Office Electricity 5,545 OUR FOOTPRINT COMMITMENT Country Office Electricity 4,972 Other 3,207 IFC’s Footprint Commitment is to make sustainability an integral part of our internal business operations. TOTAL EMISSIONS 48,279 We continue to make ­energy-­ efficiency improvements to our headquarters building, which accounts for 5 LAND RESETTLEMENT 6 BIODIVERSITY 7 INDIGENOUS PEOPLES 8CULTURAL HERITAGE Avoid involuntary Protect biodiversity Protect the rights, Protect cultural resettlement and and ecosystems. dignity, and culture of heritage and promote Creating Markets minimize the impact indigenous populations. equitable sharing on those displaced. of related benefits. Independent Assurance Report on a Selection of Sustainable Development Information In response to a request made by IFC, we performed a review on a selection of sustainable development information in the Annual Report for the financial year ending June 30, 2017, including quantitative indicators (“the Indicators”) and qualitative statements (“the Statements”). We selected statements that were deemed to be of particular stakeholder interest, and involved a potential reputation risk for IFC, together with statements on corporate-responsibility management and performance. The Indicators and the Statements are related to the following material areas: MATERIAL AREAS STATEMENTS INDICATORS IFC Policy “Our Staff” (p. 84) Development “Understanding our Development Impact” Investments rated positively (DOTS score): 55% (p. 82); effectiveness (p. 77) overall investment services DOTS score by industry (p. 82), of investments by region (p. 82), and by performance area (p. 82); and and advisory weighted and unweighted Investment Services DOTS services scores (p. 59) Advisory Projects Rated Positively: 70% (p. 83); and Advisory Services DOTS score by Performance area (p. 83), by business area (p. 83) and by region (p. 83) Reach ”Sub-Saharan Africa — ​Bringing Progress Employment (millions of jobs) : 2.4 (p. 81) to Half the World’s Poor” (pp. 50–51) Patients served (millions): 34.0 (p. 81) “Gender — E​ xpanding Women’s Economic Students reached (millions): 4.9 (p. 81) Potential” (pp. 44–45) Farmers reached (millions): 3.0 (p. 81) Gas distribution (millions of people reached): 59.9 (p. 81) Water distribution (millions of people reached): 14.3 (p. 81) Power distribution (millions of people reached): 24.8 (p. 81) Power generation (millions of people reached): 79.4 (p. 81) Phone connections (millions of people reached): 345.3 (p. 81) Trade Finance – Number of transactions (millions): 1.8 (p. 81) Trade Finance – Amount ($ billions): 270.0 (p. 81) Number and amounts of microfinance loans and SME loans for CY16 (p. 81) Type of loans Number of loans Amount (millions) ($ billions) Microfinance 53.7 60.7 loans Small and medium loans 8.3 351.1 Environmental “The IFC Performance Standards” FY17 Long-term commitments by environmental and and social risk (pp. 94–95) social category (p. 58) management Category Commitments Number of system ($ millions) projects A 1,393 22 B 3,792 126 C 245 40 FI 48 5 FI-1 614 7 FI-2 4,262 100 FI-3 1,500 42 Total 11,854 342 IFC Annual Report 2017 Sustainable A Decade of IFC “Sustainability — ​ FY17 Climate-Related Investment Commitments (p. 67): business Leadership” (pp. 40–41) $4,776 million “Our Sustainability Framework” (p. 94) FY16 carbon emissions inventory for IFC’s global operations (p. 95): 48,279 mtCO2 equivalent “Our Footprint Commitment” (p. 95) Influence on “Sub-Saharan Africa — B​ ringing Progress to Private Sector Half the World’s Poor” (pp. 50–51) Development Bridging the Economic Divide” “South Asia — ​ and creating (pp. 52–53) opportunities to fight against “Middle East and North Africa — ​Ramping poverty Up Growth and Job Creation” (pp. 54–55) “Access to Finance — Helping Entrepreneurs Reshape Economies” (pp. 32–33) Working Creating Platforms to ”Mobilization — ​ with others Accelerate Development” (pp. 22–23) “Partnerships — ​Working with Development Partners” (p. 89) Our review aimed to provide limited assurance1 that: NATURE AND SCOPE OF OUR REVIEW 1. the Indicators were prepared in accordance with We performed the following review to be able to the reporting criteria applicable during fiscal year express a conclusion: 2017 (the “Reporting Criteria”), consisting of IFC instructions, procedures and guidelines specific to •• We assessed the Reporting Criteria, policies, and each indicator, a summary of which is provided principles, with respect to their relevance, their in the Annual Report, for the indicators related to completeness, their neutrality, and their reliability. Commitments by Environmental and Social •• We reviewed the content of the Annual Report to Category (p. 58) and Development effectiveness of identify key statements regarding the sustainability investments and advisory services (The Monitoring and development areas listed above. System: Tracking the Performance and Direct •• At the corporate level, we conducted interviews with Results of IFC Operations, p. 79) and on IFC’s more than 20 people responsible for reporting to 96 – 97 website for the others; assess the application of the Reporting Criteria or to 2. the Statements have been presented in accordance substantiate the Statements. with “IFC’s Access to Information Policy,” which is •• At the corporate level, we implemented analytical available on IFC’s website2 and the principles of procedures and verified, on a test basis, the calcula- relevance, completeness, neutrality, clarity and reli- tions and the consolidation of the Indicators. ability as defined by international standards 3. •• We collected supporting documents for the Indicators or Statements, such as reports to the It is the responsibility of IFC to prepare the Indicators board of directors or other meetings, loan agree- and Statements, to provide information on the ments, internal and external presentations and Reporting Criteria and to compile the Annual Report. reports, or survey results. •• We reviewed the presentation of the Statements It is our responsibility to express a conclusion on and the Indicators in the Annual Report and the the Indicators and the Statements based on our associated notes on methodology. review. Our review was conducted in accordance with ISAE 3000, International Standard on Assurance Engagements from IFAC 4. Our independence is defined by IFAC professional code of ethics. Creating Markets 1. A higher level of assurance would have required more extensive work. 2. http://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/ifc+projects+database/projects/ ifc+disclosure+policy 3. ISAE 3000 from IFAC, Global Reporting Initiative (GRI), or AA1000 Accountability Standard. 4. ISAE 3000: “Assurance Engagement other than reviews of historical data,” International Federation of Accountants, International Audit and Assurance Board, December 2003. LIMITATIONS OF OUR REVIEW The assessment of DOTS E&S performance area for a client is done through a selection of the appli- Our review was limited to the Statements and cable Performance Standards indicators monitored Indicators identified in the table above and did not through regular E&S portfolio supervision. The E&S cover other disclosures in the Annual Report. DOTS indicators selected are the ones IFC deemed to be the most suitable as development outcomes. Our tests were limited to document reviews and While enhancing the focus on impact through AIMM, interviews at IFC’s headquarters in Washington, D.C. IFC should better reflect the positive environmental Within the scope of work covered by this statement, impact of its projects by looking not only at E&S risk we did not participate in any activities with external management but also at sector-​ specific E&S develop- stakeholders or clients, and only conduct limited ment outcome indicators. testing aimed at verifying the validity of information on a sample of individual projects. Neutrality and clarity INFORMATION ABOUT THE REPORTING IFC provides information on the methodologies used CRITERIA AND THE STATEMENT to establish the Indicators in the comments next to PREPARATION PROCESS the published data or in the related sections. Further information is available on the IFC website. With regards to the Reporting Criteria and the Statement preparation policies and principles, we Investment’s performance on DOTS Economic and wish to make the following comments: Private Sector Development areas is assessed by comparing actual indicator results to expected Relevance achievements. Most targets are established for midpoint or end of investment. Annual assessment IFC presents sustainability information on its own therefore relies on professional judgment of progress impact and on environmental and social risks, impacts, of actual indicator results towards achieving targets. and outcomes of projects it financed directly or through financial intermediaries. The development Moreover, IFC is strongly committed to reaching results of IFC Investment and Advisory Services are the climate-related target of 28% of climate invest- assessed through its Development Outcome Tracking ments. IFC periodically updates its definition of System (DOTS) and the implementation of its evalua- climate-​ related projects to include project categories tion strategy. that have a positive impact on climate. Climate- smart agriculture projects have thus been added The scope of indicators to assess the Private Sector to climate-related projects, and now represent 18% Development (PSD) performance area of DOTS of the reported figure. While expanding its climate-​ should better reflect the impact on final beneficia- related definition, IFC must continue to ensure that ries over the life cycle of the projects, as some of the impact of climate investments is significant the reach indicators in the Economic Performance in terms of avoided GHG emissions and should area of DOTS may be useful to track PSD perfor- develop — ​wherever possible — ​additional methodolo- mance. IFC is currently developing a new Anticipated gies to capture ex-ante or ex-post avoided emissions. Impact Measurement and Monitoring (AIMM) frame- This is of particular importance for Special Climate work, which will be integrated with IFC’s existing projects and climate-related projects financed results-measurement framework and monitoring through financial intermediaries that account for a system. The AIMM framework should enable IFC to significant part of climate-related investments. better reflect how projects promote Private Sector Development. Reliability Finally, while the Reach Indicators capture the overall Reach indicators are directly collected from clients contribution of IFC clients, IFC’s reporting regarding and data received can correspond to data that its contribution and development results could be differ from IFC indicators definitions. IFC enhanced enhanced by disclosing incremental data — i ​.e., addi- its internal controls on the data received, especially tional beneficiaries after IFC’s investment — ​and by from major contributors to the Reach numbers, by applying a contribution factor such as the share of comparing, for instance, reported data to publicly IFC’s investment in overall project investment. disclosed information, when available. Completeness In addition, IFC is still using extrapolations for micro-loans and SME-loans indicators where data The Indicators reported in the Annual Report cover from clients is not available. Nevertheless, signifi- the most relevant IFC activities. Nevertheless, as cant reduction in the number of extrapolations has Reach figures are based on the information provided been observed. by IFC clients, some of the information could not be obtained. IFC decided to take a conservative Eventually, in order to assess the final number of approach and not to extrapolate the data on all beneficiaries, some country averages are used — s ​ uch Reach indicators (except micro-loans and SME loans). as average people per households, which are of four Published Reach data may therefore be underesti- for non-IDA countries and five for IDA countries. These mated in some cases and might vary from year to averages should be refined in order to better reflect year, depending on clients’ responses. the evolution of demography at country level. CONCLUSION IFC Annual Report 2017 Based on our review, nothing has come to our atten- tion that causes us not to believe that: •• the Indicators were established, in all material aspects, in accordance with the Reporting Criteria; •• the Statements were presented, in all material aspects, in accordance with “IFC’s Policy on Disclosure of Information” and the principles of relevance, completeness, neutrality, clarity, and reliability as defined by international standards. Paris-La Défense, August 5, 2017 The independent auditors ERNST & YOUNG et Associés Eric Duvaud Partner, Cleantech and Sustainability 98 – 99 Creating Markets Financial Performance Summary The overall market environment has a significant influence on IFC’s financial performance. The main elements of IFC’s net income (loss) and comprehensive income (loss) and influences on the level and variability of net income (loss) and comprehensive income (loss) from year to year are: ELEMENTS SIGNIFICANT INFLUENCES Net income: Yield on interest earning assets Market conditions including spread levels and degree of competition. 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, 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 and investment portfolio commodity markets and ­ company-­ specific performance for equity investments. Performance of the equity portfolio (principally realized capital gains, dividends, equity impairments, gains on non-­ monetary exchanges and unrealized gains and losses on equity investments). Provisions for losses on loans Risk assessment of borrowers and probability of default and loss given default. and guarantees 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 budgets. Gains and losses on other non-­ Principally, differences between changes in fair values of borrowings, including trading financial instruments IFC’s credit spread, and associated derivative instruments and unrealized gains accounted for at fair value 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 are valued using internally developed models or methodologies utilizing inputs that may be observable or non-­ observable. Grants to IDA ­ overnors-­ Level of the Board of G approved grants to IDA. Other comprehensive income (loss): Unrealized gains and losses on Global climate for emerging markets equities, fluctuations in currency listed equity investments and and commodity markets and ­ company-­ specific performance. Such equity debt securities accounted for as investments are valued using unadjusted quoted market prices and debt ­available-for-sale securities are valued using internally developed models or methodologies utilizing inputs that may be observable or non-­ observable. 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. Global equity markets in emerging economies have lower provisions for loan losses. Income from liquid IFC Annual Report 2017 been volatile in recent years but there was an overall asset trading activities was also significantly higher in improved operating environment in FY17, particularly in FY17, with the majority of the increase occurring in the the second half of the fiscal year. In FY16, such markets first three months of FY17 (FY17 Q1), principally due to were generally lower with significant deterioration in the the narrowing of credit spreads across the portfolio. first three months of FY16 (FY16 Q1), followed by partial IFC experienced higher interest income on loans and recovery by the end of FY16. FY17 saw IFC’s major debt securities and borrowing charges in FY17 driven investment currencies remain relatively stable against by higher LIBOR rates. IFC’s reporting currency, the US$, compared to the significant depreciation experienced throughout much IFC has reported income before net unrealized gains of FY16. Commodity prices fluctuated during the fiscal and losses on non-­ trading financial instruments year and fell during the second half of FY17, decoupling accounted for at fair value, grants to IDA and net from the strength in emerging market assets overall. gains and losses attributable to non-­ controlling interests of $1,129 million in FY17, $629 million higher The generally stronger market conditions in FY17 than FY16 ($500 million) and $274 million higher than contributed to IFC recording robust realized gains on FY15 ($855 million). The $629 million increase in FY17 equity investments, although lower than FY16, and when compared to FY16 was principally a result of lower impairments on equity investments along with the following: Change in income before net unrealized gains and losses on non-­trading financial instruments accounted for at fair value, grants to IDA and net gains and losses attributable to non-­controlling interests FY17 vs FY16 (US$ millions) INCREASE (DECREASE) FY17 VS FY16 Higher income from liquid asset trading activities $      413 Lower provisions for losses on loans, guarantees and other receivables 273 100 – 101 Higher income from loans and guarantees, realized gains and losses on loans and associated derivatives 172 Lower unrealized losses on equity investments and associated derivatives, net 171 Higher debt securities income (excluding impairments) 162 temporary impairments on equity investments and debt securities Lower other-than-­ 154 Higher expenses from pension and other postretirement benefit plans (108) trading activities Higher foreign currency transaction losses on non-­ (142) Lower realized gains on equity investments and associated derivatives, net (144) Higher charges on borrowings (303) Other, net (19) Change in income before net unrealized gains and losses on non-­ trading financial instruments accounted for at fair value, grants to IDA and net gains and losses controlling interests attributable to non-­ $      629 Creating Markets IFC’s net income (loss) for each of the past five fiscal years ended June 30, 2017 is presented below (US$ millions): IFC’s net income (loss), fiscal years 2013–2017 Fiscal year ended June 30 (US$ millions) 2013 1,018 2014 1,483 2015 445 2016 (33) 2017 1,418 Income Available for Designations (a non-GAAP measure)1 was $1,233 million, 60% higher than in FY16 ($770 million) and 7% lower than in FY15 ($1,327 million). 1. Income available for designations generally comprises net income excluding unrealized gains and losses on investments and unrealized gains and losses on other non-trading financial instruments, income from consolidated VIEs, and expenses reported in net income related to prior year designations. Reconciliation of reported net income to income available for designations (US$ millions) FY17 FY16 FY15 Net income (loss) attributable to IFC $ 1,418 $ (33) $ 445 controlling interests Add: Net gains (losses) attributable to non-­ 4 (1) (36) Net income (loss) $ 1,422 $ (34) $ 409 Adjustments to reconcile Net Income to Income Available for Designations Grants to IDA 101 330 340 Advisory Services Expenses from prior year designations 64 57 59 Unrealized (gains) losses on borrowings (74) (62) 52 Unrealized (gains) losses on investments (287) 470 456 Other 7 9 11 Income Available for Designations $ 1,233 $ 770 $ 1,327 Based on the new Board-­ approved distribution policy, of the unutilized balances of prior year designations the maximum amount available for designation was related to Advisory Services to CMAW, and, subject $205 million. On August 3, 2017, the Board of Directors to the conditions detailed above, a designation of up approved a designation of $85 million of IFC’s to $80 million of IFC’s retained earnings for grants retained earnings for IFC’s Creating Markets Advisory to IDA. These designations are expected to be noted Window (CMAW), $40 million of IFC’s retained earn- with approval by the Board of Governors, and, subject ings for Advisory Services, a reallocation of $49 million to the above conditions, concluded, in FY18. Selected financial data as of and for the last five fiscal years IFC Annual Report 2017 (US$ millions) AS OF AND FOR THE YEARS ENDED JUNE 30 2017 2016 2015 2014 2013 Consolidated income highlights: Income from loans and guarantees, including realized gains and losses on loans and associated derivatives $ 1,298 $ 1,126 $ 1,123 $ 1,065 $ 996 Provision for losses on loans, guarantees and other receivables (86) (359) (171) (88) (243) Income from equity investments and associated derivatives 707 518 427 1,289 732 Income from debt securities, including realized gains and losses on debt securities and associated derivatives 282 129 132 89 69 Income from liquid asset trading activities 917 504 467 599 500 Charges on borrowings (712) (409) (258) (196) (220) Other income 528 501 505 461 441 Other expenses (1,617) (1,464) (1,423) (1,418) (1,401) Foreign currency transaction gains and losses on non-­ trading activities (188) (46) 53 (19) 35 Income before net unrealized gains and losses on non-­ trading financial instruments accounted for at fair value and grants to IDA 1,129 500 855 1,782 909 trading financial Net unrealized gains and losses on non-­ instruments accounted for at fair value 394 (204) (106) (43) 441 Income before grants to IDA 1,523 296 749 1,739 1,350 Grants to IDA (101) (330) (340) (251) (340) Net income (loss) 1,422 (34) 409 1,488 1,010 102 – 103 controlling Less: Net (gains) losses attributable to non-­ interests (4) 1 36 (5) 8 Net income (loss) attributable to IFC $ 1,418 $ (33) $ 445 $ 1,483 $ 1,018 AS OF AND FOR THE YEARS ENDED JUNE 30 2017 2016 2015 2014 2013 Consolidated balance sheet highlights: Total assets $ 92,254 $ 90,434 $ 87,548 $ 84,130 $ 77,525 Liquid assets, net of associated derivatives 39,192 41,373 39,475 33,738 31,237 Investments 40,519 37,356 37,578 38,176 34,677 Borrowings outstanding, including fair value adjustments 54,103 55,142 51,265 49,481 44,869 Total capital $ 25,053 $ 22,766 $ 24,426 $ 23,990 $ 22,275 of which Undesignated retained earnings $ 21,901 $ 20,475 $ 20,457 $ 20,002 $ 18,435 Designated retained earnings 125 133 184 194 278 Capital stock 2,566 2,566 2,566 2,502 2,403 Accumulated other comprehensive income (loss) (AOCI) 458 (431) 1,197 1,239 1,121 Non-­controlling interests 3 23 22 53 38 Creating Markets KEY FINANCIAL RATIOS 2017 2016 2015 2014 2013 Financial ratiosa: Return on average assets (GAAP basis)b 1.6% 0.0% 0.5% 1.8% 1.3% Return on average assets (non-GAAP basis)c 1.3% 0.5% 1.3% 1.8% 0.9% Return on average capital (GAAP basis) d 5.9% (0.1)% 1.8% 6.4% 4.8% Return on average capital (non-GAAP basis)e 4.9% 1.8% 4.6% 6.5% 3.1% Overall liquidity ratio f 82% 85% 81% 78% 77% External funding liquidity levelg N/A 504% 494% 359% 309% Debt to equity ratioh 2.7:1 2.8:1 2.6:1 2.7:1 2.6:1 Total reserves against losses on loans to total disbursed portfolioi 6.1% 7.4% 7.5% 6.9% 7.2% Capital measures: Total Resources Required ($ billions)j 19.4 19.2 19.2 18.0 16.8 Total Resources Available ($ billions)k 23.6 22.5 22.6 21.6 20.5 Strategic Capital l 4.2 3.3 3.4 3.6 3.8 Deployable Strategic Capitalm 1.8 1.0 1.1 1.4 1.7 Deployable Strategic Capital as a percentage of Total Resources Available 8% 4% 5% 7% 8% a. 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). b. Net income for the fiscal year as a percentage of the average of total assets at the end of such fiscal year and the previous fiscal year. c. 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 reserves), liquid assets net of repos, and other assets averaged for the current and previous fiscal year. d. Net income for the fiscal year as a percentage of the average of total capital (excluding payments on account of pending subscriptions) at the end of such fiscal year and the previous fiscal year. e. 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) averaged for the current and previous fiscal year. f. Overall Liquidity Policy states that IFC would at all times maintain a minimum level of liquidity, plus undrawn borrowing commitments from the IBRD, that would cover at least 45% of the next three years’ estimated net cash requirements (target range of 65–95%). g. This ratio was discontinued at the end of FY17 since it was no longer considered a key ratio for IFC. h. Leverage (Debt/equity) ratio is defined as the number of times outstanding borrowings plus outstanding guarantees cover paid-in capital and accumulated earnings (net of retained earnings designations and certain unrealized gains/losses). i. Total reserves against losses on loans to total disbursed loan portfolio is defined as reserve against losses on loans as a percentage of the total disbursed. j. Total resources required (TRR) is the minimum capital required to cover the expected and unexpected loss on IFC’s portfolio, calibrated triple-A rating. TRR is the sum of the economic capital requirements for IFC’s different assets, and it is determined by to maintain IFC’s ­ the absolute size of the committed portfolio, the product mix (equity, loans, short-term finance, and Treasury portfolio assets), and by operational and other risks. k. 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 reserves. TRA grows based on retained earnings (profit minus distributions) and increases in reserves. l. Total resources available less total resources required. m. 90% of total resources available less total resources required. COMMITMENTS IFC Annual Report 2017 In FY17, the Long-Term Finance program was $11,854 million, as compared to $11,117 million in FY16 and Core Mobilization was $7,462 million, as compared to $7,739 million for FY16, a total increase of 2%. In addition, the average outstanding balance for Short-Term Finance was $3,185 million at June 30, 2017, as compared to $2,807 million at June 30, 2016. CORE MOBILIZATION Core Mobilization is financing from entities other than IFC that becomes available to clients due to IFC’s direct involvement in raising resources. IFC finances only a portion, usually not more than 25%, of the cost financed projects, therefore, of any project. All IFC-­ require other financial partners. FY17 and FY16 long-term finance and core mobilization (US$ millions) FY17 FY16 Total Long-Term Finance and Core Mobilization $19,316 $18,856 Total Long-Term Finance $11,854 $11,117 104 – 105 Total Core Mobilization $ 7,462 $ 7,739 Creating Markets Funds managed by AMC and their activities FY17 vs FY16 (US$ millions unless otherwise indicated) AS OF JUNE 30, 2017 FOR THE YEAR ENDED JUNE 30, 2017 TOTAL FUNDS RAISED FROM TOTAL INVESTMENT INVESTMENT FROM OTHER COMMITTED COMMITMENTS DISBURSEMENTS TOTAL IFC INVESTORS BALANCE MADE BY FUND MADE BY FUND IFC Capitalization (Equity) Fund, L.P. (Equity Capitalization Fund) $ 1,275 $      775 $      500 $      885 $  – $  – IFC Capitalization (Subordinated Debt) Fund, L.P. (Sub-Debt Capitalization Fund) 1,725 225 1,500 1,562 – – IFC African, Latin American and Caribbean Fund, LP (ALAC Fund) 1,000 200 800 646 24 14 Africa Capitalization Fund, Ltd. (Africa Capitalization Fund) 182 – 182 108 – – IFC Russian Bank Capitalization Fund, LP (Russian Bank Cap Fund)* 550 250 300 – – – IFC Catalyst Fund, LP, IFC Catalyst Fund (UK), LP and IFC Catalyst Fund (Japan), LP (collectively, Catalyst Funds) 418 75 343 304 49 48 IFC Global Infrastructure Fund, LP (Global Infrastructure Fund)** 1,430 200 1,230 600 189 151 Mexico Fund, LP (China-­ China-­ Mexico Fund) 1,200 – 1,200 320 180 43 IFC Financial Institutions Growth Fund, LP (FIG Fund) 505 150 355 133 – 37 IFC Global Emerging Markets Fund of Funds, LP and IFC Global Emerging Markets Fund of Funds (Japan Parallel), LP (collectively, GEM Funds) 800 150 650 202 99 44 IFC Middle East and North Africa Fund, LP (MENA Fund) 162 60 102 15 15 15 Women Entrepreneurs Debt Fund, LP (WED Fund) 110 30 80 66 40 45 IFC Emerging Asia Fund, LP (Asia Fund) 440 150 290 70 70 70 Total $9,797 $2,265 $7,532 $4,911 $666 $467 IFC Annual Report 2017 AS OF JUNE 30, 2016 FOR THE YEAR ENDED JUNE 30, 2016 TOTAL FUNDS RAISED FROM TOTAL INVESTMENT INVESTMENT FROM OTHER COMMITTED COMMITMENTS DISBURSEMENTS TOTAL IFC INVESTORS BALANCE MADE BY FUND MADE BY FUND IFC Capitalization (Equity) Fund, L.P. (Equity Capitalization Fund) $1,275 $      775 $      500 $1,013 $  – $  – IFC Capitalization (Subordinated Debt) Fund, L.P. (Sub-Debt Capitalization Fund) 1,725 225 1,500 1,609 – – IFC African, Latin American and Caribbean Fund, LP (ALAC Fund) 1,000 200 800 764 63 81 Africa Capitalization Fund, Ltd. (Africa Capitalization Fund) 182 – 182 130 23 29 IFC Russian Bank Capitalization Fund, LP (Russian Bank Cap Fund)* 550 250 300 59 – – IFC Catalyst Fund, LP, IFC Catalyst Fund (UK), LP and IFC Catalyst Fund (Japan), LP (collectively, Catalyst Funds) 418 75 343 258 83 48 IFC Global Infrastructure Fund, LP (Global Infrastructure Fund)** 1,430 200 1,230 433 5 102 Mexico Fund, LP (China-­ China-­ Mexico Fund) 1,200 – 1,200 140 140 4 IFC Financial Institutions Growth Fund, LP (FIG Fund) 464 150 314 133 133 96 IFC Global Emerging Markets Fund of Funds, LP and IFC Global Emerging Markets Fund of Funds (Japan Parallel), LP (collectively, GEM Funds) 406 81 325 108 108 25 106 – 107 IFC Middle East and North Africa Fund, LP (MENA Fund) 162 60 102 12 12 12 Women Entrepreneurs Debt Fund, LP (WED Fund) 90 30 60 30 30 10 Total $8,902 $2,046 $6,856 $4,689 $597 $407 The Russian Bank Cap Fund has completed the exit from all its investments and has initiated the termination and dissolution of the Fund. *  **  investment fund managed by AMC on behalf of Fund LPs. Includes co-­ Creating Markets Letter to the Board of Governors The Board of Directors of IFC has had this annual report prepared in accordance with the Corporation’s bylaws. Jim Yong Kim, President of IFC and Chairman of the Board of Directors, has submitted this report with the audited financial statements to the Board of Governors. The Directors are pleased to report that, for the fiscal year ended June 30, 2017, IFC expanded its sustainable development impact through private sector investments and advice. Stay Connected IFC Annual Report 2017 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 2017 Annual Report, www.ifc.org/annualreport, provides downloadable PDFs of all materials in this volume and translations as they become available. 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