The World Bank headquarters
The Investment Lab will seek to mobilize capital from the World Bank and other institutions to address climate change and to tackle poverty. Image Credit: AFP

California: The World Bank Group is leading a new initiative aimed at driving more private-sector investment to emerging markets, with an initial focus on renewable energy and energy infrastructure.

The Private Sector Investment Lab will be led by World Bank Group President Ajay Banga, working alongside co-chairs Mark Carney, the former Bank of England governor, and Prudential Chair Shriti Vadera. Carney also is co-chair of the Glasgow Financial Alliance for Net Zero, which has more than 550 member firms, including many of the world’s biggest banks and asset managers.

For years, the World Bank and other multilateral organizations have failed to mobilize the vast sums of financing needed to help developing countries cope with the fallout from climate change. As pressure mounts on such groups to consider more drastic measures, the World Bank is now ready to let vulnerable, disaster-hit countries pause their debt repayments.

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But such steps are only part of the solution, according to Banga. Without the private sector, “there’s no way there’s adequate money” to address the challenges and “intertwining crises” that the planet is facing, he said in an interview. “That’s what we’re trying to harness. There’s a whole issue of a livable planet.”

The external financing required amounts to about $1 trillion extra a year, Carney said in the same interview. “So we need to rapidly scale it up. But we also need to generate a lot more domestic finance as well.”

The Investment Lab will seek to mobilize capital from the World Bank and other institutions to address climate change and to tackle poverty. The goals will include improving financing structures and better aligning the World Bank with the private sector. It also will focus on forming new partnerships and pursuing other areas where opportunities exist “to better catalyze private investment,” the group said.

“Public institutions can and must do more to mobilize private finance, and private finance must work with development partners to create blended finance vehicles that can be rapidly scaled,” Carney said in the statement.

The ultimate goal is to move “beyond promises and pledges to credible execution,” Vadera said.

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Members of the Lab will report directly to Banga and the World Bank Group’s leadership team. Makhtar Diop, managing director of International Finance Corp., will oversee coordination and serve as a day-to-day point of contact into the World Bank Group.

To help address climate change, investment in emerging markets and developing economies must scale fourfold, said Carney, who is UN Special Envoy on Climate Action and serves as chair and head of transition investing at Brookfield Asset Management. “Business as usual won’t work,” he said.

The Lab will be comprised of senior leaders from private finance and the corporate sector who have experience in financing, investing and doing business in emerging markets and developing economies. The team, which will be announced in the coming weeks, will work closely with experts from government, regulatory groups and businesses from around the world.