The Inter-American Development Bank (IDB) and IDB Invest say they have approved a roadmap for a series of institutional reforms for the Washington-based financial institution and mandated a proposal for a capital increase for IDB Invest, the Bank’s private-sector arm.
The decision by the Board of Governors will modernize the IDB, IDB Invest, and IDB Lab, ushering in a new, 21st-century business model that will help countries across Latin America and the Caribbean more effectively address challenges, including poverty and inequality, climate change, and the need for digitalization.
The international organization says the proposed reforms will empower the bank to accelerate inclusive and sustainable growth by strengthening the synergies between the public and private sectors, ensuring equal opportunities for women in areas including education, business, and justice, and doing more to help countries reach net-zero-emissions targets.
“Our record year in 2021 proved how the IDB can optimize its balance sheet and mobilize resources, but the new IDB can do even better. This is a historic moment for the IDB and IDB Invest. The Boards’ actions mean we are gaining the muscle, flexibility and tools needed to support the urgent needs of Latin America and the Caribbean in the 21st century,” said IDB President Mauricio Claver-Carone at the Bank’s annual meeting.
“The pandemic hit our most vulnerable citizens hard. Now the region faces rising inflation, higher global interest rates, and shifting geo-economic and geopolitical concerns. We rose to the occasion in 2020 and 2021, but we can now do even more by leveraging our strengths. Thanks to the Governors’ actions, we are now empowered to better help the region by mobilizing more private-sector resources and doing more in critical areas such as climate change and gender equality,” he said.
The new business model envisioned for IDB Invest, or IDB Invest 2.0, will be developed over the next six months, and submitted to the Boards for approval this fall.
The approval to advance with the new vision signifies confidence in IDB Invest’s ability to develop an even more impactful approach to development.
The bank said the new model will allow it to scale up work with investors and companies throughout the region. IDB Invest’s innovative approach will focus on originating more impactful projects, de-risking private-sector investment, and using new financial and technical tools, to help crowd-in investment.
The new business model goes hand-in-hand with the mandate for a capital increase proposal for IDB Invest, the details of which will be presented to the Boards of Executive Directors later this year.
These new capacities will help IDB Invest build on the record level of mobilizations it achieved in 2021 and enhance its role as the region’s foremost private-sector-mobilization partner for development. A more ambitious IDB Invest will work even closer with the IDB, which will also have new tools to creatively collaborate with, and support, borrowing member countries to enable business environments that attract investment and are more conducive to job-creation.
Reforms at the organization and IDB Invest form part of a new value proposition for the institutions, and IDB Lab, approved by the governors that will enable the bank to accelerate regional development by better addressing social challenges, strengthening the private sector, and more ambitiously combatting climate change.
The Inter-American Development Bank said the new business models will allow the financial institution to take a more sophisticated approach to collaboration. The IDB will function as a hub, linking the private-sector work of IDB Invest with partnerships and projects on the public-sector side. This will enable the Bank to better leverage trillions of dollars in private-sector assets that the region must access to successfully combat climate change.
The bank said the innovative approach also calls for transitioning IDB Lab from an innovation lab to an innovation hub, allowing it to do more to scale up the impact of private-sector projects and leverage its capacity to take on risk to do experimental work in frontier sectors and invest in early-stage projects. “IDB Lab’s agility and ability to respond rapidly to clients’ needs will enhance the Bank’s capacity to test innovative ideas and carry out pilot programs that can be expanded to meet regional development goals.”
It said that the governors’ endorsement will make the IDB more innovative and responsive, with enhancements to project design, a new Comprehensive Portfolio Management System to measure and achieve results and updated financial and technical instruments.
The organization said that the actions by the Boards of Governors stem from a mandate issued at the 2021 Annual Meeting for the Bank to conduct an in-depth analysis of the region’s challenges and the Bank’s role and optimal institutional structure.
Following a period of consultations with country authorities and other stakeholders, the Bank presented governors with a new value proposition centered on its core mandate of ensuring development effectiveness.
The next annual meeting of the bank and IDB Invest will take place in Panama.
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