Annual Report 2018 Redefining Development Finance ABOUT IFC IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in developing countries. Established in 1956, IFC is owned by 184 member countries, a group that collectively determines our policies. We have six decades of experience in the world’s most challenging markets. With a global presence in about 100 countries, a network consisting of hundreds of financial institutions, and about 2,000 private sector clients, IFC is uniquely positioned to create markets and opportunities where they are needed most. We use our capital, expertise, and influence to help end extreme poverty and boost shared prosperity. CONTENTS Letter from the IFC Board  2 Letter from Jim Yong Kim, World Bank Group President  3 Letter from Philippe Le Houérou, IFC CEO  6 Our Management Team  9 REDEFINING DEVELOPMENT FINANCE  10 Mobilizing Private Solutions  24 Creating Markets 32 Promoting Sustainability 44 Ending Poverty  52 IFC YEAR IN REVIEW  62 IFC Operational Highlights 64 IFC Financial Highlights  65 World Bank Group Summary Results 68 ABOUT US  72 Measuring Up  73 Our Expertise  76 Our People & Practices  84 Cover: To maximize finance for development, IFC follows a decision-making sequence that prioritizes private sector solutions. We call this approach the Cascade. IFC ANNUAL REPORT 2018 | 1 LETTER FROM THE IFC BOARD During fiscal 2018, the Board was actively involved in STANDING SEATED the discussion with management on implementation (Left to Right) (Left to Right) of the Forward Look vision for the World Bank Group. Werner Gruber Melanie Robinson An integral part of this discussion included a proposed Switzerland United Kingdom capital package that would allow the Bank Group to Frank Heemskerk Christine Hogan deliver development results more effectively — and in The Netherlands Canada a financially sustainable manner. Turki Almutairi Máximo Torero Saudi Arabia (Alternate) Peru This transformative financial and policy package is Andrei Lushin Jason Allford Russian Federation Australia the largest injection of capital into the World Bank Yingming Yang Bongi Kunene and IFC to date, and it represents a major shift in China South Africa approaches to address today’s toughest development Jean-­Claude Tchatchouang Merza Hasan challenges. Together with a commitment by Bank Cameroon (Alternate) Kuwait (Dean) Group management to implement necessary internal Hervé de Villeroché Franciscus Godts reforms, the package of initiatives will help support France Belgium achievement of the 2030 development agenda, the Otaviano Canuto Patrizio Pagano Brazil Italy IDA18 vision, Maximizing Finance for Development, and Kazuhiko Koguchi Juergen Zattler will help the Bank Group continue to lead on global Japan Germany public goods and scale up its support in fragile and Andin Hadiyanto Susan Ulbaek ­­conflict-​affected situations. Indonesia Denmark Erik Bethel Andrew N. Bvumbe The Board also engaged on the shareholding review to United States (Alternate) Zimbabwe rebalance shareholding among members, and agreed Fernando Jimenez Latorre Spain to reduce extreme under-­ representation in order to Omar Bougara realize voice reform and more closely align voting power Algeria between the institutions of the Bank Group. The Board Aparna Subramani has also provided guidance and direction on initiatives India that enable the Bank Group to continue to improve its business model — including through simpler and more agile processes, strengthened strategic frame- works, market creation and increased development impact through the IFC 3.0 strategy, efficiency measures in compensation and other expenses, and frameworks and mechanisms to ensure financial sustainability. IFC ANNUAL REPORT 2018 | 2 LETTER FROM JIM YONG KIM World Bank Group President It’s not an exaggeration to say First, to accelerate inclusive, sustainable economic that today’s challenges can seem growth, we need a new vision for financing develop- ment — one that helps make the global market system overwhelming. In our work around work for everyone and the planet. In a world where the world, we’re facing overlapping achieving the Global Goals will cost ­ trillions every year, but official development assistance is stagnant in the crises such as climate change, billions, we cannot end poverty without a fundamen- tally different approach. conflict, pandemics, natural disasters, and forced displacement. We must With the adoption of the Hamburg Principles in July 2017, the G-20 endorsed an approach that we call the simultaneously help our client Cascade, which will lead to our goal of Maximizing countries address immediate crises, Finance for Development. The World Bank, IFC, and MIGA are working more closely together to create build resilience against challenges markets and bring private sector solutions in sectors on the horizon, and make enduring such as infrastructure, agriculture, telecommuni- cations, renewable energy, and affordable housing. investments to prepare for an (Read more on page 5.) ­uncertain future. Second, to build resilience to shocks and But even in difficult times, I have never been more threats — e​ ven as we continue developing c ­ limate-​ optimistic that we can achieve our twin goals: to smart infrastructure and improving response end extreme poverty by 2030, and to boost shared systems — ​ we need innovative financial tools to prosperity among the poorest 40 percent around help poor countries do what wealthy ones have long the world. Across the World Bank Group, we are done: share the risks of crises with global capital harnessing new technologies and developing finan- markets. This spring, we saw the first impact of the cial innovations to drive progress on the three parts Pandemic Emergency Financing Facility (PEF) with a of our strategy to get there: accelerate inclusive, rapid grant to support the Ebola response surge in the sustainable economic growth; build resilience to Democratic Republic of Congo. With this facility — and shocks and threats; and help our client countries a similar one we are developing to improve responses invest in their people. to and prevent famine — we are finding new ways to help the poorest countries share risks with financial markets, helping break the cycle of panic and neglect that often occurs with crises. IFC ANNUAL REPORT 2018 | 3 LETTER FROM JIM YONG KIM World Bank Group President But resilience must start with the existential threat This year, we leveraged IDA’s strong capital base of climate change. When we returned to Paris in and launched the inaugural IDA bond. Investor December 2017 to celebrate the two-year anniver- demand for the $1.5 billion bond reached more sary of the Paris Climate Agreement, we put more than $4 billion. By combining IDA’s traditional donor than a dozen deals on the table to finance signif- funding with funds raised in the capital markets, icant climate action such as preventing coastal this financial innovation will expand IDA’s ability erosion in West Africa and scaling up renewable to support the world’s poorest countries, including energy worldwide. It was critical to lead by efforts to prevent conflict. example, and we announced that after 2019, we will no longer finance upstream oil and gas while The International Finance Corporation (IFC) pro- helping countries find sustainable ways to achieve vided more than $23 billion in financing for private their development goals. sector development this past year, including $11.7 billion mobilized from investment partners. Of this, nearly $6.8 billion went to IDA countries, Third, to prepare for a future where innova- and more than $3.7 billion was invested in areas tions will only accelerate, we must find new ways affected by fragility, conflict, and violence. to help countries invest more — and more effec- tively — in their people. The jobs of the future will Marking its 30th year of operation, the Multilateral require specific, complex skills, and human capital Investment Guarantee Agency (MIGA) has become will become an increasingly valuable resource. With the third leading institution among the MDBs the Human Capital Project, which we launched in terms of mobilizing direct private capital to this year, we are developing a rigorous and detailed low- and middle-income countries. This year, measure of human capital in each country. MIGA issued a record $5.3 billion in political risk insurance and credit enhancement guarantees, At the Annual Meetings in Indonesia in October helping finance $17.9 billion worth of projects in 2018, we will unveil the Human Capital Index, which developing countries. New issuances and gross will rank countries according to how well they are outstanding exposure — at $21.2 billion this year — investing in the human capital of the next genera- almost doubled as compared to fiscal 2013. tion. The ranking will put the issue squarely in front of heads of state and finance ministers so they can We know that the 2018 World Bank Group capital accelerate investments in their people and prepare increase was a strong vote of confidence in our for the economy of the future. staff, who work tirelessly to end poverty around the globe. I am inspired every day by their dedica- Around the world, demand continues to rise for tion and their ability to deliver on our ambitious financing, expertise, and innovation. The needs commitments to meet the aspirations of the are great — but the costs of failure are simply too people we serve. high. Our shareholders are helping us meet that challenge with their approval of a historic $13 billion But we also know that the capital increase rep- capital increase, which will strengthen the World resents an enormous challenge to operate more Bank Group’s ability to reduce poverty, address the efficiently and effectively, to drive innovation, most critical challenges of our time, and help our and to accelerate progress toward a world that client countries — and their people — reach their is finally free of poverty. In the year ahead, we highest aspirations. will step up once again to meet that challenge every day. This year, the World Bank Group committed nearly $67 billion in financing, investments, and guarantees. The International Bank for Reconstruction and Development (IBRD) continues to see strong demand from clients for its services, with commit- ments rising to $23 billion in fiscal 2018. Meanwhile, the International Development Association (IDA) provided $24 billion to help the poorest countries — Jim Yong Kim the largest year of IDA commitments on record. World Bank Group President IFC ANNUAL REPORT 2018 | 4 Benban (Aswan Governorate) How a Unique Strategy Is Helping Egypt Overcome Its Power Distress Four years ago, the Arab Republic of Egypt faced a serious power crisis. Hours-long power cuts affected businesses and the quality of life, while demand for electricity exceeded supply by 20 percent. With scarce public funds needed elsewhere, Egypt needed an alternative way to find the resources needed to solve its power problems. That’s where the World Bank Group’s emphasis on Maximizing Finance for Development (MFD) came in. The MFD approach is a continuation of the World contracts for the Photovoltaic Solar Feed-in Tariff Bank Group’s efforts to mobilize resources beyond (FiT) Program. In 2017, IFC finalized a $653 million official development assistance to meet countries’ debt package to finance the construction of the development needs. It leverages capabilities across Benban PV Solar Park, which will be the world’s largest the Bank Group institutions to come up with innova- when complete. Benban’s 32 solar power plants will tive solutions that will help achieve the Bank Group’s generate up to 752 megawatts of power, serve over twin goals. More importantly, MFD envisages a key 350,000 residential customers, and generate up to role for the private sector — both as financier and as 6,000 jobs during construction. MIGA has received a source of knowledge. approval to provide up to $210 million in political risk insurance for 12 projects within the solar park. In 2014, the Egyptian government began working Overall, the World Bank Group and other lenders will with the World Bank Group to address its energy mobilize a total of $2 billion of private investment problems, bringing together local and global experts under the FiT program to support 1,600 megawatts to develop a national strategy that prioritized of power generation. energy sustainability and private sector investment. This clear articulation of policy helped attract over Egypt’s energy sector is on the way to being $30 billion of private investment by March 2015 transformed. Among other reforms, by 2016 the into Egypt’s oil and gas production and in liquefied Government of Egypt halved subsidies to the sector — natural gas. In December 2015, IBRD approved the to 3.3 percent of GDP — while keeping electricity first of three programmatic loans to deliver the tech- tariffs affordable relative to global benchmarks, with nical and financial support to achieve Egypt’s energy help from the World Bank Group. The energy sector sector reform goals, committing more than $3 billion has become more efficient and financially sustain- over 2015–17. able. The government has also improved the enabling environment for the private sector, freeing up more ­ A key part of the reform program was to leverage public resources for use in critical social sectors. Egypt’s abundant supply of sunshine. In 2015, IFC worked with the government to develop the For more information, visit www.worldbank.org/mfd. IFC ANNUAL REPORT 2018 | 5 LETTER FROM PHILIPPE LE HOUÉROU IFC Chief Executive Officer Fiscal 2018 was a historic year for the World Bank Group. Our shareholders endorsed a $13 billion paid-in capital increase for IBRD and IFC — including $7.5 billion for IBRD and $5.5 billion for IFC. For IFC, this capital increase will more than triple the cumulative paid-in capital that we have received since inception. $ $23.3B 30% 36% 45% IN OF OUR OF OUR OF NEW ADVISORY INVESTMENTS INVESTMENTS INVESTMENTS WERE PROJECTS INCLUDED IN IDA COUNTRIES CLIMATE-RELATED A FOCUS ON GENDER IMPACT IFC ANNUAL REPORT 2018 | 6 In addition, our shareholders agreed to suspend • IDA18 IFC-MIGA Private Sector Window, a $2.5 billion IFC transfers to the International Development de-risking facility that helps address high-risk proj- Association (IDA). As a result, the paid-in capital plus ects and overcome the challenge of limited access to the saved retained earnings from the suspension of local-currency loans in IDA countries and in fragile and IDA transfers will total $9.2 billion in additional capital conflict-affected areas. In FY18, we delivered our first to support IFC operations between now and 2030. transactions and developed a pipeline of projects that will benefit from this window in the next two years. This constitutes a clear vote of confidence in our ­ strategic priorities for the years ahead. But it comes • Country Private Sector Diagnostics and Sector with high expectations: We must deliver on our Deep Dives, which enable us to identify what needs strategy to achieve high impact, particularly in some to be done to create markets in each country and of the world’s toughest markets. We project that by in each sector. These two diagnostic pieces will serve 2030, we will have to more than double our annual as a base for strengthened country strategies. The commitments to reach $48 billion in total. We pledged latter will outline the upstream agenda required to to significantly increase our investments in IDA coun- enable the private sector to come in and help close tries and in fragile and conflict-affected areas. We development gaps. They will also identify IFC’s specific also pledged to step up our climate investments and advisory and investment program deliverables in gender-related interventions. every country. This year, we started to roll out the new tools and • Creating Markets Advisory Window, a funding facility instruments designed the year before. At the same to support upstream work in IDA-eligible and fragile time, we changed our organizational structure, and and conflict-affected countries. In FY18, resources delivered record levels of investments. from this window enabled diagnostic work that is helping us focus our advisory work to create markets and develop project pipelines. ROLLING OUT • Improved Project Selection, with two new tools. NEW TOOLS AND The first is the Anticipated Impact Measurement and Monitoring (AIMM) system, which assesses APPROACHES proposed projects according to their ex-ante — or expected — development impact. The AIMM method- We rolled out new tools to reduce risks, select projects ology and associated scoring is fully functional for all more strategically, and measure development results IFC investment projects since January 1, 2018; it will more rigorously: be expanded to advisory projects in FY19. The second is Carbon Pricing, which began May 1 for all project-­ • To Maximize Finance for Development, the World finance investments in the cement, chemicals, and Bank Group adopted a methodical approach that we thermal power sectors. This will help IFC select more call the Cascade — a decision-making sequence that low-emission projects, in line with the recommenda- prioritizes private sector solutions. As you can see on tions of the Report of the High-Level Commission on the cover of this Annual Report, the Cascade can be Carbon Prices. visualized as a series of waterfalls — each waterfall representing a step along the private/public solution and financing mix. IFC ANNUAL REPORT 2018 | 7 LETTER FROM PHILIPPE LE HOUÉROU IFC Chief Executive Officer IFC delivered record levels of investment finance in FY18 — thanks to the talent and dedication of our staff. NEW This growth reflects an unprecedented level of mobilization — at $11.7 billion in FY18 compared with ORGANIZATIONAL $7.5 billion in FY17. STRUCTURE Nearly 30 percent of our commitments went to support development in the poorest countries: To complement FY17’s organizational changes — those eligible to borrow from IDA. Climate-related which included the creation of the Economics & investments accounted for a record 36 percent of our Private Sector Development and the Partnerships, financing for the year. In addition, we increased our Communications & Outreach teams — in FY18, focus on gender by helping women access financial we focused on Operations and rebalanced the services, by supporting female entrepreneurs as they matrix between IFC’s industry and regional teams expand their businesses, and by fostering gender to better leverage the full range of resources and parity in the corporate world. We also continued to capabilities available in IFC: deliver advisory solutions to clients in developing countries — especially in IDA countries and in fragile • A New Structure, which will allow us to fully and conflict-affected areas. About 57 percent of benefit from our local presence and global sector IFC’s Advisory program was delivered to clients in knowledge and expertise. This includes a Chief IDA ­countries and 19 percent in fragile and conflict-­ Operating Officer to oversee all IFC operations. affected areas. Twenty-seven percent of the program The teams under the new IFC Regional Vice was climate-related. In addition, almost 45 percent Presidents are working in close collaboration of new advisory projects included a focus on gender with Global Industry Senior Directors to deliver impact in project design — up from a third last year. tailored solutions for each country. Guided by substantive country strategies, stronger IFC We were also honored to receive more than 40 awards regional teams also help us solidify our collabo- this year — a strong endorsement by third parties of ration with the Bank and MIGA, and ensure that our ability to deliver innovative projects and solutions. “the Cascade approach” is systematically designed and implemented at the country level. This past year we laid the foundation for us to ­ implement the new IFC strategy — with our capital • Advisory Reforms, which are establishing a increase, renewed support from our shareholders, tighter link between our advisory and investment a new structure, and new tools and approaches to work to prioritize upstream work and proactively deliver. This foundational work will position IFC develop projects. At the end of FY18, we moved to actively participate in the “billions to trillions” most of the cross-cutting advisory teams with agenda and the reshaping of development finance. IFC investment staff. This will allow us to better leverage our advisory experience and insights and focus on Creating Markets priorities. DELIVERING Philippe Le Houérou IFC Chief Executive Officer Despite all these changes, IFC delivered record levels of investment finance in FY18 — thanks to the talent and dedication of our staff. IFC provided a record $23.3 billion in financing to private companies, up from $19.3 billion in FY17. IFC ANNUAL REPORT 2018 | 8 Philippe Le Houérou IFC Chief Executive Officer 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. Stephanie von Friedeburg Georgina Baker Elena Bourganskaia Marcos Brujis Chief Operating Officer Vice President, Latin America Chief of Staff CEO, IFC Asset Management and the Caribbean, and Europe Company and Central Asia Karin Finkelston Mohamed Gouled Jingdong Hua Hans Peter Lankes Vice President, Partnerships, Vice President, Risk and Financial Vice President and Treasurer Vice President, Economics and Communication, and Outreach Sustainability Private Sector Development Monish Mahurkar Sérgio Pimenta Nena Stoiljkovic Ethiopis Tafara Vice President, Corporate Strategy Vice President, Vice President, Vice President, Legal, Compliance and Resources Middle East and Africa Asia and Pacific Risk and Sustainability & General Counsel IFC ANNUAL REPORT 2018 | 9 REDEFINING DEVELOPMENT FINANCE MAXIMIZ the PRIVATE SECTOR’S ROLE It is a new era. Private sector solutions now stand at the forefront of development thinking — addressing more difficult challenges, in more countries, than ever before. This requires mobilizing private investment at a far larger scale than in the past — and steering it where it is needed most. IFC is the global leader in this field, leveraging our many partner- ships — b​ eginning with our Bretton Woods partner institutions, the World Bank and the International Monetary Fund. IFC ANNUAL REPORT 2018 | 10 Scaling Up IFC helped European asset manager Amundi launch the world’s largest green-bond fund focused on emerging markets. The fund is expected to deploy ­ limate-­ $2 billion in support of c f inance needs. IZING E IFC ANNUAL REPORT 2018 | 11 REDEFINING DEVELOPMENT FINANCE CHANGIN the Way We DO BUSINESS IFC ANNUAL REPORT 2018 | 12 Committed to Innovation Using the Cascade approach, IFC and other World Bank Group institutions are helping Egypt attract $2 billion in financing for the Benban Solar Park. NG To help meet today’s ambitious development goals, IFC has hardwired its Creating Markets strategy for scaling up the private sector’s role and has begun implementing it widely. The strategy begins with the Cascade — a ­ setting priority-­ system central to the World Bank Group’s Maximizing Finance for Development approach. This sparks the innovations and reforms needed to attract new investment and increase the impact of every dollar mobilized — especially in the poorest conflict-­ countries and in fragile and ­ affected areas. IFC ANNUAL REPORT 2018 | 13 REDEFINING DEVELOPMENT FINANCE This year, shareholders endorsed our new strategy with a record $5.5 billion capital increase. It is the largest capital increase by far that we’ve received in more than six decades as the world’s largest global development finance institution focused on the private sector. It will more than triple the cumulative paid-in capital we’ve received since inception. Now is the time to deliver on this historic vote of confidence — by building on our strong base, and by working in new ways to extend the private sector’s reach in creating jobs, reducing poverty, and increasing living standards in the toughest areas of the developing world. STRENGTH Our CAPITAL IFC ANNUAL REPORT 2018 | 14 Entering Tough Markets Afghanistan’s production of raisins is expected to double — benefiting 3,000 small-scale farmers — because of IFC’s support for a state-of-the-art plant being built by Rikweda Fruit Processing Company. HENING BASE IFC ANNUAL REPORT 2018 | 15 REDEFINING DEVELOPMENT FINANCE FINDI New Ways to RISK AND IFC ANNUAL REPORT 2018 | 16 risking tools IFC uses a wide set of de-­ and platforms to clear the way for new investment and widen its impact. They increase investors’ appetite for entering riskier markets, dismantling key barriers that have held back capital flows. These new instruments include both blended finance vehicles and mobilization platforms. They help us catalyze new investment and expertise into high- need areas, filling critical gaps across the development landscape. ING to Balance RETURN New Tools Using the new IDA18 IFC-MIGA Private Sector Window, IFC is unlocking $500 million for housing finance in West Africa, where few can afford to buy their own home. IFC ANNUAL REPORT 2018 | 17 REDEFINING DEVELOPMENT FINANCE REDEFIN IFC It takes a broad approach to achieve big goals. We start with new country strategies that identify the gaps and outline the ways we can help the private sector fill them. This helps us determine where we need to position our people, working alongside our many clients and partners. And we use a new upfront ­ results-­ measurement system, rating our projects on their ability not just to achieve impact but also to create markets. As we rebalance our portfolio to achieve greater results in the poorest countries, this integrated approach will be key to scaling up the impact of every dollar we invest while supporting our clients’ business goals and improving people’s lives. We can do it. We must do it. We are doing it. IFC ANNUAL REPORT 2018 | 18 AMBITIONS FOR 2030 • $25 billion in annual investments NING for IFC’s own account and $23 billion in funds mobilized from others • 40 percent of investments in IDA countries and in fragile and conflict-affected areas — including 15 to 20 percent in low-income and fragile and conflict-affected IDA countries • 35 percent of investments for IFC’s own account are climate-related • $2.6 billion in annual commitments to financial institutions specifically targeting women • A fourfold increase in annual financing dedicated to women and women-led SMEs • 50 percent of the directors that IFC nominates to boards of companies where we have a board seat will be women IFC ANNUAL REPORT 2018 | 19 2018 GLOBAL AWARDS IFC and our clients received more than 40 awards this year, highlighting our achievements in a broad range of areas. COLUMBIA PROJECT FINANCE UNIVERSITY INTERNATIONAL School of International and Public Affairs GLOBAL MULTILATERAL DEAL OF THE YEAR for joint work with the European Bank for GLOBAL LEADERSHIP AWARD honoring Reconstruction and Development in support “innovative or extraordinary contributions of Egypt’s solar power program to the global public good” IJGLOBAL LATINFINANCE DEVELOPMENT FINANCE MULTILATERAL DEVELOPMENT BANK INSTITUTION OF THE YEAR OF THE YEAR for IFC’s “innovative approach in the Middle East and North Africa and commitment to Latin America” IFC ANNUAL REPORT 2018 | 20 REGIONAL SOUTH ASIA AWARDS Global Agriculture FY18 Leadership Awards: EAST ASIA CSR Leadership Award for IFC AND THE PACIFIC client DCM Shriram Ltd. (India) Project Finance International: Greentech Foundation: AWARDS Asia-­ Pacific Deal of the Year Gold Award in Chemical Sector for DCM Shriram Ltd.’s for Myingyan IPP (Myanmar) outstanding achievement in AsiaMoney China safety management (India) Green Finance Awards: Best Green International Bureau of Energy Efficiency Financial Institution Ministry of Power, Government of India: Best Performer Singapore VC & PE Association: in Energy Saving for DCM GLOBAL Partnerships Awards: Best Utilities Project Gold VC Deal of the Year for IFC client Jungle Ventures Shriram Ltd. (India) AWARDS Medal and Projects Grand Prix IJGlobal: for Kigali Bulk Water Supply Power Deal of the Year Financial Times: EUROPE for Sirajganj 4 Dual Fuel • FT Global GC 25 recognition PPP (Rwanda) (Bangladesh), Hydro Deal of for IFC VP and General Counsel TXF: Soft Commodities EMEA Finance: the Year for Karot Hydropower Ethiopis Tafara Finance Deal of the Year Best Restructuring in (Pakistan), Water Deal of the for IFC’s financing of Mercon Central and Eastern Europe Year for Clean Ganga Varanasi • Innovative Lawyers Coffee Group for AES Kavarna (Bulgaria) Wastewater (India), Midstream Award for Innovation in Legal Expertise: New Markets IJGlobal: Oil & Gas Deal of the Year Stevie Awards: and Capital European Airports Deal of for Moheshkhali Floating LNG Best Annual Report in the Year for Greece’s 14 Import Terminal (Bangladesh) Fortune: Banking, Financial Services, Regional Airports and Wind Deal of the Year for Top 50 Change the World List Insurance & Real Estate Sapphire 150MW Wind Farm recognition for IFC client bKash ARC Awards: (Pakistan) (Bangladesh) Gold Award for Best Annual LATIN AMERICA AND THE CARIBBEAN Partnerships Bulletin: International Financial Law Report from International Special Award for the Review Asia Awards: Development and Finance LatinFinance: Bangladesh Dialysis PPP Project Finance Deal of the Institutions Best Loan, Best Sponsor, Year for Myingyan Independent Best Infrastructure Financing: The Asset Triple A Asia Graphic Design USA: Power Producer (Myanmar) Mexico for Red Compartida Infrastructure Awards: American Graphic Design Wireless Telecommunications PPP Deal of the Year for Award for IFC’s Annual Report PPP (Mexico) Sembcorp North-West Power League of American Company (Bangladesh) and Communications PPP Awards & Conference: Renewable Energy Deal of Professionals: Vision Award Most Innovative PPP of the the Year for Azure Power for IFC’s Annual Report Year for São Paulo Roads PPP Energy (India) (Brazil) IJGlobal: SUB-­SAHARAN AFRICA Latin America Solar Deal of the Year for Solem 1 and Africa’s Information Solem 2 (Mexico) Technology & Telecom Awards: CSR Initiative Award of the Year for IHS Towers MIDDLE EAST AND NORTH AFRICA GlobalCapital Bond Awards: Most Innovative Sub-­Saharan UN FRAMEWORK CONVENTION IJGlobal: ­ edium-Term Note Africa M Infrastructure Program for Issuer ON CLIMATE CHANGE Egypt Solar Program IJGlobal: MOMENTUM FOR CHANGE CLIMATE African Renewables Deal of SOLUTIONS AWARD for leveraging “­ private-­ the Year for Bangweulu Solar sector capital to develop and construct the PV (Zambia), African Water world’s first large-scale concentrated solar Deal of the Year for Kigali Bulk power plant,” KaXu Solar One in South Africa Water Supply PPP (Rwanda) and African Upstream Oil & Gas Deal of the Year for Vitol Sankofa (Ghana) GLOBAL WATER AWARDS WATER DEAL OF THE YEAR for making “the biggest contribution to the advancement of private sector participation in the international water sector” with the Kigali Bulk Water Supply project in Rwanda IFC ANNUAL REPORT 2018 | 21 REDEFINING DEVELOPMENT FINANCE PAGE PAGE 24 32 MOBILIZING CREATING PRIVATE MARKETS SOLUTIONS IFC ANNUAL REPORT 2018 | 22 Across the world, debt has reached historic proportions. In the wealthiest countries, it is at levels unseen since World War II. In developing countries, it is at thresholds untested since the 1980s debt crisis. That poses a formidable challenge to the global effort to end extreme poverty by 2030 and boost shared prosperity. Overcoming this challenge requires a new mind-set. PAGE PAGE 44 52 PROMOTING ENDING SUSTAINABILITY POVERTY IFC ANNUAL REPORT 2018 | 23 MOBILIZING PRIVATE SOLUTIONS PAGE PAGE 26 DE-RISKING TOOLS: 28 MOBILIZATION: Removing a Barrier Putting Private to Progress in Capital to Work Tough Markets for Development IFC ANNUAL REPORT 2018 | 24 IFC WORKS TO MAXIMIZE FINANCING FOR DEVELOPMENT. PAGE 30 LOCAL CAPITAL MARKETS: Building Private Sector Growth and Stability IFC ANNUAL REPORT 2018 | 25 Photo: In the least-developed countries, IFC helps reduce invest- ment risks to attract private finance that will benefit the poor. IFC ANNUAL REPORT 2018 | 26 DE-RISKING TOOLS REMOVING IFC and the World Bank Group have introduced A BARRIER several innovations to do exactly that. In FY18, we teamed up with the World Bank’s International Development Association to create the $2.5 billion IDA18 IFC-MIGA Private Sector Window, a facility TO PROGRESS to accelerate private sector investment in IDA countries — with a special emphasis on fragile and conflict-affected areas. The facility enables IFC and other investors in these countries to share IN TOUGH investment risks with development institutions. We used the window for the first time to unlock MARKETS $500 million for housing finance in West Africa, where fewer than 7 percent of households can afford to buy their own home. Using the window, IFC bought $9 million in long-term local-currency bonds issued by Caisse Régionale de Refinancement Hypothécaire de l’UEMOA, a leading mortgage-refinancing com- Each year, more than $1.5 trillion moves across pany. Our investment will enable the company to international borders — as foreign direct investment ­ expand its portfolio of housing loans by $500 million that helps businesses and economies innovate and while deepening the local bond market. grow. Most of it goes to just 10 countries. Barely 1 percent trickles into areas with the greatest need ­ ariety In the riskiest markets, IFC also works with a v for investment: countries affected by conflict of development partners (see page 98) to help and instability. ­ private investors transfer some of their risks. We do so, in part, through blended finance (see page 79) — A key reason is risk — or investors’ perceptions of which involves using concessional donor funds to it. In choosing where to put their money, investors mitigate specific investment risks. In FY18, IFC used make complex judgments about an array of risks and $218 million of donor funds to catalyze $1.5 billion ­ uncertainties — financial, regulatory, legal, and political, in private investment. among others. These tend to be greatest in the small- est, poorest, and most fragile economies. Reducing IFC also plays a prominent role in facilitating these risks — or enabling investors to share them more private partnerships (PPPs). Since 2004, IFC- public-​ widely — can unlock significant private capital. structured PPPs have facilitated at least $27.5 billion in private investment. FY18 marked a milestone for an IFC-led PPP project in Brazil that is modernizing infrastructure in the state of São Paulo: concessions for three of four roads in a 1,500-kilometer project were auctioned, setting records for concession fees to the government and establishing the foundation for about $4 billion in new investment to complete the project. Our innova- tive work prompted the national government to ask IFC to structure similar PPPs at the national level. $500M UNLOCKED FOR HOUSING FINANCE IN WEST AFRICA IFC ANNUAL REPORT 2018 | 27 MOBILIZATION PUTTING PRIVATE CAPITAL TO WORK FOR DEVELOPMENT Across the world, at least $100 trillion in financing is available from institutional investors — such as insurance companies, sovereign funds, and pension funds. That’s more than enough to cover the $4.5 trillion in financing that developing countries need each year to achieve the Sustainable Development Goals by 2030. But tapping the world’s vast pool of private capital requires a new mind-set. Private investors can be mobilized to help address the most urgent development chal- lenges — provided investment risks and returns are balanced appropriately. IFC is a global leader in mobilizing private capital. We do it through two major channels. The first is our loan-­ syndications program, which since 1959 has mobilized $69 billion from over 500 financing partners for around 1,000 projects in 115 countries. The second, IFC Asset Management Company, has raised $10.1 billion in assets from institutional investors — including $2.3 billion from IFC. The Managed Co-­ Lending Portfolio Program is our main loan-­ syndication platform. IFC created MCPP in 2013, when the People’s Bank of China pledged $3 billion for investment in IFC projects. Since then, the platform has more than doubled in size by including a variety of global institutional investors. In 2017, the Hong Kong Monetary Authority committed $1 billion to MCPP. This will support financing of projects in over 100 countries. We continue to introduce fresh innovations, including credit-­ mobilization transactions. These transactions enable us to provide more financing to our clients by leveraging the risk-­bearing capacity of insurance companies. Two recent examples are our MCPP Financial Institutions and MCPP Unfunded Risk Participation initiatives, which will tap $500 million apiece in unfunded credit insurance from Munich Re, Liberty Specialty Markets, and Swiss Re Corporate Solutions. Credit mobilization helped IFC provide $185 million to Vietnam International Commercial Joint Stock Bank, enabling the bank to expand its portfolio of affordable mortgages and loans to small and medium enterprises. Two global insurers, Liberty Mutual and $69B Munich Re, provided credit insurance to benefit the project. Overall, credit-­ in FY18, ­ mobilization transactions supported $325 million of investments made for IFC’s own account. In 2018, the IFC Emerging Asia Fund — managed by IFC Asset Management Company — reached final close, having raised MOBILIZED $693 million to make g ­ rowth-­ capital investments in 26 Asian THROUGH LOAN ­ countries. In Mozambique, we helped mobilize nearly $2.7 billion from a variety of lenders to support the Nacala Corridor railway SYNDICATIONS ­ project. The newly built 912-­kilometer line will connect two land- locked countries — Zambia and Malawi — to the deepest port in SINCE 1959 southern Africa. It is expected to result in significant job creation in the region — up to 1 million jobs by 2040. IFC ANNUAL REPORT 2018 | 28 Photo: IFC ­f inancing is helping Vietnam International Commercial Joint Stock Bank widen its portfolio of affordable SME loans. IFC ANNUAL REPORT 2018 | 29 LOCAL CAPITAL MARKETS Deep and efficient local capital markets are essential for lasting prosperity. ­ BUILDING They drive growth, helping companies to expand and create more jobs. They help people buy homes, PRIVATE SECTOR pay for college, and save for retirement. They help governments secure financing for roads, schools, and hospitals. They shield local economies against an array GROWTH AND of financial hazards that can emerge from abroad. Such markets, however, remain small in developing countries. Although they account for more than STABILITY a third of the world’s economic output, developing countries represent just 10 percent of the capitaliza- tion of stock markets worldwide. These countries also constitute a disproportionately small share of the global market for corporate bonds. Photo (above): In Uzbekistan, IFC’s sum-­ denominated bond raised $10 million to expand lending to micro, small, and medium enterprises. IFC ANNUAL REPORT 2018 | 30 Photo (below): Peru is one of many countries that could benefit from the World Bank Group’s Joint Capital Markets Program to strengthen local capital markets. IFC plays a vital role in strengthening local capital prices. In Uzbekistan, we launched the first sum-­ markets in developing countries. We do so by issuing denominated bond to be issued in international local-currency bonds, which can protect companies markets, raising $10 million to expand lending for from the dangers of foreign-currency fluctuations. micro, small, and medium enterprises in the country. We encourage a variety of global investors to par- ticipate in the bond offerings. We help developing We take a systematic and coordinated approach to countries draft policies and regulations for stronger developing capital markets. The Joint Capital Markets capital markets. Often, we are the first international Program, launched in 2017 by IFC and the World Bank, issuer of bonds in these countries. leverages the collective expertise of World Bank Group institutions to accelerate capital markets develop- Since 2013, our local-currency bond issuances have ment wherever it is needed most — beginning with more than quadrupled, climbing from $183 ­ million to Bangladesh, Kenya, Morocco, Peru, Vietnam, and the close to $806 million issued in FY18. During this period, countries of the West African Economic and Monetary we provided more than $13 billion in local-­currency Union. The first joint capital markets diagnostic financing in 74 different currencies — through loans, ­ mission to Bangladesh took place in December 2017. swaps, guarantees, risk-sharing facilities, and securi- tized products. IFC’s Social Bond Program, launched in March 2017, continues to expand. IFC has issued 18 social bonds denominated In Ukraine, we issued our first hryvnia-­ in public and private markets across six currencies, loan, providing the equivalent of $15 million to raising $980 million for more than 30 IFC projects that Auchan Retail — one of the largest food retailers in benefit women-owned enterprises and businesses the world — to finance its long-term investments that create opportunities for smallholder farmers and in the country. Our investment will help create jobs low-income people. while enabling low- and middle-income households to obtain better-­quality foods and goods at affordable IFC ANNUAL REPORT 2018 | 31 CREATING MARKETS PAGE PAGE PAGE 34 INFRASTRUCTURE: 36 TECHNOLOGY: 38 ACCESS TO FINANCE: Accelerating Delivering High- Turning Smart, Sustainable Tech Solutions Entrepreneurs’ Development Ideas into Opportunities IFC ANNUAL REPORT 2018 | 32 WE FOCUS ON SECTORS THAT HAVE THE GREATEST POTENTIAL TO CREATE JOBS AND IMPROVE PEOPLE’S LIVES. PAGE PAGE 40 AGRIBUSINESS: 42 HUMAN CAPITAL: Boosting Farmers’ Promoting Productivity and Access to Better Incomes Education and Health IFC ANNUAL REPORT 2018 | 33 INFRASTRUCTURE ACCELERATING SMART, SUSTAINABLE DEVELOPMENT $7.4B INVESTED 79M PEOPLE BENEFITED IN FY18 FROM POWER GENERATION Photo: The IFC-funded Rewa Ultra Mega Solar Park in India will provide Delhi’s Metro Rail Corporation with 80 percent of its daytime energy. IFC ANNUAL REPORT 2018 | 34 Few places are as barren as Egypt’s Western square-­ Desert. But today, a 37-­ kilometer plot near the city of Aswan is buzzing with con- struction workers building what is expected In fiscal year 2018, IFC invested nearly $7.4 billion to become the biggest solar installation in in core infrastructure projects, including funds the world. mobilized from other investors. Our clients helped generate power for more than 79 million people in By 2019, the Benban Solar Park will churn out countries where such improvements are desper- more than 1,600 megawatts of electricity — ately needed. enough to power hundreds of thousands of homes and businesses. IFC spearheaded a $653 million funded Rewa Ultra Mega Solar In India, the IFC-­ financing package for the park — using the World Park is expected to become operational in late Bank Group’s Maximizing Finance for Development 2018, providing the Delhi Metro Rail Corporation strategy to marshal support from other Bank with 80 percent of its daytime energy. IFC Group members and a consortium of nine inter­ provided a financing package totaling $289 mil- national banks. lion — including funds mobilized from other investors — to develop the 750-­megawatt plant. Modern infrastructure is essential to growth, job creation, and quality of life. It requires Over the past decade, IFC has provided more than $3.3 trillion in investments each year — far more $12 billion in financing for 350 urban infrastruc- than the $2.5 trillion currently being spent. ture projects in emerging markets. In Argentina, IFC works to bridge the gap by helping improve we provided a $300 million package to finance access to energy, transportation, and municipal the construction of 17 kilometers of new roads, infrastructure. underpasses, and bridges to complete the ring road surrounding the city of Cordoba. The project will help promote economic growth and create job opportunities. In Turkey, we agreed to finance a new tram line in the city of Antalya. IFC will provide a €140 million financing package to the city, enabling it to add 18 kilometers of track and 29 stations to its urban rail transit system. The new tram line will carry an additional 25 million passengers every year. In Kazakhstan, we helped put together a landmark public-­ ­ private partnership to build and operate the city of Almaty’s ring road, which will shorten commutes by up to an hour. In Vietnam, we agreed to lend $15.3 million to DNP Water to help it increase access to clean water for urban households and residents in smaller cities across the country. IFC ANNUAL REPORT 2018 | 35 Rice. Eggs. Tomatoes. They top the grocery In Mexico, Red Compartida, the largest telecommuni­ lists of many Bangladeshis. But for people in cations project in the country’s history, went live in crowded cities like Dhaka, slogging through 2018 — well ahead of schedule. By 2024, the IFC-backed traffic to get to the store is often more time- 4G-LTE voice and data platform is expected to provide consuming than the shopping itself. access to online banking, health, communications, and education services to more than 92 percent of Mexicans. That’s why Waseem Alim started his successful e-grocery delivery company, Chaldal, in 2013. Technology is also transforming Africa. In 2018, IFC Chaldal leads a new wave of technology start-ups helped Partech Ventures launch a €100 million fund that in Bangladesh, and has received venture capital is expected to become the largest venture-capital fund from several investors, including IFC. focused on digital-technology start-ups in sub-Saharan Africa. IFC’s €15 million equity investment is our first in As Bangladesh and other emerging-market econ- a mainstream venture-capital fund in the region. We omies develop a start-up investment culture, IFC also invested $6 million in Africa’s Talking, a mobile-tech is committed to their active participation in the ­ company that creates critical digital-infrastructure soft- global e-marketplace. Modern information and ware for entrepreneurs across the continent. communication technologies make it easier for the poor to obtain access to services and resources. Large-scale changes are underway in China, too. Truck These technologies create opportunities and make drivers and freight shippers across the country have markets more efficient. improved their logistics operations by connecting through Full Truck Alliance, an online marketplace also IFC expands the availability of such technologies by known as “Uber for trucks.” The platform connects channeling investments toward private companies long-haul drivers with shippers throughout the coun- that build modern communications infrastructure try — which means these drivers no longer have to and information-technology businesses. In FY18, share up to half of their earnings with intermediaries. we invested $376 million in initiatives related to IFC invested $15 million for our own account. IFC Asset technology, including funds mobilized from other Management Company mobilized an additional $32 mil- investors — expanding our portfolio in this sector lion through the IFC Catalyst Fund and the IFC Global to more than $2.4 billion. Emerging Markets Fund of Funds. IFC ANNUAL REPORT 2018 | 36 TECHNOLOGY DELIVERING HIGH-TECH SOLUTIONS Photo (left): Employees of IFC-backed Chaldal in Bangladesh use technology to deliver more than 1,500 grocery orders a day. Photo (right): An IFC fund helped Santiago Zavala set up 500 Luchadores, a Mexico City company that finances and coaches technology start-ups. IFC ANNUAL REPORT 2018 | 37 ACCESS TO FINANCE TURNING ENTREPRENEURS’ IDEAS INTO OPPORTUNITIES IFC ANNUAL REPORT 2018 | 38 Zeina Khoury Daoud started selling artisanal olive oil in Lebanon at age 22. Eager to make her mark as an entrepreneur, she later launched a produce delivery ­ service and opened a franchise of organic grocery stores. ­ With each venture, she faced the biggest obstacle confront- ing small and medium enterprises: access to finance. But BLC Bank, an IFC client known for backing Lebanon’s SMEs, stood by Khoury Daoud’s ideas, providing loans and advice at every step. Her businesses have grown and she continues to hire more employees. Access to finance turns ideas into opportunities for entre- preneurs everywhere — it’s essential to economic growth. In developing countries, however, 2.5 billion adults lack a bank account and 200 million businesses go without much-­ needed credit. IFC works through financial institutions to provide access to finance to far more SMEs than we would be able to reach on our own. In FY18, our clients provided nearly $365 billion in SME loans. In addition, since 2005, we have invested over $18 billion and worked with over 550 inclusive businesses in more than 90 countries. These businesses serve low-­ income and underserved populations. In Lao PDR, IFC and Thailand’s TMB Bank teamed up in 2017 to provide $9.1 million in financing to ACLEDA Bank Lao. The funding will help the bank bolster access to finance for the country’s SMEs, especially those owned by women. To reach even more people across emerging markets, IFC worked with Crédit Agricole CIB on an innovative transaction that will enable the bank to boost its trade-­f inance activi- ties and lend an additional $510 million to support health, education, and other key services. Through the Synthetic Risk Transfer transaction, we provided $85 million in c ­ redit-​ $365B risk protection on Crédit Agricole CIB’s $2 billion portfolio of ­ emerging-­ market trade finance and corporate loans, enabling it to expand lending. IFC’s $200 million investment through offshore local-­ currency IN SME LOANS bonds in India’s Housing Development Finance Corporation is also helping to expand affordable housing. HDFC will allocate PROVIDED BY IFC $600 million from its own resources to create a fund that will CLIENTS finance the construction of 80,000 homes by 2022 — helping to fulfill the country’s ambitious “Housing for All” plan. In Turkey, where women entrepreneurs face a credit gap of ­ rivate ­ $5 billion, IFC invested $75 million in the first p sector gender bond in emerging markets. The bond, issued by Garanti Bank, is expected to triple the number of loans to the bank’s women clients over the next five years. Photo: Lebanese organic farmer Zeina Daoud launched a successful organic-grocery franchise and delivery service, backed by financing from an IFC client. IFC ANNUAL REPORT 2018 | 39 AGRIBUSINESS BOOSTING FARMERS’ PRODUCTIVITY AND INCOMES Kakuy Ouanko’s family has relied — for genera- IFC supports programs that link smallholder farmers tions — on the sale of cotton and cereals to earn a to modern supply chains, enabling them to adopt living. The size of the crop determines how much farming practices that will increase productivity and food his family will have for the year — and whether profitability. This is one element of our comprehensive he can afford to send his children to school. approach to agribusiness. In FY18, our overall invest- ments in agribusiness and forestry totaled nearly Without access to proper inputs or technology, $1.6 billion, including funds mobilized from other there’s little Kakuy can do to reduce his vulnerability investors. Our clients created opportunities for about to bad weather. 3.7 million farmers. But a project being implemented by the Société We work with the entire supply chain to build sus- Burkinabè des Fibres Textiles (SOFITEX) — with support tainable food-production systems. To help clients from IFC and the World Bank — aims to address this finance inventories, seeds, and farm chemicals, we challenge in west Burkina Faso, where Kakuy lives. The working-capital facilities. To facilitate trade and offer ­ project provides farmers with financing and training reduce cost, we invest in infrastructure, including for soil and water management, rainwater capture, ports and warehouses. and irrigation to stabilize and increase cotton yields, boosting their incomes. The goal is to reach 1,000 In India, we worked with the state of Odisha on a farmers in four years — Kakuy being one of them. public-private partnership to develop, finance, and maintain facilities for rice storage. The reserves will Making smallholder farmers more productive and provide food security to the poor in remote areas of resilient is an important step in the effort to end global the state, which is often hit by cyclones and other poverty. About three-quarters of the world’s poor live natural disasters. The project is now being replicated ­ in rural areas, toiling on tiny plots of land that yield in other locations in Odisha, potentially benefiting barely enough to support basic family needs. more than 300,000 people. We also help agribusiness companies in developing countries become more competitive. In Argentina, we partnered with Rabobank to arrange a $410 million finance package to help Renova build a new grain port and boost its soy-processing capacity. OUR CLIENTS CREATED OPPORTUNITIES FOR ABOUT 3.7M Photo: Ousmane Sie helps his company — IFC client SOFITEX — change the lives of cotton farmers through financing and better training. FARMERS IFC ANNUAL REPORT 2018 | 40 IFC ANNUAL REPORT 2018 | 41 IFC’s efforts in education reached Jordan — where our $8.8 million investment in Luminus is helping students gain skills tailored to economic needs — and Africa, where our client Andela helps train and place students in technology jobs across the globe. Market- responsive education is a focus of IFC’s work in China, where we arranged a syndicated local-currency loan HUMAN CAPITAL of about $200 million for the micro-loan unit of the PROMOTING ACCESS technology company Baidu. This unit finances tuition fees for women enrolled in vocational training and TO BETTER EDUCATION business-focused institutions. To assure the best match between a student’s edu- AND HEALTH cation and her career prospects, we introduced an Employability Assessment Tool that allows institu- tions to evaluate the effectiveness of professional placement services. The tool goes beyond indicators Byju Raveendran is among the few to score like graduation and placement rates to assess the 100 percent on India’s famously difficult quality and relevance of learning — guiding educators Common Admission Test, a post-graduate to tailor their offerings to better suit employers’ needs. entrance exam. We are working equally hard to improve people’s Having spent a few years teaching others how access to quality health care. In the Kyrgyz Republic, to ace the test, he became determined to solve dialysis an IFC public-private partnership is building six ­ a more basic problem — how to offer Indian centers that will serve more than 70 percent of the ­ students a world-class math education to prepare population. It is making possible at-home dialysis, them for 21st-century jobs. Now, 900,000 users which citizens never had access to before — easing across India pay for subscriptions to Byju’s, the hospitals’ load and reducing patients’ time, travel, interactive app Raveendran created. Bolstered by and expense. A similar PPP in Bangladesh resulted financing from IFC and other investors, the app is in an eightfold increase in the country’s capacity to expected to help narrow India’s education gap. provide dialysis services. This addresses a significant social need in a nation where fewer than 10 percent of India is hardly the only country whose citizens people with end-stage renal disease receive dialysis crave high-quality services that can help their treatment. families thrive. Worldwide, IFC finances health and education companies that move societies In Kenya, expanding access to quality retail pharmacies forward. In FY18, we provided $769 million in is helping to transform health care. IFC’s investment financing to such companies, including funds of $3 million in Goodlife Pharmacy helped the chain mobilized from other investors. Our clients helped add over 70 new outlets. Goodlife has become East provide education for 5.7 million students and Africa’s largest pharmaceutical retail company — oper- delivered health care to 41.2 million patients. ating over 100 licensed pharmacies with cutting-edge technology systems in high-traffic retail centers, gas stations, and health clinics. Photo (left): IFC investee Goodlife Pharmacies is helping Kenyans access genuine high-quality drugs through more than 100 outlets across the country. Photo (below): In Nairobi, Mbarak Mbigo trains software developers at Andela, an IFC client. IFC ANNUAL REPORT 2018 | 43 PROMOTING SUSTAINABILITY PAGE PAGE 46 SUSTAINABILITY: 48 CLIMATE BUSINESS: A $12 Trillion Driving a Opportunity for Greener Path Businesses to Growth IFC ANNUAL REPORT 2018 | 44 SUSTAINABILITY IS AT THE HEART OF EVERYTHING WE DO — BECAUSE THE WORLD’S FUTURE DEPENDS ON IT. PAGE 50 GENDER: Investing in Women to Boost Prosperity IFC ANNUAL REPORT 2018 | 45 SUSTAINABILITY A $12 TRILLION OPPORTUNITY FOR BUSINESSES It’s a formidable undertaking: Globally, as much as $7 trillion a year in investments will be needed to achieve the Sustainable Development Goals by 2030 — including up to $4.5 trillion in ­ developing countries. But along with the massive costs come massive opportunities. Businesses stand to gain at least $12 trillion a year in market oppor- tunities by adopting sustainable practices and contributing in other ways to achieving the goals, according to the Business & Sustainable Development Commission. Surveys show businesses see many compelling reasons to boost their performance on sustainabil- ​ ustomers and employees expect it, regulators and investors ity — c demand it. Emerging markets have joined the push toward sustainability as well. The first Global Progress Report of the IFC-supported Sustainable Banking Network shows that emerging markets have become a major force in driving development and fighting climate change: ­ Thirty-four emerging-market countries have initiated bank- ing reforms to expand sustainable lending. Those 34 countries account for $42.6 trillion in bank assets — more than 85 percent of total bank assets in emerging markets — and all have made progress in advancing sustainable finance. Reforms implemented require banks to assess and report on environmental and social risks in their lending operations and put market incen- tives in place for banks to lend to green projects. For more than six decades, IFC has led the way in helping businesses become more sustainable. The IFC Performance Standards (see page 102) have become a global benchmark for sustainability prac- tices. With these as a guide, our clients can craft business solutions that are as good for communities and the environment as they are for the bottom line. Fifteen years ago, IFC’s environmental and social safeguards inspired the Equator Principles — the beginning of rigorous environmental and social standards for investment projects in the international banking industry. Today, 94 financial institutions in 37 countries have adopted the principles. Other leading development insti- tutions — including the European Bank for Reconstruction and Development and the Asian Development Bank — have adopted practices rooted in our standards. In addition, our Corporate Governance Methodology (see page 103) has been adopted by 35 development finance institutions. Our push for green buildings continues. In Indonesia — a leading emitter of greenhouse gases — we joined with local architects and construction companies to promote green initiatives in new housing projects. This will help cut annual greenhouse emissions by 1.2 mil- lion metric tons, avoid 500 megawatt-hours of energy use, and save almost $200 million per year by 2021. This year, we launched the Disclosure and Transparency Toolkit, an ambitious effort to create environmental, social, and governance principles for capital markets. Global stock exchanges, regulators, investors, and development and donor organizations see the toolkit as important guidance for developing countries to use in advancing transparency in their capital markets. IFC ANNUAL REPORT 2018 | 46 Photo (top): Across the world, projects in which IFC invests must follow the IFC Performance Standards — a global benchmark for sustainability practices. Photo (bottom): The Ciputra Residence — a green-buildings project in Indonesia — illustrates how IFC helps clients create business solutions that are good for the environment. 35 DEVELOPMENT INSTITUTIONS ADOPTED IFC’S CORPORATE GOVERNANCE METHODOLOGY IFC ANNUAL REPORT 2018 | 47 CLIMATE BUSINESS DRIVING A GREENER PATH TO GROWTH IFC ANNUAL REPORT 2018 | 48 Private investors increasingly have the appetite and capacity to invest in climate-smart projects in emerging markets. Yet they often lack the proper tools to make ­investments happen. That leaves a significant gap in financing available to tackle climate change. Shifting to a greener path of growth could help ­ countries accelerate job c ­ reation while cutting fuel costs and saving lives. By 2030, it could also open up at least $23 trillion in investment opportunities for businesses in some of the largest emerging-market economies. IFC plays a key role in advancing private sector solutions to address climate change. In FY18, we provided $8.4 billion in climate-smart financing, including a record $4.5 billion mobi- lized from others. This accounted for 36 percent of our total commitments for the year — including funds mobilized from others — and exceeded our target for 2020. Our investments are expected to help our clients reduce greenhouse emissions by an estimated 10.4 million metric tons annually. climate-​ Our investment decisions increasingly are driven by ­ related considerations. In three industry sectors where greenhouse emissions tend to be high — thermal power gen- eration, chemical and fertilizers, and cement — we now assign carbon prices to encourage the adoption of technologies and processes that will help lower emissions. This approach reflects the recommendations of the Report of the High-Level Commission on Carbon Prices. Green bonds are an especially attractive financing tool for infrastructure projects as they provide a potentially low-cost ­ and long-term source of capital. At the end of FY18, IFC had issued a total of $7.6 billion in green bonds over the years. In 2018, we — along with Amundi, Europe’s largest asset manager — launched the world’s largest targeted green-bond fund focused on emerging markets, the Amundi Planet Emerging Green One. $8.4B The fund, which closed at $1.42 billion, is expected to deploy $2 billion into emerging markets green bonds over its lifetime as returns are reinvested. PROVIDED IN In 2017, IFC led World Bank Group efforts, with support from Australia, to help the Pacific Island nation of Fiji raise $50 mil- CLIMATE-SMART lion through a sovereign green bond — the first to be issued FINANCING by a developing nation, and the first of its kind to be listed on the London Stock Exchange. Fiji needs investment of more than $4 billion in the next 10 years to reduce its vulnerability to ­climate change. Photo: IFC helped the island nation Sustainable power generation is a priority area. In Serbia, we of Fiji raise $50 million through a are helping the city of Belgrade turn its waste-disposal problem sovereign green bond. ­ into energy. The city generates 500,000 tons of waste each year — and the current landfill constitutes a significant environ- mental threat. In September 2017, we helped the city create a public-​private partnership to build and operate a complex that will transform waste into energy and heat for the city. In the Dominican Republic, IFC and Canada completed an $80 million financing package — including $17 million in blended-​ finance support — for the construction and operation of a new, grid-connected, 50-megawatt wind farm. The Pecasa wind farm will be one of the country’s largest and will reduce greenhouse gases by a volume equivalent to taking 20,000 cars off the road. IFC ANNUAL REPORT 2018 | 49 GENDER INVESTING IN WOMEN TO BOOST PROSPERITY For years, Mansa Devi’s family struggled to pay her For women entrepreneurs, access to finance is key to children’s school fees and buy their textbooks. their success. But they also need linkages to markets and advice to overcome policy and legal barriers. That changed in 2016, when she became an entre- To address their needs, IFC and the World Bank helped preneur with Dharma Life, a distribution partner of set up the Women Entrepreneurs Finance Initiative, IFC’s Lighting Asia/India program. Devi, who lives or We-Fi, with financial support from 14 governments. in one of India’s poorest states, now goes door-to- Under the initiative, several multilateral development door selling solar-powered lamps. Her income meets banks will offer finance and advice to public and pri- her family’s needs, and the training has sharpened her vate institutions. We-Fi’s first round of financing is sales acumen. When she pitches the solar lamps, expected to drive $1.6 billion in investments. she reminds potential customers: “You can use them to charge your mobile phones.” Through the Women Entrepreneurs Opportunity Facility (WEOF), launched in 2014 by IFC’s Banking on Women like Devi constitute a powerful force for Women program and Goldman Sachs’ 10,000 Women ­ economic growth and opportunity across the world. initiative, IFC has made over $1.1 billion in investments In developing countries, they account for about a in 41 financial intermediaries in 29 countries — sur- third of small and medium enterprises — the engine passing its original target size of $600 million. It has ­ reation. They make up 41 percent of the formal of job c also funded 9 advisory projects in 9 countries with workforce worldwide. Yet they remain significantly total project value of $4.2 million. underrepresented in most economic activities. Research shows that increasing their participation IFC also publishes research that underscores the could boost economic output by trillions of dollars ­ business case for reducing the gender gap. Our a year. Tackling Childcare report, for example, was designed to help companies identify the type of childcare sup- IFC works to expand that participation — by provid- port they can offer to their employees — while reaping ing investment and advice that enables our clients gains through improved productivity. Another report, to create opportunities for women, by ­ conducting Driving toward Equality, explored how new technolo- research that highlights the business case for gies like ride-hailing apps can enable women’s equal gender inclusion, and by developing global and participation in the economy. country-­specific partnerships that support women as employees, entrepreneurs, consumers, and busi- We also promote diversity in corporate leadership. ness leaders. In FY18, our clients provided more Our Women on Boards program, and our collabora- than 800,000 jobs to women in emerging econo- tions with regional women’s networks, encourage mies, and delivered $11.4 billion in loans to small and corporations to retain diverse talent, cultures, and medium enterprises owned by women. perspectives. Photo (left): IFC’s Lighting Asia/India program turned housewives like Mansa Devi into successful earners. She sells solar lamps. Photo (right): Ung Sopheap, who runs a weaving center in Phnom Penh, Cambodia, grew her business with a loan from IFC client ACLEDA Bank. IFC ANNUAL REPORT 2018 | 50 IFC ANNUAL REPORT 2018 | 51 ENDING POVERTY PAGE PAGE 54 IDA AND CONFLICT- 56 SUB-SAHARAN AFRICA: AFFECTED AREAS: A Continent of Combating Opportunity Poverty in the for Businesses Toughest Areas IFC ANNUAL REPORT 2018 | 52 BY 2030, ABOUT HALF THE WORLD’S POOR WILL LIVE IN AREAS TORN BY CONFLICT AND VIOLENCE — PARTICULARLY IN AFRICA, SOUTH ASIA, AND THE MIDDLE EAST. PAGE PAGE 58 SOUTH ASIA: 60 MIDDLE EAST Helping 250 Million AND NORTH AFRICA: People Escape Accelerating Extreme Poverty Growth and Job Creation IFC ANNUAL REPORT 2018 | 53 IDA AND CONFLICT- AFFECTED AREAS COMBATING POVERTY IN THE TOUGHEST AREAS K EN YA KAKUMA REFUGEE CAMP REPRESENTS A $56M/YR MARKET Poverty increasingly is concentrated in areas where it’s hardest to eradicate. About 1.3 billion people live in 75 of the world’s poorest countries — those eligible to borrow from the World Bank’s International Development Association. By 2030, nearly half of the world’s extremely poor will live in fragile and strife- torn areas. IFC is taking a comprehensive approach to eradicate poverty in these countries. We are helping to create or strengthen institutions, mobilize investment, and promote private entrepreneurship. By 2030, we expect 40 percent of IFC’s annual investment commitments to be in IDA countries and in fragile and conflict-affected areas. IFC ANNUAL REPORT 2018 | 54 Photo (above): The IFC-funded Rikweda raisin-­ processing plant is helping 3,000 smallholder farmers in Afghanistan — by buying their produce at higher prices. Photo (left): Refugees learn new skills at the Kakuma camp in Kenya. An IFC report found that the refugee camp represents a $56 million- a-year market. We began implementing the Creating Markets Advisory Window, which addresses the growing need for advisory solutions. Funding from the window is helping increase access to affordable housing, promote clean electricity, and boost the value of agriculture around industrial parks in Haiti’s northeast corridor. It is supporting key agribusiness initiatives in Nicaragua and strengthening environmental and social standards in the Honduran financial sector. In addition, IFC and the United Nations High Commis- sioner for Refugees published a report that identified how private investment can improve the lives of people in refugee camps. More than 160,000 refugees and dis- placed people live in a refugee camp near the town of Kakuma, Kenya. The refugees and the town depend on each other for business and employment and represent a market of at least $56 million a year, the report found. IFC’s long-term investment commitments in IDA countries In Myanmar, we are helping remote communities connect climbed to $6.8 billion in FY18, including funds mobilized to the outside world by supporting Yoma Micropower, from other investors. Fifty-seven percent of our advisory which is using blended finance to set up hundreds of program is in these countries. In FY18, our investments solar-based micro power plants across the country. By in fragile and conflict-affected areas totaled $3.7 billion, 2022, about 2,000 of these plants will power commu- including funds mobilized from other investors. Nearly nications towers and supply power to remote off-grid 20 percent of IFC advisory programs was in such areas. communities. In 2018, the World Bank Group used a new tool — the IDA18 In Cambodia, we helped strengthen the local furniture IFC-MIGA Private Sector Window — to help Afghanistan’s industry and integrate it with international markets. Rikweda Fruit Processing Company build a state-of-the- IFC lent the equivalent of $26 million to Morris Holdings, art raisin-processing plant. Once operational, the plant a China-based manufacturer of affordable furniture, to will double the country’s production of raisins and support help the company build a modern production facility 3,000 smallholder farmers by buying their produce. in Sihanoukville. IFC ANNUAL REPORT 2018 | 55 SUB-SAHARAN AFRICA A CONTINENT OF OPPORTUNITY FOR BUSINESSES Sub-Saharan Africa is home to the largest number of Sub-Saharan Africa needs to create a large number people in extreme poverty — about 400 million, more of jobs to keep up with its rapid population growth — than the rest of the world combined. The region also a challenge small and medium enterprises are best has more conflict-affected countries than any other. suited to address. In South Africa, we designed the SME Push Program, which is creating partnerships with Yet it is a continent of vast opportunity for businesses, the country’s largest banks to channel up to $3 billion according to Shaping the Future of Africa, a new IFC report. By in investment into SMEs over the next seven years. 2030, 100 million people are expected to join Africa’s middle- Under the program, we agreed to lend up to $200 mil- and high-income groups, boosting the total to more than lion to FirstRand to be used to support small and 160 million. Household consumption and business spending medium enterprises. are growing rapidly — and could total $5.6 trillion by 2025. In Zambia, we finalized financing — including $25.3 mil- That means the private sector has a crucial interest lion in blended-finance support — for the construction in addressing the region’s most urgent development of the country’s first large-scale solar power plants challenges — its inadequate infrastructure, its rapid urban- under the World Bank Group’s Scaling Solar program. ization, and its need for jobs that can lift people out of Low-cost renewable power from the two plants will help poverty. IFC plays a comprehensive role here — by helping offset a drought-induced decline in hydropower. We also businesses improve productivity and establish links to expanded the program to Senegal, where we are help- broader markets, by expanding financial and social inclusion, ing the government add 60 megawatts to the country’s and by boosting prosperity in ways that help limit conflict. power-generation capacity — at tariffs 60 percent lower than those that prevailed in the past. In FY18, our long-term investments in sub-Saharan Africa totaled $6.2 billion, including $4.6 billion mobilized from IFC provided $7 million in financing — half of it blended other investors. Our clients supported more than 278,000 finance — to Bonne Viande de Madagascar, or BoViMa, jobs, created opportunities for more than 1 million farmers, to revitalize the country’s dwindling population of Zebu and treated more than 1.4 million patients. One-third of our cattle. The company is building a modern feedlot and global advisory program was in the region. slaughterhouse that will create an export market for Zebu beef and goat meat, helping rebuild the country’s cattle industry and creating jobs. Meanwhile, a World Bank initiative will train veterinarians, rehabilitate ­ laboratories, and help provide better animal care, allow- ing Madagascar to issue internationally recognized animal health certificates. Zebu meat will be shipped overseas through a modern port at Tolanaro, partly funded by the World Bank. IFC ANNUAL REPORT 2018 | 56 Z A MBIA $25.3M IN BLENDED FINANCE FOR THE CONSTRUCTION OF THE COUNTRY’S FIRST LARGE-SCALE SOLAR POWER PLANTS UNDER THE WORLD BANK GROUP’S SCALING SOLAR PROGRAM Photo: Jackie Adriano is a construction manager at BoViMa, an IFC client that is building ­ a world-class feedlot and slaughterhouse. IFC ANNUAL REPORT 2018 | 57 Photo: A fisherwoman in the Ganga River in India. IFC is helping the govern- ment clean up one of the world’s most polluted rivers. SOUTH ASIA HELPING 250 MILLION PEOPLE ESCAPE EXTREME POVERTY IFC ANNUAL REPORT 2018 | 58 In a busy textile factory in Bangladesh, Krisno Kumar Das carefully guides fabric into a dyeing machine, secure in the knowledge that precious resources and money are no longer swirling down the drain. Not long ago, his employer, Textown, joined forces with the In 2017, we arranged a $125.7 million financing package for IFC-led Partnership for Cleaner Textile (PaCT) to switch to Bangladesh’s first liquefied natural-gas import terminal. more sustainable production methods. This slashed the When complete, the terminal will enable the state-owned amounts of energy, dye, and chemicals the company used, Petrobangla to increase the country’s natural-gas supply by and cut water consumption by 11 million liters per year — up to 20 percent, enough to support 3,000 megawatts of equal to more than four Olympic-size swimming pools. power-generation capacity. PaCT — which is funded by Australia, Canada, Denmark, and In India, we are supporting the country’s ambitious program the Netherlands — has provided on-site assessments to to clean up the Ganga River. In FY18, we helped ­structure more than 200 factories over the past five years. Its advice the first public-private partnership to enable private has helped reduce water use by 21 billion liters per year in companies to build sewage treatment plants in Haridwar, Bangladesh. These factories also cut energy consumption Mathura, and Varanasi — cities that discharge millions of and reduced greenhouse emissions by 460,000 tons annu- liters of untreated sewage into the river. The three plants ally — equivalent to taking 100,000 cars off the road. will process more than 200 million liters of sewage per day, improving water quality for millions of people. South Asia’s GDP growth rate of 6.5 percent is driven mainly by India and Bangladesh. Private consumption is In Nepal, which depends heavily on tourism, we invested strong and investment is buoyed by infrastructure ­ projects $1.7 million in Himalayan Chain Resorts. IFC’s investment will and reforms. Yet, despite the region’s recent economic help the company to expand its current chain of three lodges progress, more than 250 million South Asians still live in to 10 along the Gokyo Lakes Trail and Everest Base Camp extreme poverty. Trail in the Khumbu/Everest region of Nepal. The expansion is expected to create 120 jobs. That is why the region is a strategic priority for IFC. In FY18, we provided $3.4 billion in financing for businesses in South Asia, including $1.3 billion mobilized from other investors. Our clients distributed gas to about 1.1 million customers, provided more than 590,000 jobs, and created opportuni- ties for more than 1.6 million farmers. BA NGL A DE SH ADDING3,000 MEGAWATTS OF POWER-GENERATION CAPACITY IFC ANNUAL REPORT 2018 | 59 MIDDLE EAST AND NORTH AFRICA ACCELERATING GROWTH AND JOB CREATION IFC ANNUAL REPORT 2018 | 60 Ibrahim Hassouna isn’t surprised when electricity fails at the Gaza plastics company ­ where he works. On most days, up to dozens of blackouts halt assembly lines and render the company’s 130 employees idle. “Every time the current goes out, it delays production for up to 30 minutes,” says Hassouna, a 41-year-old manager. Hassouna’s frustration is felt across Gaza, which than 119,000 people, health care for more than is facing one of its worst power crises. Gaza’s only 2.9 million people, and phone connections for power plant suffers from lack of fuel, aging feed- about 1 million people. ing lines, and damage caused by wars. Blackouts have devastated the territory’s manufacturing In Jordan, we helped IrisGuard improve the lives sector, which has shriveled by 60 percent since of Syrian refugees. IrisGuard’s e-payment solu- the late 1990s. tions — using iris-scanning technology — help refugees access cash or goods quickly and easily. IFC is helping reverse that decline. In 2018, we The company’s point-of-sale devices through- launched a Maximizing Finance for Development out Jordan and the region will allow 2.3 million initiative — working with other members of the Syrian refugees to withdraw cash at ATMs or pay World Bank Group — to finance a $12 million solar for goods. project in Gaza to ease the energy shortage. The 7-megawatt rooftop solar-power plant will IFC is also helping to transform Iraq’s Salahaddin provide critical energy to 32 factories in the Gaza Holding — a leading player in banking, construc- Industrial Estate — much more cheaply than tion, and manufacturing — by bringing more before. The project will create around 800 jobs. internal discipline and control to management decision-making, clarifying responsibility, author- Across the Middle East and North Africa, economic ity and roles, and improving the training of leaders. growth rates have halved since 2011. Youth unem- ployment is high, and conflict has displaced vast investment In Egypt, IFC made a $75 million equity ­ numbers of people. That’s why the region is a prior- in Apex International Energy, which aims to be ity for IFC. In FY18, we invested more than $2 billion the country’s largest oil-and-gas production plat- in the region, including $1 billion mobilized from form. IFC Asset Management Company mobilized other investors. Our clients provided jobs for more an additional $25 million for the project. The ­ project is expected to increase Egypt’s oil-and- gas reserves by the equivalent of 100 million barrels of oil by 2023. JOR DA N IR AQ 2.3M IFC IS HELPING TO TRANSFORM SYRIAN REFUGEES SALAHADDIN ABLE TO WITHDRAW HOLDING — CASH A LEADING PLAYER IN BANKING, CONSTRUCTION, AND MANUFACTURING EGY P T Photo (above): A worker making plastic parts in a $75M Gaza industrial park, where IFC financed a 7-­ megawatt EQUITY INVESTMENT solar plant that helped create 800 jobs. IN APEX INTERNATIONAL Photo (left): Nancy El Asmar, co-owner of Madera ENERGY Creation in Beirut, launched a thriving furniture business with financing from an IFC client. IFC ANNUAL REPORT 2018 | 61 IFC Year in Review In FY18, IFC invested $23.3 billion, including nearly $11.7 billion mobilized from other investors. Our comprehensive approach helped businesses innovate, build internationally competitive industrial sectors, and create better jobs. LATIN AMERICA EAST ASIA AND EUROPE AND AND THE THE PACIFIC: CENTRAL ASIA: CARIBBEAN: $3.4 $2.9 $5 BILLION BILLION BILLION in long-term in long-term in long-term investment investment investment commitments commitments commitments $209 4.7 $103 BILLION MILLION BILLION in micro, small, patients cared for in micro, small, and medium loans and medium loans provided provided $10 $5.7 BILLION $3.5 BILLION in goods and BILLION services purchased in goods and from domestic in financing services purchased suppliers facilitated for from domestic infrastructure suppliers through public- 20 private partnerships 554,000 POLICY REFORMS in 11 countries to 2.1 jobs provided support growth MILLION and promote investments students educated IFC ANNUAL REPORT 2018 | 62 MIDDLE EAST AND SUB-SAHARAN NORTH AFRICA: SOUTH ASIA: AFRICA: $2.0 $3.4 $6.2 BILLION BILLION BILLION in long-term in long-term in long-term investment investment investment commitments commitments commitments 3 $49.7 33 MILLION BILLION POLICY REFORMS patients cared for in micro, small, in 12 countries to and medium loans support growth provided and promote $1.6 investments BILLION 153 in goods and MILLION 1.3 services purchased MILLION from domestic non-cash retail suppliers transactions farmers benefited facilitated, totaling $7.9 billion 3.4 46.7 MILLION $84 MILLION people gained MILLION people gained access to power access to power in new investment generated through policy reforms IFC ANNUAL REPORT 2018 | 63 Operational Highlights Dollars in millions, for the years ended June 30 2018 2017 2016 2015 2014 Long-Term Investment Commitments FOR IFC’S OWN ACCOUNT $ 11,629 $ 11,854 $ 11,117 $ 10,539 $ 9,967 Number of projects 366 342 344 406 364 Number of countries 74 75 78 83 73 CORE MOBILIZATION1 $ 11,671 $ 7,461 $ 7,739 $ 7,133 $ 5,142 Syndicated loans2 $ 7,745 $ 3,475 $ 5,416 $ 4,194 $ 3,093 IFC Initiatives & Other $ 2,619 $ 2,207 $ 1,054 $ 1,631 $ 1,106 Asset Management Company (AMC) Funds $ 263 $ 531 $ 476 $ 761 $ 831 Public-Private Partnership (PPP)3 $ 1,044 $ 1,248 $ 793 $ 548 $ 113 TOTAL INVESTMENT COMMITMENTS $ 23,301 $ 19,316 $ 18,856 $ 17,672 $ 15,109 Investment Disbursements For IFC’s account $ 11,149 $ 10,355 $ 9,953 $ 9,264 $ 8,904 Syndicated loans4 $ 1,984 $ 2,248 $ 4,429 $ 2,811 $ 2,190 TOTAL INVESTMENT DISBURSEMENTS $ 13,133 $ 12,602 $ 14,382 $ 12,075 $ 11,094 Committed Portfolio Number of firms 1,977 2,005 2,006 2,033 2,011 For IFC’s account $ 57,173 $ 55,015 $ 51,994 $ 50,402 $ 51,735 Syndicated loans5 $ 16,210 $ 16,047 $ 16,550 $ 15,330 $ 15,258 TOTAL COMMITTED PORTFOLIO $ 73,383 $ 71,062 $ 68,544 $ 65,732 $ 66,993 Short-Term Finance Average Outstanding Balance $ 3,435 $ 3,185 $ 2,807 $ 2,837 $ 3,019 Advisory Services Advisory Services program expenditures $ 273.4 $ 245.7 $ 220.6 $ 202.1 $ 234.0 Share of program in IDA countries6 57% 63% 62% 65% 66% 1. Defined as “core mobilization” — f inancing from entities other than IFC that becomes available to client due to IFC’s direct involvement in raising resources. 2. Includes B-Loans, Parallel Loans, and MCPP Loans. 3. Third-party financing made available for public-private partnership projects due to IFC’s mandated lead advisor role to national, local, or other government entities. 4. Includes B-Loans, Agented Parallel Loans, and MCPP Loans. 5. Includes B-Loans, A-Loan Participations (ALPs), Structured A-Loan Participation Sales (SALPS), Agented Parallel Loans, Unfunded Risk Participations (URPs) and MCPP Loans. 6. All references in this report to percentages of advisory program expenditures in IDA countries and fragile and conflict-affected areas exclude global projects. IFC ANNUAL REPORT 2018 | 64 Financial Highlights Dollars in millions, as of and for the years ended June 30* 2018 2017 2016 2015 2014 Net income (loss) attributable to IFC 1,280 1,418 -33 445 1,483 Grants to IDA 80 101 330 340 251 Income before grants to IDA 1,360 1,523 296 749 1,739 Total assets 94,272 92,254 90,434 87,548 84,130 Loans, equity investments and debt securities, net 42,264 40,519 37,356 37,578 38,176 Estimated fair value of equity investments 14,573 14,658 13,664 14,834 14,890 Key Ratios Return on average assets (GAAP basis) 1.4% 1.6% 0.0% 0.5% 1.8% Return on average capital (GAAP basis) 5.0% 5.9% -0.1% 1.8% 6.4% Cash and liquid investments as a percentage of next three years’ estimated net cash requirements 100% 82% 85% 81% 78% Debt-to-equity ratio 2.5:1 2.7:1 2.8:1 2.6:1 2.7:1 Total resources required ($ billions) 20.1 19.4 19.2 19.2 18.0 Total resources available ($ billions) 24.7 23.6 22.5 22.6 21.6 Total reserve against losses on loans to total disbursed loan portfolio 5.1% 6.1% 7.4% 7.5% 6.9%  ee Management’s Discussion and Analysis and Consolidated Financial Statements for details on the calculation of these numbers: * S http://www.ifc.org/FinancialReporting IFC ANNUAL REPORT 2018 | 65 FY18 Long-Term Commitments FY18 Long-Term Dollar amounts in millions, for IFC’s own account as of June 30, 2018 Commitments by Total $ 11,629 100.00% Environmental and By Industry Social Category Financial Markets $ 5,509 47.37% NUMBER Infrastructure $ 2,073 17.83% COMMITMENTS OF NEW Agribusiness & Forestry $ 956 8.22% CATEGORY ($ MILLIONS) PROJECTS Tourism, Retail & Property $ 764 6.57% A 817 12 Funds $ 747 6.42% Health & Education $ 739 6.36% B 4,225 148 Manufacturing $ 536 4.61% C 139 23 Telecommunications & FI5 23 0 Information Technology $ 207 1.78% Oil, Gas & Mining $ 97 0.83% FI-1 754 12 FI-2 3,907 100 By Region1 FI-3 1,764 71 Latin America and the Total 11,629 366 Caribbean $ 2,509 21.58% Europe and Central Asia $ 2,256 19.40% 5. FI category applies to new commitments South Asia2 $ 2,080 17.88% on previously existing projects. Visit www.ifc.org/escategories for information East Asia and the Pacific $ 1,940 16.89% on category definitions. Sub-Saharan Africa $ 1,566 13.25% Middle East and North Africa2 $ 1,010 8.69% Global $ 268 2.31% IFC’s Largest By Product Country Exposures6 June 30, 2018 (Based on IFC’s Account) Loans3 $ 9,804 84.30% Equity4 $ 1,300 11.18% GLOBAL COMMITTED % OF Guarantees $ 442 3.80% COUNTRY PORTFOLIO GLOBAL Risk-management products $ 83 0.71% RANK ($ MILLIONS) PORTFOLIO 1 India 6,127 10.71% 2 Turkey 4,957 8.67% FY18 Committed Portfolio 3 China 3,378 5.91% Dollar amounts in millions, for IFC’s own account as of June 30, 2018 4 Brazil 2,877 5.03% Total $ 57,173 100% 5 Bangladesh 1,520 2.66% By Industry 6 Argentina 1,411 2.47% Financial Markets $ 20,017 35% 7 Egypt, Arab Infrastructure $ 11,370 20% Republic of 1,406 2.46% Funds $ 4,640 8% 8 Colombia 1,343 2.35% Manufacturing $ 4,515 8% 9 Pakistan 1,196 2.09% Agribusiness & Forestry $ 3,866 7% 10 Mexico 1,192 2.09% Trade Finance $ 3,527 6% Health & Education $ 2,828 5% 6. Excludes individual country shares of regional and global projects. Tourism, Retail & Property $ 2,678 5% Oil, Gas & Mining $ 1,976 3% Telecommunications & Information Technology $ 1,757 3% By Region1 Latin America and the Caribbean $ 12,313 22% Europe and Central Asia $ 10,345 18% South Asia2 $ 9,898 17% East Asia and the Pacific $ 9,045 16% Sub-Saharan Africa $ 8,824 15% Middle East and North Africa2 $ 4,905 9% Global $ 1,842 3% 1. Amounts include regional shares of investments that are officially classified as global projects. 2. Afghanistan and Pakistan, which previously were grouped under the Middle East and North Africa region, are now grouped under South Asia. In FY18, these countries accounted for $2 million of IFC’s commitments. 3. Includes loan-type, quasi-loan products. 4. Includes equity-type, quasi-equity products. IFC ANNUAL REPORT 2018 | 66 Weighted FY18 Investment Services DOTS Score and Unweighted by Industry Investment IFC Total 776 (45,275) 59% Services DOTS Funds 98 (1,700) 64% Manufacturing 58 (2,569) 64% Scores Financial Markets 216 (26,282) 62% Infrastructure 143 (6,454) 62% FY18 Health & Education 56 (1,540) 61% 776 59% Oil, Gas & Mining 17 (1,351) 59% $45,275 71% Agribusiness & Forestry 100 (3,047) 54% Tourism, Retail & Property 46 (1,277) 48% FY17 Telecommunications & 828 55% Information Technology 42 (1,054) 31% $31,526 69% Numbers at the left end of each bar are the total number of companies rated and the FY16 total IFC investment (US$ millions) in those projects at the end of FY18. 834 58% $32,751 68%    Unweighted    Weighted FY18 Investment Services DOTS Score by Region Numbers at the left end of each bar for unweighted DOTS score are the total number of companies rated. Numbers IFC Total 776 (45,275) 59% at the left end of each bar for weighted Middle East and North Africa 64 (3,733) 66% DOTS score represent total IFC investment East Asia and the Pacific 97 (6,452) 63% (US$ millions) in those projects. Europe and Central Asia 140 (10,295) 61% South Asia 123 (5,330) 59% Sub-Saharan Africa 158 (8,228) 55% Latin America and the Caribbean 173 (10,418) 54% Numbers at the left end of each bar are the total number of companies rated and the total IFC investment (US$ millions) in those projects at the end of FY18. FY18 Advisory Services Program Expenditures Dollar amounts in millions Total 273.4 100% By Region Sub-Saharan Africa 86.4 32% East Asia and the Pacific 45.9 17% South Asia* 42.0 15% Europe and Central Asia 37.3 14% Latin America and the Caribbean 29.6 11% Middle East and North Africa* 15.2 6% Global 17.1 6% By Business Area Financial Sector 78.8 29% Investment Climate 60.3 22% Cross-Industry Areas 55.3 20% Public-Private Partnerships 34.5 13% Energy & Resource Efficiency 25.3 9% Agribusiness 19.1 7% Afghanistan and Pakistan, which previously were grouped under the Middle East * and North Africa region, are now grouped under South Asia. In FY18, these countries accounted for $2 million of IFC’s commitments. IFC ANNUAL REPORT 2018 | 67 World Bank Group 2018 Summary Results IFC ANNUAL REPORT 2018 | 68 The Institutions of the World Bank Group 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 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. World Bank Group Financing for Partner Countries by fiscal year, millions of dollars World Bank Group 2014 2015 2016 2017 2018 Commitmentsa 58,190 59,776 64,185 61,783 66,868 Disbursements b 44,398 44,582 49,039 43,853 45,724 IBRD Commitments 18,604 23,528 29,729 22,611 23,002 Disbursements 18,761 19,012 22,532 17,861 17,389 IDA Commitments 22,239 18,966 16,171 19,513c 24,010d Disbursements 13,432 12,905 13,191 12,718c 14,383 IFC Commitmentse 9,967 10,539 11,117 11,854 11,629 Disbursements 8,904 9,264 9,953 10,355 11,149 MIGA Gross issuance 3,155 2,828 4,258 4,842 5,251 Recipient-Executed Trust Funds Commitments 4,225 3,914 2,910 2,962 2,976 Disbursements 3,301 3,401 3,363 2,919 2,803 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. Figure does not include $185 million in approved IDA18 IFC-MIGA Private Sector Window instruments, of which IDA has exposure of $36 million in guarantees and $9 million in derivatives. e. Long-term commitments for IFC’s own account. Does not include short-term finance or funds mobilized from other investors. IFC ANNUAL REPORT 2018 | 69 World Bank Group Global Commitments The World Bank Group maintained strong 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. $66.9 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. IFC ANNUAL REPORT 2018 | 70 $6.8 BILLION EAST ASIA AND THE PACIFIC $8.8 BILLION EUROPE AND CENTRAL ASIA $8.7 BILLION LATIN AMERICA AND THE CARIBBEAN $8.2 BILLION MIDDLE EAST AND NORTH AFRICA $14.1 BILLION SOUTH ASIA $19.8 BILLION SUB-SAHARAN AFRICA IFC ANNUAL REPORT 2018 | 71 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. 73 MEASURING UP 74 How We Help End Poverty and Boost Shared Prosperity 75 IFC’s Performance in Key Areas 76 OUR EXPERTISE 77 Where We Work 78 What We Do 82 Our Industry Expertise 84 OUR PEOPLE & PRACTICES 85 Understanding our Development Impact 92 Corporate Responsibility 94 Our Governance 95 Accountability 96 Global Partnerships 99 Portfolio Management 100 Managing Risks 102 Our Sustainability Framework 104 Reporting under the Task Force on Climate-related Financial Disclosures 106 Independent Assurance Report on a Selection of Sustainable Development Information 110 Financial Performance Summary IFC ANNUAL REPORT 2018 | 72 MEASURING UP IFC offers clients a unique combination of investment and advice designed to promote sustainable private sector development in emerging markets. We use this special edge to maximize our development impact. IFC ANNUAL REPORT 2018 | 73 How We Help End Poverty and Boost Shared Prosperity Our activities are guided by our determination to create markets and mobilize private solutions 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, are greatest. and inclusion. 3 4 Help address climate change and promote Strengthen local capital markets and mobilize environmental and social private capital. sustainability. IFC ANNUAL REPORT 2018 | 74 IFC’s Performance in Key Areas Focus Regions INDICATOR FY18 FY17 Middle East and North Africa Long-Term Investment Total Commitments (millions) $2,032 $8981 South Asia Long-Term Investment Total Commitments (millions) $3,406 $3,3421 Sub-Saharan Africa Long-Term Investment Total Commitments (millions) $5,953 $3,513 IDA and Conflict-Affected Areas IDA Long-Term Investment Total Commitments (millions) $6,837 $4,590 IDA % Share of Advisory Services Program 57% 63% FCS2 Long-Term Investment Total Commitments (millions) $3,721 $902 FCS % Share of Advisory Services Program 19% 20% Infrastructure, Health & Education, Agribusiness & Forestry, and Financial Markets Infrastructure Long-Term Investment Total Commitments (millions) $7,439 $3,122 Health & Education Long-Term Investment Total Commitments (millions) $763 $929 Agribusiness & Forestry3 Long-Term Investment Total Commitments (millions) $2,640 $2,121 Financial Markets Long-Term Investment Total Commitments (millions) $8,595 $8,576 Climate Change and Environmental & Social Sustainability Climate-Related Investment Commitments (millions) $8,452 $4,776 % Share of Advisory Services Program 27% 26% Mobilization Core Mobilization $11,671 $7,461 Total commitments include funds invested for IFC’s own account as well as funds mobilized from other investors. 1. Pakistan and Afghanistan, which were previously grouped under the Middle East and North Africa, are now grouped under South Asia. FY17 data have been revised to reflect that change. 2. 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. 3. Agribusiness & Forestry includes fertilizers. IFC ANNUAL REPORT 2018 | 75 OUR EXPERTISE IFC blends investment with advice and resource mobilization to help the private sector advance development. IFC ANNUAL REPORT 2018 | 76 Where We Work 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. IFC ANNUAL REPORT 2018 | 77 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 asset management. These are mutually basis. We invest exclusively in for-profit projects in reinforcing, and deliver financing and developing countries, and we charge market rates for our products and services. global expertise to clients in developing countries. Our offerings are designed to meet the specific needs with a special of IFC clients in different industries — ​ focus on infrastructure, manufacturing, agribusiness, Together, they give us a special services, and financial markets. In FY18, we made $11.6 billion in long-term investments in 366 projects. advantage in helping the private sector In addition, we mobilized nearly $11.7 billion to support create opportunity — ​our investment the private sector in developing countries. and advice can be tailored to a client’s PRODUCT LINES specific needs, and in ways that add value. Our ability to attract other Loans investors brings additional benefits, IFC finances projects and companies through loans introducing our clients to new from our own account, typically for seven to 12 years. We also make loans to intermediary banks, leasing sources of capital and better ways companies, and other financial institutions for of doing business. 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 products. IFC has provided financing in 74 local currencies. In FY18, we made commitments for $9.8 billion in new loans for our own account. 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 FY18, equity investments accounted for about $1.3 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 287 banks across 87 countries. In FY18, IFC had an average outstanding balance of more than $3.4 billion in trade finance. IFC ANNUAL REPORT 2018 | 78 Syndications ADVICE IFC’s Syndicated Loan Program is the oldest and Providing advice is a critical part of IFC’s strategy largest among multilateral development banks. In to create markets and mobilize private investment. FY18, it accounted for nearly two-thirds of the funds Through this work, we help establish the necessary mobilized by IFC. conditions that will attract the most private capital, enabling the private sector to grow. In FY18, IFC syndicated $7.7 billion in B-loans, parallel loans, MCPP loans, structured A-loan participations, That’s why we have shifted to a more strategic and unfunded risk participations provided by approach, systematically linking our advisory 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. focus increasingly on developing high-impact The syndicated loan portfolio totaled $16.2 billion at projects that can help our clients attract the the end of FY18. particularly in the poorest financing  they need — ​ and most conflict-affected areas of the world. More than 40 percent of the financing we provided $ 3.57 billion in all — ​ through syndications — ​ went to ••We help companies attract private investors and borrowers in IDA countries. partners, enter new markets, and increase their impact. We provide tailored market insights as well Derivatives and Structured Finance as advice on how to improve companies’ operational performance and sustainability. IFC makes derivatives products available to our ••We help industries adopt good practices and clients, solely for hedging purposes. By allowing standards to increase competitiveness and these companies to access international derivatives productivity. markets to hedge currency, interest-rate or ••We help governments structure public-private commodity-price risks, we enable them to enhance partnerships to improve people’s access to high- their creditworthiness and improve their profitability. quality infrastructure and basic services. We help In offering risk-management products, IFC acts governments implement reforms that encourage generally as an intermediary between the market private investment. and private companies in emerging markets. IFC also provides structured-finance products for clients IFC’s advisory platform consists of seasoned experts, seeking to raise funds on global and local capital and about 80 percent of our advisory staff are based markets and manage financial risk. IFC has assisted in the field. In FY18, our advisory portfolio grew to first-time client issuers in accessing the markets $1.5 billion, encompassing 741 advisory projects in through partial credit guarantees. We also assist about 100 countries. Fifty-seven percent of IFC’s clients in structuring and placing securitizations with advisory program was in IDA countries, 19 percent in capital-markets investors. fragile and conflict-affected areas, and 27 percent of our advisory program was climate-related. Blended Finance HOW WE WORK WITH COMPANIES IFC uses several tools to crowd in private financing that would otherwise not be available for high- Agribusiness: We help companies improve impact development projects. We blend concessional productivity and standards — ​ among other things, funds — t​ ypically from development partners — ​ with by creating efficient value chains, ensuring food our own financing and that of our co-investors. security, and providing strong economic, social, and Blended finance can help mitigate early-entrant costs environmental benefits for smaller farming enterprises or project risks, enabling pioneering investments and communities. and creating a track record that paves the way for commercial investments. IFC has historically applied Infrastructure and Natural Resources: We help this approach in climate change, agribusiness and companies provide benefits to local communities and food security, and SME financing — a ​ lthough the mitigate local risks in projects. introduction of the IDA18 IFC-MIGA Private Sector Window (see page 27) has opened up opportunities for Corporate Finance Services: We help companies us to support many other sectors. Our approach to enter new markets, attract investors, and structure blended finance is principled and judicious — d​ esigned complex projects, offering advice on the design and to address market failures, avoid market distortions, execution of mergers, acquisitions, and partnerships. uphold transparency, and enhance development impact. In FY18, we committed more than $218 million Energy and Water Advisory: We help companies of concessional donor funds, catalyzing $1.5 billion in use energy and water more efficiently to enhance private investment. performance and environmental sustainability. We also accelerate the development of renewable-energy markets and improve people’s access to modern energy services. IFC ANNUAL REPORT 2018 | 79 Green Buildings: We offer tools and training to HOW WE WORK WITH GOVERNMENTS help companies construct buildings that use energy, water, and materials more efficiently. We also help Public-Private Partnerships: We help governments governments establish related policy frameworks and design and implement PPPs that are tailored to work with banks to launch green-finance products. local 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 Gender Equality: We work with companies to investment, 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 innovative programs, and create new market IFC ASSET MANAGEMENT opportunities. COMPANY Corporate Governance: We help companies improve IFC Asset Management Company, LLC, a wholly access to capital, mitigate risk, and safeguard against owned subsidiary of IFC, mobilizes and manages mismanagement by improving their corporate capital for businesses in developing countries and governance. frontier markets. Created in 2009, AMC provides investors with unique access to IFC’s emerging- Environmental and Social Risk Management: markets investment pipeline, while also expanding We help integrate environmental and social risk- the supply of long-term capital to these markets. management considerations into companies’ AMC enhances IFC’s development impact and operations to achieve long-term success. generates profits for investors by leveraging IFC’s global platform and investment standards. HOW WE WORK WITH FINANCIAL INSTITUTIONS AND FUNDS As of June 30, 2018, AMC had raised approximately $10.1 billion, including about $2.3 billion from IFC. Financial Institutions: We help clients strengthen It manages 12 investment funds covering equity, debt, risk management and diversify product offerings and fund-of-fund products on behalf of a wide variety in categories such as SME finance, gender, housing of institutional investors, including sovereign wealth finance, and sustainable energy. We also promote funds, pension funds, and development-finance universal access to finance, strengthen capital institutions. markets, and establish credit bureaus and collateral registries. AMC FUNDS Fund Managers: We help develop the private equity IFC Capitalization Fund industry in frontier markets and provide advice to fund managers and SMEs in which the funds invest. The $3 billion IFC Capitalization Fund consists of two sub-funds — a ​ n 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, 2018, the fund had made 41 investment commitments totaling $2.8 billion. IFC ANNUAL REPORT 2018 | 80 IFC African, Latin American, and Caribbean Fund IFC Global Emerging Markets Fund of Funds The $1 billion IFC African, Latin American, and Launched in 2015, the $800 million IFC Global Caribbean Fund was launched in 2010. The fund Emerging Markets Fund of Funds invests mainly in invests in equity and equity-related investments private equity funds that are focused on growth across a range of sectors in sub-Saharan Africa and companies in various sectors across emerging and in Latin America and the Caribbean. As of June 30, frontier markets. The fund also invests directly in such 2018, the fund had made 38 investment commitments companies. As of June 30, 2018, the fund had made totaling $879 million. 18 investment commitments totaling $397 million. Africa Capitalization Fund IFC Middle East and North Africa Fund The $182 million Africa Capitalization Fund was Launched in 2015, the $162 million IFC Middle East launched in 2010 to invest in systemically important and North Africa Fund makes equity and equity- commercial-banking institutions in Africa. As of related investments in the MENA region. As of June 30, 2018, the fund had made eight investment June 30, 2018, the fund had made three investment commitments totaling $130 million. commitments totaling $52 million. IFC Catalyst Fund Women Entrepreneurs Debt Fund The $418 million IFC Catalyst Fund was launched in The $115 million Women Entrepreneurs Debt Fund, 2012 and invests in funds that provide growth capital launched in 2016, extends senior loans to commercial to companies developing innovative ways to address banks for on-lending to women-owned small and climate change in emerging markets. It also may medium enterprises in emerging markets. This is a invest directly in those companies. As of June 30, component of the $600 million Women Entrepreneurs 2018, the fund had made 19 commitments totaling Opportunity Facility, a partnership established in $382 million. March 2014 between IFC and the Goldman Sachs 10,000 Women initiative. As of June 30, 2018, the fund IFC Global Infrastructure Fund had made investment commitments to eight banks amounting to $87 million. The $1.2 billion IFC Global Infrastructure Fund was launched in 2013 and co-invests with IFC in equity IFC Emerging Asia Fund and equity-related investments in the infrastructure sector in emerging markets. As of June 30, 2018, the The $693 million IFC Emerging Asia Fund, launched fund had made 21 investment commitments totaling in 2016, makes equity and equity-like investments $662 million. across all sectors in emerging markets in Asia. As of June 30, 2018, the fund had made three investment China-Mexico Fund commitments of $90 million. Launched in 2014, the $1.2 billion China-Mexico Fund is a country-specific fund that makes equity, equity- like, and mezzanine investments along with IFC in Mexico. It focuses on infrastructure, oil and gas, and other sectors, including manufacturing, agribusiness, services, and banking. As of June 30, 2018, the fund had made three investment commitments totaling $270 million. IFC Financial Institutions Growth Fund The $505 million IFC Financial Institutions Growth Fund is a follow-on fund to the IFC Capitalization Fund and makes equity and equity-related investments in financial institutions in emerging markets. As of June 30, 2018, the fund had made four investment commitments totaling $133 million. IFC ANNUAL REPORT 2018 | 81 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 for at least half of GDP and employment in many private sector development reflects developing countries, making it a priority for IFC. a special advantage — ​ the depth and IFC provides support for the private sector to breadth of expertise we have acquired address demand for agricultural commodities in an environmentally sustainable and socially inclusive over 60 years of helping emerging- way. To help clients finance inventories, seeds, market firms succeed and grow. fertilizers, chemicals, and fuel for farmers, IFC offers working-capital facilities. To facilitate trade and lower costs, we pursue investments in infrastructure such We have moved to leverage our global as warehouses and cold-storage facilities. To bring land into sustainable production, we work to improve industry knowledge to tackle the biggest productivity by transferring technologies and making development challenges of the coming the best use of resources. years — ​including unemployment, climate In FY18, our new long-term commitments for our own change, and food and water security. account in agribusiness and forestry totaled about $956 million. 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 such as women- sectors that are strategic priorities — ​ owned businesses and climate change — ​ and in underserved regions such as fragile and conflict- affected states as well as in housing, infrastructure, and social services. In FY18, our new long-term commitments for our own account in financial markets totaled about $5.5 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 of 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 public-private collaboration. In education, we help private enterprises complement the work of the public sector and create more opportunities for children, youth, and working adults. IFC ANNUAL REPORT 2018 | 82 IFC is the world’s largest multilateral investor in IFC’s mission in the oil, gas, and mining sector is to private health care and education. In FY18, our new help developing countries realize these benefits, long-term commitments for our own account in while helping promote sustainable energy sources. health and education totaled $739 million. We provide financing and advice for private sector clients, and also help governments adopt effective INFRASTRUCTURE regulations 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 challenges, including rapid urbanization and enjoy tangible benefits. In FY18, our new long-term climate change. commitments for our own account in the sector totaled $97 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 technologies business models can be widely replicated. make it easier for the poor to obtain access to services and resources. They expand opportunity and We help increase access to power, transportation, make markets and institutions more efficient. IFC and water. We advise client governments on public- works to extend the availability of such technologies. private partnerships. We work to improve urban We channel investments toward private companies infrastructure and related services. We mitigate that build modern communications infrastructure risk and leverage specialized financial structuring and information-technology businesses, and develop and other capabilities. In FY18, our new long-term climate-friendly technologies. commitments for our own account in this sector totaled about $2 billion. IFC helps clients move beyond their own national borders and into other developing markets. In FY18, MANUFACTURING our new commitments for our own account in this sector totaled $207 million. The manufacturing sector plays a vital role in creating opportunity and reducing poverty in developing TOURISM, RETAIL, AND PROPERTY countries. IFC’s manufacturing clients tend to create or maintain more employment than those in any The tourism, retail, and property sectors contribute other sector. significantly to job creation, tax revenues, and economic growth for developing countries. We have increased our activities in the sector, which includes chemicals, construction materials, IFC works to strengthen all three in developing energy-efficient machinery, and transportation countries. Our investments promote the development machinery. We invest in and advise companies ​n places where there is of critical infrastructure — i that are developing new products and markets, often a shortage of high-quality hotels for tourists and are restructuring and modernizing to become and business visitors. We work with our retail clients internationally competitive. to create jobs, contribute to the tax base, build local banking capacity, improve infrastructure, and As these industries represent some of the most raise labor standards. We also invest in property carbon-intensive sectors, we are helping clients companies to expand affordable housing and develop and undertake investments that help commercial real estate. reduce carbon emissions and energy consumption. In FY18, our new long-term commitments for our In FY18, our new long-term commitments for our own account in tourism, retail, and property totaled own account in the manufacturing sector totaled $764 million. $536 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, and government revenues. They also provide a wide array of other benefits for local economies. In Africa, in particular, large-scale sustainable investments in these industries can create equally large-scale gains in economic development. IFC ANNUAL REPORT 2018 | 83 OUR PEOPLE & PRACTICES IFC’s commitment to alleviating poverty and creating opportunity for the developing world’s most vulnerable people is reflected in our corporate culture. IFC ANNUAL REPORT 2018 | 84 Understanding Our Development Impact IFC is at the forefront of development- impact measurement for private sector operations. We are one of the few international financial institutions that set corporate targets for direct development impact. Measuring the results of our work is at the heart of what we do. It is critical to understanding how well our strategy is working — ​ and whether IFC and our clients are reaching the people and markets that most need our help. IFC’S IMPACT ASSESSMENT AND RESULTS-MEASUREMENT SYSTEM IFC has developed a comprehensive system to guide operations to achieve strong development impact and improve our performance each year. The process begins with country and sector diagnostics and identification of priorities and potential projects. It is buttressed by an assessment of anticipated development impact that informs project selection and design. It is deepened by regular monitoring of operational project results and, eventually, selective evaluation of mature projects to identify impacts achieved and lessons learned. Diagnostics: Our work begins with a diagnosis of the needs of the private sector in specific countries. IFC introduced a new tool — ​Country Private Sector Diagnostics (CPSDs) — ​to identify constraints to AN END-TO-END 1 SUPPORT SYSTEM DIAGNOSTICS FOR IMPACT Inform sector focus and ASSESSMENT project selection; identify country priorities 2 3 4 PROJECT RESULTS EVALUATION RATINGS MEASUREMENT Promotes Drive Identifies learning and project achievements accountability selection and lessons ex-post and design learned ex-ante Monitoring / Feedback IFC ANNUAL REPORT 2018 | 85 private sector investment, pinpoint sectors that MONITORING: IDENTIFYING ACHIEVEMENTS have the greatest potential for private sector AND LESSONS LEARNED engagement, and recommend specific activities to drive developmental priorities. This approach enables Our results-measurement system uses a multi-tiered the World Bank Group, governments, and partners approach to enhance IFC’s contributions to the to define development challenges and take concrete World Bank Group’s twin goals — b ​ y helping improve actions to address them. new business decisions and increasing the value of monitoring and evaluation. Since 2006, IFC has tracked Working closely with the World Bank, IFC has development impact through DOTS — a ​ framework completed CPSDs for Ghana and Kazakhstan and has that helps us monitor and assess the performance of started work in 13 other countries across the globe. all IFC’s active investment client companies. Over the More will follow over the next three years. next few years, the AIMM system will progressively incorporate relevant elements of the DOTS system, AIMM: IMPROVING PROJECT SELECTION providing an “end-to-end” approach to results AND DESIGN measurement. In 2017, IFC introduced a new project-impact- An important feature of the AIMM system is its assessment tool that strengthens our results capacity to link ex-ante project ratings with real-time measurement framework — ​ the Anticipated Impact results-measurement findings. It is an evidence-based Measurement and Monitoring (AIMM) system. system — ​ in which estimates of expected development Under this system, proposed projects are rated and impact are explicitly tied to monitoring indicators. ​ r expected — ​ selected on the basis of their ex-ante — o Under the AIMM system, there is at least one tracking development impact. This approach enables us to indicator associated with every impact claim used to set ambitious yet achievable targets, select projects justify an ex-ante rating. with the greatest potential for development impact, and optimize project design. With the system in place, EVALUATIONS: PROVIDING EVIDENCE AND IFC is now better able to select a mix of projects that PROMOTING ACCOUNTABILITY deliver high development impact and solid financial returns. We continue to work to refine the system. Evaluations of mature or completed projects provide the final link in the impact-assessment framework. The AIMM system enables IFC to assess a project’s Each year, IFC undertakes self-evaluations of a outcomes as well as its effect on market creation. sample of maturing investment operations and It looks at how investment beneficiaries — ​ including completed advisory services projects. These ratings employees, customers, and suppliers — a ​ re affected. form the basis of performance assessments for It also examines broader effects on the economy IFC overall and feed into sector, thematic, and and on society. The system enables IFC to examine regional assessments. They are then validated by how a project promotes objectives that underpin the Independent Evaluation Group. by promoting IFC’s efforts to create markets — ​ competitiveness, resilience, integration within and IFC also conducts in-depth evaluations of mature across markets, inclusiveness, and sustainability. projects or clusters of projects. Since 2017, IFC has adopted a more strategic approach to evaluations In 2018, IFC began scoring all new investment projects designed to fill critical knowledge gaps. We undertook using the AIMM framework. The part of the system 27 evaluations and applied-research efforts focusing that involves monitoring is being integrated with on practical issues facing operations and affecting the current Development Outcome Tracking System the effectiveness of our interventions. In doing so, (DOTS). The AIMM system for advisory services will be we are able to assess IFC’s impact beyond individual developed during FY19. ​ e also capture useful lessons that inform projects — w industry strategies and operations. For example, an assessment of the Global Agriculture and Food Security Program (GAFSP), one of IFC’s blended-finance facilities, showed that IFC’s unique approach — i ​nvolving a combination of investment and advisory services — ​adds significant value to agricultural markets in IDA-only countries. By blending IFC’s commercial financing with GAFSP’s concessional funds, IFC was able to reach new clients and markets in countries that are often perceived as too risky by investors. IFC ANNUAL REPORT 2018 | 86 In FY17, GAFSP-supported projects reached over IFC THOUGHT LEADERSHIP IN RESULTS 874,000 farmers in countries with high poverty rates MEASUREMENT and severe food insecurity. GAFSP also leveraged investments of significant additional capital — ​ Among multilateral development banks and approximately $250 million catalyzed a total of development finance institutions, IFC is at the $1.6 billion in investment. forefront of monitoring and evaluation for private sector operations. One illustration of this is our IFC’s 2012 investment in the Abengoa KaXu Project, work to create a Community of Practice among a 100-megawatt concentrated solar plant (CSP) in international finance institutions for evaluation of South Africa, also illustrates the value of evaluations. private sector operations. The KaXu Project, partly financed with concessional funding from the Clean Technology Fund, was the In March 2018, IFC jointly hosted the second Annual first privately financed CSP in sub-Saharan Africa. Evaluating Private Sector Development Impact Conference The project provided 1,700 construction jobs and 80 in London with the CDC Group, the United Kingdom’s well above employment targets. full-time positions — ​ development finance institution. Representatives from It also produced enough energy to serve an additional 31 development partners, multilateral development 33,000 customers while avoiding an estimated banks, and international finance institutions attended. 306,000 metric tons of carbon dioxide a year. The conference highlighted the importance of producing clear, credible evidence of how private THE IFC DEVELOPMENT GOALS: SUPPORTING investment contributes to achieving the SDGs. It also THE IFC STRATEGY underscored the challenges of assessing market- creation impacts. The IFC Development Goals complement the AIMM system to identify reach-related goals that our IFC’S PERFORMANCE AND DEVELOPMENT projects are expected to achieve. These goals cover IMPACT five areas aligned with our strategy that have a direct impact on people’s lives in the markets we serve: As the Independent Evaluation Group has noted, IFC’s development-effectiveness ratings have declined ••Creating sustainable farming opportunities in recent years for both investment and advisory ••Improving health and education services ​ artly because of slower economic growth, services — p ••Providing more access to financial services for depressed commodity prices, and political turmoil in microfinance and SME clients many countries. Weaknesses in project selection and ••Increasing or improving infrastructure services supervision have also contributed to the decline. ••Reducing greenhouse emissions IFC is taking several steps to address these issues — ​ We work with our clients to estimate specific including strengthening accountability in the project development impacts we expect to achieve over time selection and implementation process. IFC is also with every investment and advisory commitment we conducting semi-annual portfolio reviews of all make. In the second year of the current three-year advisory projects to ensure proactive management cycle (FY17–19), IFC made good gains in commitments and timely corrective actions. toward the goals in FY18. More information is available on our website at https://www.ifc.org/ In FY18, 59 percent of our investments were positively developmentgoals. ​ p four points from FY17. The improvement rated — u showed across all performance areas. These IFC’S CONTRIBUTION TO THE SDGs DOTS rating scores are based on a cohort of 776 investments approved between 2009 and 2014 that IFC’s results monitoring is aligned with the United were mature enough to be rated. Nations’ Sustainable Development Goals (SDGs) adopted in September 2015. In particular, the AIMM Larger IFC investments performed better, with system helps IFC maintain a line of sight from our own 71 percent rated positively. strategic objectives to the World Bank’s twin goals and the SDGs. By design, the AIMM system measures Among industry sectors, investments in private project-level and systemic outcomes against equity funds performed the best — w ​ ith 64 percent SDG-related objectives. This approach has positioned of investments rated positively. Investments in the IFC to play a key role among international finance tourism, retail, construction & real estate sector and our clients — ​ institutions in reporting how we — ​ registered the biggest improvement — ​ 4 8 percent of contribute to achieving the SDGs. More information investments were rated positively, up 14 points from about how IFC contributes to the SDGs is available FY17. This increase was driven principally by improved online at https://www.ifc.org/sdgalignment. DOTS scores in sub-Saharan Africa and Latin America and the Caribbean, where two-thirds of IFC’s projects in this sector are located. IFC ANNUAL REPORT 2018 | 87 The DOTS score declined for the telecommunications, ••We helped create or enhance five credit-bureau media, and technology sector. Thirty-one percent operators in Morocco, Mongolia, Nigeria, Jordan, of investments in this sector were rated positively — ​ and Azerbaijan. a decline of six points from FY17. The decline was concentrated in three regions — L ​ atin America and Providing Solutions and Services: the Caribbean, Europe and Central Asia, and South Asia, where clients’ financial performance was weaker ••More than 17 million people benefited from IFC than expected. advisory work in support of off-grid solar solutions. ••Our clients generated and distributed power to Among regions, investments in the Middle East and 97.2 million people, many of them in sub-Saharan North Africa performed best. Sixty-six percent of Africa and South Asia. They provided phone ​p investments in the region were rated positively — u connections to 186.7 million people, mostly in South 16 points from FY17. The increase reflected stronger Asia. They distributed gas to 3.1 million people, performance of investments in the nonfinancial sector. mostly in South Asia. ••Our clients helped educate 5.7 million students. In FY18, 66 percent of completed advisory projects Our agribusiness clients supported 4 million ​ own four points from FY17, were rated positively — d farmers through improved access to finance and but still above our target of 65 percent. This score markets and through sustainable farming practices. reflected the performance of 136 projects that were These benefits are expected to improve farmers’ completed during the year and were eligible for productivity and income and enhance their ability development-effectiveness ratings. to cope with unexpected events. ••We worked with firms to adopt new practices Three regions showed a marked improvement in and technologies that attracted financing performance. Europe and Central Asia was the of $121.2 million through resource-efficient strongest performer, with 88 percent of projects rated technologies projects. positively. Projects in South Asia, sub-Saharan Africa, ••IFC helped governments sign 17 contracts with and Latin America and the Caribbean experienced a private operators. These transactions are expected performance decline. to improve access to infrastructure and health services for 6.1 million people and mobilize over CLIENTS’ DEVELOPMENT REACH AND RESULTS $4.6 billion in private investment in infrastructure. Across the globe, IFC investment and advisory clients Improving the Business Environment: reached many people and recorded some remarkable achievements (see page 89). Here are a few ••In collaboration with the World Bank, we supported highlights: 35 national and local governments to implement 73 reforms that helped improve the enabling Improving Access to Finance: environment for private sector development and foster competitive markets and job creation. ••IFC provides investment and advice to financial Fifty-one reforms were in IDA countries, including 13 institutions that serve individuals and micro, small, in fragile and conflict-affected areas. and medium enterprises. These institutions provided ••These reforms led to $85.5 million in private sector about 54.4 million micro and 8.3 million small and savings and contributed to more than $142 million in medium loans totaling nearly $439 billion. They also new investments. provided 2.3 million housing finance loans totaling $69.8 billion. ••We supported our partners in digital financial services to facilitate over 366 million non-cash retail transactions, totaling $10 billion. ••We helped strengthen country financial markets by working with collateral registries and credit bureaus that facilitated $146.8 billion in financing. More than 302,000 micro, small and medium enterprises received loans secured with movable property. ••Loans totaling $444 million were disbursed to agri- borrowers and in the housing sector for energy efficiency. IFC ANNUAL REPORT 2018 | 88 Development reach by IFC’s clients PORTFOLIO PORTFOLIO Investments CY16 CY17 Employment (millions of jobs)1 2.4 2.5 Microfinance loans 2, 3 Number (millions) 53.7 54.4 Amount ($ billions) 60.7 73.9 SME loans2, 3 Number (millions) 8.3 8.3 Amount ($ billions) 351.1 364.7 Trade Finance4 Number (millions) 1.8 1.7 Amount ($ billions) 255.9 280.4 People reached with services Power generation (millions of people)5 78.1 79.2 Power distribution (millions of people) 24.8 18.0 Water distribution (millions of people) 14.3 18.2 Gas distribution (millions of people) 59.9 3.1 Phone connections (millions of people) 345.3 186.7 Patients served (millions) 34.0 41.2 Students reached (millions) 4.9 5.7 Farmers reached (millions) 3.0 3.7 Payments to suppliers and governments Domestic purchases of goods and services ($ billions) 36.6 38.3 Contribution to government revenues or savings ($ billions) 14.6 15.8 These figures represent the total reach of IFC clients as of end of CY16 and CY17. CY16 and CY17 portfolio data are not strictly comparable, because they are based on a changed portfolio of IFC clients. For microfinance and SME loans, the 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 fund investee companies, representing 35% of the total. 2. Portfolio reach figures represent the micro, small and medium outstanding loan portfolio of IFC’s financial institution clients with MSME-oriented finance. 3. Reported Microfinance and SME data include a substantial contribution from a large institution in Asia. 4. The total number and dollar volume of trade transactions financed by the Global Trade Finance Program’s network of emerging-market banks are based on actual data from 76% (number) and 79% (dollar volume) of the network’s active banks for CY17. 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. CY16 data have been updated to reflect prior-year data corrections from survey participants. 5. The number of CY16 total power generation customers reached has been revised due to the restatement of one client value in South Asia and one client value in Latin America and the Caribbean. IFC ANNUAL REPORT 2018 | 89 Investment Services DOTS Investment Services DOTS score by performance area, score by region, FY17 vs. FY18 FY17 vs. FY18 % Rated Positively % Rated Positively IFC Total 59% Development Outcome 55% 59% Middle East and North Africa* 55% 66% Environmental & Social Performance 49% 70% East Asia and the Pacific 69% 63% Private Sector Development Impact 59% 70% Europe and Central Asia 67% 61% Economic Performance 56% 52% South Asia* 49% 59% Financial Performance 55% 41% Sub-Saharan Africa 39% 55%    FY18    FY17 53% Latin America and the Caribbean 54% Investment Services DOTS 54% score by industry, FY17 vs. FY18    FY18    FY17 % Rated Positively Projects in Afghanistan and Pakistan, which previously were * grouped under the Middle East and North Africa region, are now grouped under South Asia. The FY17 number has been IFC Total recalculated to incorporate the change. 59% 55% Funds 64% 60% Manufacturing 64% 54% Financial Markets 62% 58% Infrastructure 62% 54% Health & Education 61% 60% Oil, Gas & Mining 59% 48% Agribusiness & Forestry 54% 59% Tourism, Retail & Property 48% 34% Telecoms & IT 31% 37%    FY18    FY17 IFC ANNUAL REPORT 2018 | 90 Advisory Services DOTS score Advisory Services DOTS score by region, FY17 vs. FY18 by business area, FY17 vs. FY18* % Rated Positively % Rated Positively IFC Total IFC Total 66% 66% 70% 70% Europe and Central Asia Agribusiness 88% 100% 70% 67% East Asia and the Pacific Energy & Resource Efficiency 69% 85% 57% 43% South Asia* Financial Sector* 65% 75% 93% 77% Sub-Saharan Africa Cross-Industry Advisory Services 61% 61% 74% 70% Latin America and the Caribbean Investment Climate 60% 50% 75% 71% Middle East and North Africa* Public-Private Partnerships 56% 50% 42% 69%    FY18    FY17    FY18    FY17 Projects in Afghanistan and Pakistan, which previously were * “ Financial Sector” also includes projects undertaken by the *   grouped under the Middle East and North Africa region, are integrated World Bank Group team in the Finance & Markets now grouped under South Asia. The FY17 number has been Global Practice. recalculated to incorporate the change. IFC ANNUAL REPORT 2018 | 91 Corporate IFC is committed to going beyond the inherent diversity we have as an international institution. In Responsibility 2018, IFC made progress across all diversity index ​ otably on including more women and indicators — n nationals from sub-Saharan Africa and the Caribbean in senior-professional and manager-level positions. IFC’s corporate responsibility commitment We did so by implementing targeted recruitment is to make sustainability an integral part initiatives. of our internal business operations — ​ IFC joined leading companies to obtain EDGE holding ourselves accountable to the (Economic Dividends for Gender Equality) an assessment of the organization’s certification — ​ same environmental and social standards alignment with global best practices on gender we ask of our clients. Our commitment as a member of the World equality. In FY18, IFC — ​ Bank Group — ​ became the first international financial to walk our talk connects IFC’s mission institution to receive global EDGE certification. with how we run our business. IFC has in place a suite of initiatives to maintain gender balance across the talent pipeline, proactively manage gender pay equity, implement gender- OUR STAFF equality policies and practices, and foster an inclusive workplace culture. IFC’s employees are our most important asset, bringing innovative solutions and global best Promoting ethical culture: IFC promotes a positive practices to our clients. Their knowledge, skills, and respectful workplace. The World Bank Group is diversity, and motivation are a key part of our revising its Code of Conduct around five core values comparative advantage. ​mpact, integrity, respect, refreshed this fiscal year — i teamwork, and innovation. Initiatives to reinforce INDICATOR FY16 FY17 FY18 these values are being rolled out in our performance Total full-time staff 3,757 3,860 3,921 management, recruitment, internal communications, Non-U.S.-based staff (%) 56.5% 55.9% 54.9% and staff-training programs. Short-term consultants/ Enriching staff development: IFC has a Leadership temporaries (FTEs) 904 1,018 1,092 and Management Framework that provides Employee engagement development programs for leaders across the index 72% 75% 75% organization. IFC has two flagship programs for Diversity high-potential staff: the Global Business Leadership Women managers (%) 34.8% 35.5% 39.5% Program (GBLP) and the Corporate Leadership Program (CLP). These best-in-class leadership Part II managers (%) 40.6% 38.9% 40.5% development programs inspire personal mastery Women GF+ Technical and leadership at all levels in the organization. In (%) 45.7% 46.2% 46.7% FY18, 60 staff participants completed the GBLP and Sub-Saharan/ CLP programs — ​ joining an alumni network of more Caribbean GF+ (%) 10.5% 10.9% 11.2% than 850 staff who coach and mentor employees Average days of training and advance corporate priorities through stretch per staff in headquarters 3.35 3.21 2.8 assignments. Average days of training per staff in country IFC had its first cohort of 19 staff complete an offices 4.08 3.71 2.95 executive Sponsorship Program this fiscal year — t​ he newest initiative in a suite of programs developing a Note: FTE = full-time equivalent (staff); GF+ refers to salary grade pipeline of diverse talent. Staff are nominated through i.e., professional staff. GF or higher — ​ IFC’s talent-review process. Participants gain sponsor- advisee relationships with Vice Presidents, along with Advancing diversity and inclusion: At IFC, our work enriched career networks. reaches clients across the globe — p​ eople, places, languages, and ideals. That diversity is reflected in Ensuring competitive compensation and benefits: our staff, representing people of 151 nationalities IFC applies the World Bank Group’s compensation who work out of 95 countries. Their unique insights framework, with salaries based on the U.S. market and perspectives are the cornerstone of our for staff recruited in Washington, D.C., and based on development work. local competitiveness determined by independent local market surveys for all other staff. IFC also has variable-pay programs consisting of recognition programs and performance awards. IFC provides a competitive package of benefits, including a retirement plan, medical, life, accidental death, workers’ compensation, and disability insurance. IFC ANNUAL REPORT 2018 | 92 Staff salary structure (Washington, D.C.) As of June 30, 2018, the salary structure (net of tax) and annual average net salaries/benefits for World Bank Group staff were as follows: STAFF AT AVERAGE GRADE SALARY/ AVERAGE REPRESENTATIVE MINIMUM MIDPOINT MAXIMUM LEVEL GRADE BENEFITS a GRADES JOB TITLES (US$) (US$) (US$) (%) (US$) (US$) GA Office Assistant 27,200 38,900 50,600 0.02% 38,995 21,129 GB Team Assistant, Information Technician 33,200 47,500 61,800 0.23% 46,393 25,137 GC Program Assistant, Information Assistant 40,700 58,100 75,500 6.69% 59,947 32,481 GD Senior Program Assistant, Information Specialist, Budget Assistant 47,900 68,500 89,100 6.21% 74,009 40,101 GE Analyst 65,200 93,100 121,000 10.44% 85,303 46,220 GF Professional 85,300 121,800 158,300 21.06% 111,642 60,491 GG Senior Professional 112,800 161,200 209,600 33.68% 155,672 84,349 GH Manager, Lead Professional 153,000 218,600 284,200 18.72% 218,903 118,609 GI Director, Senior Advisor 233,100 291,400 349,700 2.50% 289,412 156,813 GJ Vice President 278,900 328,100 377,300 0.37% 359,193 194,623 GK Managing Director, Executive Vice President, Chief Executive Officer 310,000 364,700 419,400 0.08% 408,904 263,497 Note: Because World Bank Group staff, other than U.S. citizens, usually are not required to pay income taxes on their 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 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 OFFICES In FY18, IFC made significant advancements toward our zero-waste goal for our headquarters building. Minimizing IFC’s impact on the environment is a We upgraded the building-wide recycling system priority for us. That’s why we design and manage our and launched a reusable food-container program, buildings in a sustainable way, and offset emissions eliminating nearly 250,000 disposable containers that cannot be eliminated. annually. The program helped reduce our total waste by an estimated 26 percent from 2015, according to Using natural resources efficiently: IFC’s largest our latest waste audit. In addition, IFC is sorting more office, our headquarters in Washington, D.C., recyclables and diverting them from landfill waste, the accounts for nearly half of our global real estate audit found. by square foot. Efficiency efforts have reduced total electricity consumption at our headquarters Designing sustainably: Nearly 60 percent of IFC’s by 18 percent since 2007. We also continue to real estate footprint by square foot is LEED-certified upgrade our lighting systems to LEDs from compact or equivalent. IFC is leading the development and fluorescent lighting while adjusting temperature engineering of a new net-zero energy-use World Bank setpoints for water use and heating and cooling Group office building in Dakar, Senegal. The project is systems. In FY17, these energy-saving projects saved slated for completion in 2020. IFC is also studying the nearly 60,000 kilowatt hours of electricity. potential for adding on-site solar-energy generation at our other owned properties. IFC ANNUAL REPORT 2018 | 93 Maintaining climate neutrality: IFC continues to be $2.56 billion was held by 184 member countries. carbon-neutral for global business operations. In FY17, These countries guide IFC’s programs and activities. the latest year for which data are available, carbon emissions from our global business operations totaled IFC works with the private sector to create opportunity 43,672 metric tons of carbon-dioxide equivalent — ​ of where it’s needed most. Since our founding in 1956, which business travel accounted for 71 percent. Office we have committed more than $234 billion of our own electricity consumption accounted for an additional funds for private sector investments in developing 23 percent — ​half of which was attributable to IFC countries, and we have mobilized more than $51 billion headquarters. Over the past three years, IFC’s carbon from others. emissions per full-time employee have declined by 2 percent to the equivalent of 8.95 metric tons In working to end extreme poverty and boost shared of carbon dioxide. These numbers reflect emission prosperity, we collaborate closely with other members factors that were updated in FY18; data for prior years of the Bank Group. were updated accordingly. We purchased carbon credits from four projects. Our member countries — ​ IFC chose projects that bring tangible development strong shareholder support benefits to the communities in which they take place. For example, one project provides solar cookers OUR MEMBER PERCENTAGE OF to residents of the Iridimi refugee camp in Chad, COUNTRIES CAPITAL STOCK helping avoid the use of firewood. IFC also purchases United States 22.19 renewable-energy certificates (RECs) equal to the consumption of our headquarters office. IFC annually Japan 6.33 reports its greenhouse emissions in the United Germany 5.02 Nations’ Climate Neutral Now initiative, and through France 4.72 the Carbon Disclosure Project. More details can be United Kingdom 4.72 found at http://www.ifc.org/footprint. India 4.01 Russian Federation 4.01 FY17 carbon emissions Canada 3.17 inventory for IFC’s global Italy 3.17 operations China 2.41 174 OTHER COUNTRIES 40.25 METRIC TONS OF CARBON-DIOXIDE EQUIVALENT Business Travel 30,933 OUR BOARD Country Office Electricity 5,099 HQ Office Electricity 4,781 Each of our member countries appoints one governor and one alternate. Corporate powers are vested in Other 2,859 the Board of Governors, which delegates most powers TOTAL EMISSIONS 43,672 to a board of 25 directors. Voting power on issues Note: Emission factors were updated in FY18 under the World Bank brought before them is weighted according to the Group’s Inventory Management Plan. 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 Our Governance strategic guidance to IFC management. The President of the World Bank Group is also President of IFC. OUR PLACE IN THE WORLD BANK GROUP EXECUTIVE COMPENSATION The World Bank Group is a vital source of financial The salary of the President of the World Bank Group and technical assistance to developing countries. is determined by the Board of Directors. The salary Its mission is to fight poverty with passion and structure for IFC’s CEO is determined by positioning a professionalism, for lasting results. midpoint between the salary structure of staff at the highest level, as determined annually by independent IFC is one of five members of the Bank Group, though U.S. compensation market surveys, and the salary of it is a separate legal entity with separate Articles the World Bank Group President. The compensation of Agreement, share capital, financial structure, of our executive leadership is transparent. management, and staff. Membership in IFC is open only to member countries of the World Bank. IFC’s CEO, Philippe Le Houérou, receives an annual As of June 30, 2018, IFC’s paid-in capital of about salary of $419,400, net of taxes. IFC ANNUAL REPORT 2018 | 94 Accountability INDEPENDENT EVALUATION GROUP The Independent Evaluation Group is an independent unit that reports directly to IFC’s Board of Directors. IEG’s mission is to strengthen World Bank Group institutions through evaluations that inform strategies and future work — a ​ nd lead ultimately to greater development effectiveness. IEG assesses the results of IFC operations and offers recommendations for improvement. IEG also contributes to internal learning by informing new directions, policies and procedures, and country and sector strategies. This year, IFC and IEG formed a joint working group to boost improvement of the development effectiveness of advisory projects. IEG’s most recent annual review of World Bank Group results and performance focuses on assessing the development-outcome indicator for environmental and social effects. This and other major reports are available on IEG’s website at 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 manner that is fair, objective, and constructive — ​ with 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 a flexible, problem-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 improvements in IFC performance. During FY18, CAO addressed 55 cases related to IFC projects in 32 countries. More information about how IFC is engaging with CAO’s work is available at www.cao-ombudsman.org. IFC ANNUAL REPORT 2018 | 95 Global Partnerships In FY18, our partnerships focused on several development priorities: SCALING UP OUR ACTIVITIES IN AFRICA IFC and our development partners work together in innovative ways to maximize Our partners’ financial commitments to advisory programs in the African continent increased finance for development. In line with 35 percent over the previous year, allowing us to IFC’s new strategy for creating markets address key development challenges. and mobilizing private sector investment Denmark, Ireland, Japan, the Netherlands, Norway, to solve development problems, our Sweden, and the United Kingdom supported our work to promote economic growth and stability in partnerships serve a range of functions. sub-Saharan African countries. They did so not only They incubate new ideas. They allow through longstanding platforms such as the Conflict- Affected States in Africa (CASA) initiative but also proven solutions to be scaled up. They through new country-specific advisory interventions facilitate knowledge transfer. They build such as our private sector development programs in business and institutional capacity. Somalia, Ethiopia, Mozambique, and Kenya. Together we support initiatives that The IFC Support Program for the Compact with strengthen our impact — ​particularly Africa Initiative (ISCA), created in FY18, received support from Germany and Norway to help the in cross-cutting areas such as climate G-20 Compact with Africa Initiative to promote change and gender equality — ​ and private sector development in 10 African countries. It will work in close collaboration with the multi- channel resources to regions of the donor Public-Private Infrastructure Advisory Facility world where private investment is (PPIAF) and other existing platforms to ensure that funding and operational activities are complementary. needed most. EXPANDING INNOVATIVE SOLUTIONS FOR WORKING WITH DEVELOPMENT PARTNERS CLIMATE CHANGE IFC collaborates with more than 30 governments, Our partners’ advisory and blended-finance 20 foundations and corporations, and a variety commitments in support of solutions to address of multilateral and institutional partners. In FY18, climate change globally grew more than tenfold from we gained a new development partner, the United a record increase. the previous year to $536 million — ​ Kingdom’s Foreign and Commonwealth Office. Such initiatives included: Our partnerships support IFC’s advisory and investment services — ​including through blended ••The new Canada-IFC Blended Climate Finance finance, which has grown significantly as an Program, which aims to support developing countries instrument to support strategic priority areas (see in their transition to low-carbon, sustainable, and page 75). In FY18, our development partners more climate-resilient economies. committed more than $268 million to support IFC ••The Finland-IFC Climate Change Program, which advisory services and $469 million for blended- focuses on climate mitigation, investments in finance initiatives. renewable energy, energy efficiency, green buildings, climate-smart agriculture, and forestry. The program will also seek investments that support developing countries’ efforts to adapt to climate change. Finland became the first European bilateral partner with IFC to establish a returnable-capital blended- finance program for climate. ••The Ukraine Energy Efficiency Fund, which enables homeowners’ associations to conduct energy- efficiency renovations in multi-family residential buildings. IFC has partnered with the European Union and Germany in support of this program. IFC ANNUAL REPORT 2018 | 96 ••The Green Bond Technical Assistance Program, which WORKING WITH INTERNATIONAL promotes green-bond issuance in emerging markets. INSTITUTIONS The program supported the new Amundi Emerging Green One fund (see page 49). Switzerland and IFC engages with key international institutions Luxembourg provided funding to facilitate adoption across a variety of issues to enhance the role of of the Green Bond Principles, policy reform, and the private sector in development finance. This awareness of the potential of green bonds as a includes the United Nations, the Organisation for financing instrument. Economic Cooperation and Development, the ••The Canada-IFC Renewable Energy Program for Africa, Group of 20 leading economies, the Group of Seven which aims to improve access to affordable and nations, multilateral development banks (MDBs), and sustainable energy services and reduce fossil-fuel development finance institutions (DFIs). dependency in sub-Saharan Africa. Canada is now IFC’s largest bilateral partner in blended finance. IFC has built strong partnerships while sharing ••The Green Finance program, which focuses on lessons from our six decades of experience in building awareness of and delivering finance emerging markets. We have shaped the global products to support renewable energy projects in agenda on private sector solutions for development Ukraine, thereby reducing or avoiding greenhouse impact, and engaged our clients to align their emissions by 200,000 metric tons per year. The business models to the new market opportunities program is supported by Austria. presented by the Sustainable Development Goals. This engagement is helping confirm the SUPPORTING GENDER EQUALITY central role of the private sector in achieving development impact. The Women Entrepreneurs Finance Initiative (We-Fi) is a new collaborative partnership hosted by the IFC collaborates with MDBs through the MDB Heads World Bank Group. It is supported by 14 governments, platform, where our management regularly discusses eight multilateral development banks, and other issues of strategic importance to the MDB system. public and private sector stakeholders. IFC received Key achievements include harmonizing the way we We-Fi funding to address financial and nonfinancial define and measure mobilization of private finance, constraints faced by women entrepreneurs in climate finance, blended finance, and alignment of developing countries. This work involves a mix of development outcomes. We also collaborate with blended finance, research, and advisory services. these institutions to address climate change and scale up investment in infrastructure. We also introduced the new MENA Women Banking Champions Program, which is supported In FY18, we worked with other MDBs to publish a by Switzerland. The program aims to increase second joint report on the mobilization of private access to financial services for women — ​including finance by MDBs and DFIs, using a common women entrepreneurs — b ​ y working with financial measurement framework and methodology. The intermediaries in Egypt, Morocco, and Tunisia. report found that MDBs and DFIs mobilized more than $160 billion from private investors. This included STRENGTHENING THE INFRASTRUCTURE mobilization by the European Development Finance SECTOR Institutions (EDFIs). EDFIs and the MDB Heads also adopted the Enhanced Principles for DFI Blended The new Korea-IFC Partnership Program represents Concessional Finance for Private Sector Projects and the largest commitment to date by the Republic of agreed to their implementation. Korea to IFC advisory services. The program addresses constraints in key areas of infrastructure, including information and communication technologies globally. The partnership will support IFC advisory efforts involving power, transportation, water, waste, utilities, subnational finance, extractives, digital services, and public-private partnerships. IFC ANNUAL REPORT 2018 | 97 Development partner commitments FINANCIAL COMMITMENTS TO IFC ADVISORY SERVICES (US$ MILLION EQUIVALENT) Summary FY17 FY18 Governments 256.76 192.01 Institutional/Multilateral Partners 8.32 76.34 Corporations, Foundations, and NGOs 3.07 0.00 Total 268.15 268.35 Governments FY17 FY18 Australia 62.92 3.05 Austria 6.47 8.19 Canada 0.00 3.78 Denmark 9.17 5.02 France 2.12 0.00 Germany 2.62 23.24 Ireland 0.96 1.08 Israel 0.00 0.80 Italy 5.09 0.00 Japan 21.17 6.25 Korea, Republic of 0.00 9.00 Luxembourg 3.98 9.28 The Netherlands 11.00 4.91 New Zealand 4.82 1.24 Norway 0.94 13.72 Sweden 0.00 7.12 Switzerland 68.68 24.89 United Kingdom 38.74 70.43 United States 18.08 0.00 Total 256.76 192.01 Institutional/Multilateral Partners FY17 FY18 Climate Investment Funds 4.70 0.25 European Commission 3.08 50.54 MENA Transition Fund 0.54 0.00 TradeMark East Africa (TMEA) 0.00 0.35 Women Entrepreneurs Finance Initiative (We-Fi) 0.00 25.20 Total 8.32 76.34 Corporations, Foundations, and NGOs FY17 FY18 BHP Billiton Foundation 2.57 0.00 The William and Flora Hewlett Foundation 0.50 0.00 Total 3.07 0.00 FINANCIAL COMMITMENTS TO IFC BLENDED FINANCE INITIATIVES (US$ MILLION EQUIVALENT) Development Partner FY17 FY18 Canada 0.00 310.54 Finland 0.00 134.31 United Kingdom 36.40 0.00 Women Entrepreneurs Finance Initiative (We-Fi) 0.00 24.20 Total 36.40 469.06 IFC ANNUAL REPORT 2018 | 98 Portfolio Management At the project level, our multidisciplinary teams — ​ including investment and sector specialists — ​ closely monitor investment performance and compliance with investment agreements. We do this, among Building and proactively managing a other things, through site visits to evaluate project portfolio that produces strong financial implementation, and through active engagement with sponsors and government officials, where results and development impact is at relevant, to identify potential problems early on the core of IFC’s approach to portfolio and formulate appropriate solutions. We also track environmental and social performance in a timely management. We achieve this through and risk-based manner, and measure financial and a combination of strong presence on development results. the ground and deep sector expertise. Following the strong growth of our equity portfolio This enables us to stay close to our in recent years, IFC has implemented a new equity approach, leading to more moderate growth and clients and markets, monitor trends, greater selectivity. We are also proactively assessing and anticipate impacts on our clients. our equity portfolio to identify assets ready for divestments, where IFC’s development role has been An IFC Management committee — ​ the Corporate completed. This rebalancing of the equity portfolio Portfolio Committee — ​ regularly reviews the entire results from an analysis that takes into account portfolio of nearly $57.2 billion for IFC’s own account, market conditions, opportunities, expected returns, looking at broad trends as well as select individual and is adjusted periodically as required. and risks — ​ projects. This review is complemented by monthly This approach is supported by the appointment of in-depth discussions of IFC’s key sector and country IFC’s Equity Heads of Industry, who provide central exposures. Quarterly reviews of IFC’s portfolio results oversight and are required to effectively manage IFC’s are presented to the Board, along with an in-depth larger and more complex equity positions. analysis at the end of each fiscal year. Our investment and portfolio teams, largely based in field offices, For projects in financial distress, our Special complement global reviews with asset-by-asset Operations Department determines the appropriate quarterly assessments, for both debt and equity remedial actions. It seeks to keep the project investments. operational to achieve the development impact intended at its onset. It also negotiates agreements At the corporate level, IFC combines analysis of with creditors and shareholders to share the burden our portfolio performance with sector expertise, of restructuring. Investors and other partners local market intelligence, and projections of global participating in IFC’s operations are kept regularly macroeconomic and market trends to inform decisions informed on project developments. IFC consults them about future investments. We also regularly conduct or seeks their consent as appropriate. stress tests to assess the performance of the portfolio against possible macroeconomic developments, and Active portfolio management depends on timely to identify and address risks. and accurate information to drive business decisions. IFC continues to invest in information-technology systems to better support the management of our portfolio. We are also strengthening our portfolio support structure by creating a corporate Operations Support Unit, to be extended over time to sector and regional teams. IFC ANNUAL REPORT 2018 | 99 Managing Risks TREASURY IFC raises funds in the international capital markets ENTERPRISE RISK MANAGEMENT for private sector lending and to ensure sufficient liquidity to safeguard IFC’s triple-A credit ratings. IFC provides long-term investments to the private sector in emerging markets, which includes expanding Issuances include benchmark bonds in core currencies the investment frontier into the most challenging such as U.S. dollars, thematic issuances to support markets. In doing so, IFC is exposed to a variety of strategic priorities such as climate change, and financial and nonfinancial risks. Active monitoring and issuances in emerging-market currencies to support sound management of evolving risks are crucial to capital-market development. Most of IFC’s lending is fulfilling our mission. denominated in U.S. dollars, but we borrow in many currencies to diversify access to funding, reduce IFC’s enterprise-risk-management framework is borrowing costs, and support local capital markets. designed to enable the prudent management of financial and reputational impacts that originate Over the years, IFC’s funding program has grown from our business activities. In this context, IFC’s risk- in FY18, new core to keep pace with our lending — ​ management efforts are designed specifically to help and short-term borrowings totaled approximately align our performance with our strategic direction. $16.7 billion. IFC has developed risk-appetite statements that set the direction for our willingness to take on risks in fulfilment of our development goals. These statements reflect our core values of maximizing development impact, preserving our financial sustainability, and safeguarding our brand. FY18 total borrowing AMOUNT CURRENCY (US$ EQUIVALENT) PERCENT U.S. dollar USD 9,106,890,500 54.5% Australian dollar AUD 1,436,546,360 8.6% Japanese yen JPY 815,159,597 4.9% Russian ruble RUB 239,001,013 1.4% Brazilian real BRL 434,491,970 2.6% Turkish lira TRY 1,180,551,179 7.1% Indian rupee INR 608,468,320 3.6% Other 2,893,671,464 17.3% Total 16,714,780,403 100.0% IFC ANNUAL REPORT 2018 | 100 LIQUIDITY MANAGEMENT CAPITAL ADEQUACY AND FINANCIAL CAPACITY Liquid assets on IFC’s balance sheet totaled Sound risk management plays a crucial role in $38.9 billion as of June 30, 2018, compared with ensuring IFC’s ability to fulfill our development $39.2 billion a year earlier. Most liquid assets are mandate. The very nature of IFC’s business, as a held in U.S. dollars. The exposures 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 position The level of these assets is determined with a view to enable us to preserve our financial strength and ensuring 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 liquid assets in interest-bearing instruments managed borrowing costs, allowing us to provide affordable actively against stated benchmarks. financing to our clients. The level of liquid assets is determined to ensure The soundness and quality of IFC’s risk management that IFC has sufficient resources to meet cash-flow and financial position can be seen in our triple-A requirements for both a normal planning horizon and credit rating, which has been maintained since a period of market stress. We use liquidity coverage coverage began in 1989. ratios to assess IFC’s liquidity needs. We assess IFC’s minimum capital requirement in TREASURY RISK MANAGEMENT accordance with our economic capital framework, which is aligned with the Basel framework and leading Treasury risks are managed through a two-tier risk industry practice. Economic capital acts as a common framework: (1) a comprehensive policy framework; currency of risk, allowing us to model and aggregate and (2) a hard economic-capital limit for treasury the risk of losses from a range of different investment activities. The policy framework is based on four products as well as other risks. principles: Consistent with industry and regulatory practice, (1) Investment in high-quality assets IFC calculates economic capital for the following (2) Diversification via position size/concentration limits risk types: (3) Tight limits on market risks (credit spread, interest rate, and foreign-exchange risk) ••Credit risk: the potential loss due to a client’s default (4) Proactive portfolio surveillance or downgrade ••Market risk: the potential loss due to changes in In line with the changes that are occurring in the market variables (such as interest rates, currency, global financial markets, we enhanced our Treasury equity, or commodity prices) policy framework in FY18, including changes to ••Operational risk: the potential loss resulting from economic-capital methodology. inadequate or failed internal processes, people, and systems or from external events IFC’s total resources available consist of paid-in capital, retained earnings net of designations and certain unrealized gains, and total loan-loss reserves. The excess available capital, beyond what is required to support existing business, allows for future growth of our portfolio while also providing a buffer against unexpected external shocks. As of June 2018, total resources available stood at $24.7 billion, while the minimum capital requirement totaled $20.1 billion. IFC ANNUAL REPORT 2018 | 101 Our Sustainability IFC PERFORMANCE STANDARDS Framework At the core of our Sustainability Framework are the IFC Performance Standards — ​ which help our clients avoid, mitigate, and manage risk as a way of doing business sustainably. They help clients devise solutions Sustainability is critical to companies’ that are good for business, good for investors, and business success. It’s critical, too, for their good for the environment and communities. customers, surrounding communities, Our Performance Standards have become a global and broader stakeholders. benchmark of sustainability practices. The Equator Principles, which are modeled on these standards, have been adopted by 94 financial institutions in IFC research shows that companies perform better 37 countries. In addition, other financial institutions financially when their environmental, social, and reference the IFC Performance Standards — i ​ncluding corporate-governance performance is strong. Nearly export-import banks and export credit agencies. 90 percent of our clients believe that our work is IFC also serves as the Secretariat for the Sustainable key in helping them reach their long-term business Banking Network, a global knowledge-sharing group goals, improve their relations with stakeholders and of banking regulators and banking associations, local communities, and boost their brand value and to help develop guidance and capacity for banks recognition. IFC’s Sustainability Framework and our to incorporate environmental and social risk Corporate Governance Methodology are designed to management into credit decision-making. help our clients achieve those objectives. The Performance Standards guide our environmental IFC helps clients understand and manage the and social due-diligence process, which integrates the risks they face, partnering with industry and other client’s assessment of environmental and social risks stakeholders to find innovative solutions that open with an understanding of the client’s commitment and up opportunities for economically, socially, and capacity to mitigate and manage these risks. This environmentally sustainable private investment — ​ review identifies any gaps between client practice and which contribute in turn to jobs and inclusive growth. the IFC Performance Standards in order to agree on This may include leveraging the capacity of other a plan of action to ensure compliance. We supervise institutions of the World Bank Group to address our projects throughout the life of our investment. environmental, social, and governance challenges that are beyond the ability or responsibility of a company to solve alone. In all of our investment decisions, IFC gives the same weight and attention to environmental, social, and governance risks as we do to credit and financial risks. This enables us to take informed risks to achieve both development impact and financial sustainability. The IFC Performance Standards 1 RISK MANAGEMENT 2LABOR 3 RESOURCE EFFICIENCY 4 COMMUNITY Anticipate risks, Treat workers fairly and Promote energy Protect local communities avoid, minimize, and provide safe and healthy ­ efficiency, use resources from worksite accidents compensate for any working conditions. sustainably, and cut and other ­project-­ impacts. greenhouse emissions. related dangers. IFC ANNUAL REPORT 2018 | 102 INTEGRATED GOVERNANCE Another tool is the IFC Transparency and Disclosure Toolkit and Guidance — ​ which helps companies Corporate governance is a paramount consideration in emerging markets prepare comprehensive and in investors’ decision making. But investors are best-in-class annual reports that are appropriate increasingly paying equal attention to the way for their size and organizational complexity and companies behave on a variety of environmental adapted to the context of operation. The objective is and social indicators. Investors see businesses’ to provide useful information for investors and other management of environmental and social issues as stakeholders. a test of how they would handle all strategic and operational challenges. We apply this integrated approach beyond the companies we invest in. We also use it in our advisory It’s essential, therefore, to assess environmental, work with regulators and stock exchanges — t ​ o help social, and governance practices in an them apply higher disclosure standards to corporate integrated fashion. listings, reporting requirements, and other disclosure obligations. IFC has developed comprehensive market guidance and practical tools to do this in the context of emerging markets, drawing on our track record in applying our Performance Standards and Corporate Governance Methodology. One new tool — ​ the IFC Corporate Governance Progression Matrix — ​ guides companies, investors, regulators, corporate-governance evaluators, and other stakeholders in assessing and improving a company’s environmental, social, and governance framework. It emphasizes the importance of continuing progress — ​ rather than static minimum standards — i​n the governance practices of a company. The matrix focuses the assessment along six corporate-governance parameters — k ​ ey environmental and social policies and practices, the structure and functioning of the board of directors, the control environment, disclosure and transparency, treatment of minority shareholders, and governance of stakeholder engagement (which includes civil society and communities affected by a company’s operations). 5 LAND RESETTLEMENT 6BIODIVERSITY 7 INDIGENOUS PEOPLES 8 CULTURAL HERITAGE Avoid involuntary Protect biodiversity Protect the rights, dignity, Protect cultural resettlement and and ecosystems. and culture of indigenous heritage and promote minimize the impact populations. equitable sharing on those displaced. of related benefits. IFC ANNUAL REPORT 2018 | 103 Reporting under the The Climate Implementation Plan was created in conjunction with investment departments to support Task Force on Climate- the mainstreaming of climate activities in IFC operations. It was approved by the IFC Management related Financial Team. IFC reports annually to the Board of Directors on progress made toward climate goals. IFC’s most recent report to the Board was in June 2018, when Disclosures IFC reported climate business to be at 34 percent of its total own-account commitments for FY18, exceeding the annual climate target for the second CLIMATE-RELATED FINANCIAL DISCLOSURE year in a row, and exceeding the FY20 target. IFC has increased its core investments in clean energy while In December 2015, the Financial Stability Board substantially building its investments in climate-smart launched the Task Force on Climate-related Financial agriculture, green buildings, and green finance. Disclosures (TCFD), which in July 2017 released recommendations for companies to voluntarily Governance: IFC created the Climate Business disclose how they evaluate and mitigate climate- Department (CBD) in 2010 to support a corporate related financial risks. This is IFC’s first disclosure focus on climate. It complements the work of the under the TCFD framework, although IFC has been IFC department that oversees environmental, social, annually disclosing its climate-related investments and governance performance standards for each and net emission reductions for several years. IFC investment — ​including environmental risks more broadly.1 CBD’s role is to help increase climate STRATEGY AND GOVERNANCE business and build market opportunities to invest in tomorrow. CBD staff includes dedicated experts on Strategy: IFC was an early investor in climate climate-business sectors, metrics, strategy, policy, businesses and began tracking its climate-related and climate-finance innovation. investments in 2005. By the end of FY18, over a third of IFC’s total commitments were climate-related. In To integrate climate business throughout the 2016, IFC developed a Climate Implementation Plan. Corporation, IFC established a Climate Anchors part of the World Bank Group’s Climate This plan — ​ Network. Anchors in each industry sector and region Change Action Plan — ​ lays out four elements that are responsible for building climate business in their drive IFC’s climate activities: (1) increase climate respective areas. Each anchor reports to her/his investments to 28 percent of IFC’s own account department director and the Director of the Climate commitments by 2020; (2) mobilize $13 billion per year Business Department. in private capital by 2020; (3) account for climate risks; and (4) maximize impact. RISK MANAGEMENT The plan identifies how to increase climate IFC recognizes that climate change potentially ​ lean energy, investments in five priority sectors — c poses a risk to its financial returns, particularly for green buildings, climate-smart cities, climate-smart its longer-hold investments. In 2011 and 2015, IFC agribusiness, and green finance. In each area, IFC supported two Mercer studies to identify financial identifies the market potential today, where the risk implications — ​focusing on risks to institutional market is moving, and how IFC can accelerate investors and providing related insights to financial investments in each sector. IFC also specifies the institutions.2 The reports found significant risks to tools and resources needed to achieve the plan’s investing in a business-as-usual scenario. Since then, goals, including prime areas for technical assistance, IFC has increased its proportion of climate-related geographic priorities for each sector, and where investments, and is developing tools for systematically blended finance can help open new markets. evaluating climate risk in key new investments. Physical risks: This describes how the physical impact of climate change on an investment will affect its financial returns. IFC initiated a pilot to incorporate physical climate-risk analysis into IFC’s investment due diligence, going beyond the existing environmental and social risk assessment. IFC is introducing tools to assess this risk in its investments 1. Download at: https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/sustainability-at-ifc/ policies-standards/performance-standards/performance-standards 2. Download at: https://www.ifc.org/wps/wcm/connect/6b85a6804885569fba64fa6a6515bb18/ ClimateChangeSurvey_Report.pdf?MOD=AJPERES https://www.mercer.com/content/dam/mercer/attachments/global/investments/mercer-climate-change-report-2015.pdf IFC ANNUAL REPORT 2018 | 104 in key sectors, including ports, waterways, roads, Climate metrics: IFC’s Definitions and Metrics for airports, forestry, pulp and paper, and insurance. Climate-Related Activities identifies projects and IFC will evaluate the outcomes of the pilot in FY19, sectors that qualify as climate investments; these adjusting and extending the approach as necessary. definitions are harmonized with other multilateral development banks, and are publicly available.4 Transition risks: To address government policies and stranded-asset risk and systematically incorporate Investment disclosure: IFC reports on its climate climate-related considerations in its investment finance commitments in the Annual Report (see decisions, in November 2016, the IFC Management page 75) and in the Joint Report on Multilateral Team approved a pilot to use an internal carbon price Development Banks’ Climate Finance.5 In its annual for project-finance investments in selected sectors. Green Bond Impact Report, IFC also reports on This involved stress-testing prior investments in these the environmental and market impact of projects sectors and using a carbon price in calculating the financed through green bonds that IFC issues.6 economic rate of return for new investments. Emissions disclosure: IFC reports aggregated net In March 2018, the Management Team approved reductions in greenhouse emissions from its climate full implementation of carbon pricing for project- investments in this Annual Report (see page 49). In finance transactions in select high-emitting sectors. FY18, net aggregate reductions were 10.4 million Beginning in May 2018, IFC has applied a carbon metric tons, up from 6.7 million metric tons the year ​n line with the 2016 Report of the High-Level price — i before. Under IFC Performance Standard 3, emissions Commission on Carbon Prices3 — ​ to the economic of projects with estimated annual emissions over analysis of project-finance transactions with annual 25,000 metric tons of carbon dioxide equivalent emissions of more than 25,000 metric tons of carbon are disclosed through the Environmental and Social dioxide equivalent in thermal power generation, Review Summary (ESRS) for each project. cement, and chemicals. For these projects, IFC provides a carbon-price sensitivity analysis and reports outcomes to the Board. Other sectors and other types of transactions are currently being analyzed for potential future inclusion. TARGETS AND METRICS Targets: IFC has two publicly stated quantifiable targets for climate business, as set forth above under the Climate Implementation Plan. IFC creates internal incentives to reach these targets by including climate performance in corporate and individual units’ scorecards. In April 2018, as part of the capital-increase package approved for IFC, IFC’s Board set a new target of 35 percent climate business for IFC’s own-account investments by 2030. As IFC’s total investment increases, this new target is expected to almost triple IFC’s dollar volume in climate-related commitments compared with FY17. IFC will also implement a plan to systematically screen transactions for climate risk, building on its current pilot described above. 3. Download at: https://www.carbonpricingleadership.org/report-of-the-highlevel-commission-on-carbon-prices 4. Available at: https://www.ifc.org/wps/wcm/connect/8ea3b242-c6bb-4132-82b1-ee4bd7007567/ IFC+Climate+Definitions+v3.1+.pdf?MOD=AJPERES 5. Access report at: http://pubdocs.worldbank.org/en/266191504817671617/2016-joint-report-on-mdbs-climate-finance.pdf 6. https://www.ifc.org/wps/wcm/connect/37ad9090-df3f-489e-b3d7-66d3ca2ff69c/ 201710-IFC-Green-Bond-Impact-Report-FY17-v2.pdf?MOD=AJPERES IFC ANNUAL REPORT 2018 | 105 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 ended June 30, 2018, including quantitative indicators (“the Indicators”) and qualitative statements (“the Statements”). We selected indicators and statements that were deemed to be of particular stakeholder interest, to involve a potential reputation risk for IFC, and/or to value IFC’s corporate responsibility management and performance. The Statements in the following sections have been reviewed: “Redefining Development Finance” (pp. 24–61), “Measuring Up” (pp. 73–75), “Understanding Our Development Impact” (pp. 85–91), “Corporate Responsibility” (pp. 92–94), “Our Sustainability Framework” (pp. 102–103), and “Reporting under the Task Force on Climate-related Financial Disclosure” (pp. 104–105). IFC ANNUAL REPORT 2018 | 106 The following indicators have been reviewed: MATERIAL AREAS INDICATORS FY18 DOTS scores Investments DOTS scores (percentages, weighted and unweighted) by (pp. 90–91) performance area, industry and region, Advisory services DOTS scores (percentage) by performance area, industry and region CY17 Reach indicators Employment (millions of jobs), Patients served (millions), Students reached (p. 89) (millions), Farmers reached (millions), Gas distribution (millions of people reached), Water distribution (millions of people reached), Power distribution (millions of people reached), Power generation (millions of people reached), Phone connections (millions of people reached), Number of transactions (millions) and amount ($ billions) in Trade Finance, Number (millions) and amounts ($ billions) of microfinance loans and SME loans, Financing facilitated through advisory services ($ billions) FY18 long-term commitments by Long-term commitments ($ millions) and projects (number) by Environmental Environmental and Social category and Social category (p. 66) FY18 climate-related achievements Commitments in Climate-related investments ($ billions) (p. 75) FY17 emissions from IFC’s global Carbon emissions (tCO2e) for IFC’s own operations business operations (p. 94) 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: 2018 (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 completeness, their neutrality and their reliability. to Commitments by Environmental and Social •• We reviewed the content of the Annual Report to Category (p. 66) and development effectiveness identify key statements regarding the sustainability of investments and advisory services, and on IFC’s and development areas listed above. website for the others; •• At the corporate level, we conducted interviews with 2. The Statements have been presented in accordance more than 20 people responsible for reporting to with “IFC’s Access to Information Policy,” which is assess the application of the Reporting Criteria or to available on IFC’s website2 and the principles of substantiate the Statements. relevance, completeness, neutrality, clarity and •• At the corporate level, we implemented analytical reliability as defined by international standards.3 procedures and verified, on a test basis, the calculations and the consolidation of the Indicators. It is the responsibility of IFC to prepare the Indicators •• We collected supporting documents for the and Statements, to provide information on the Indicators or Statements, such as reports to Reporting Criteria and to compile the Annual Report. the board of directors or other meetings, loan agreements, internal and external presentations and It is our responsibility to express a conclusion on reports, or survey results. the Indicators and the Statements based on our •• We reviewed the presentation of the Statements review. Our review was conducted in accordance and the Indicators in the Annual Report and the with ISAE 3000, International Standard on Assurance associated notes on methodology. Engagements from IFAC.4 Our independence is defined by IFAC professional code of ethics. 1. A higher level of assurance would have required more extensive work. 2. https://disclosures.ifc.org 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. IFC ANNUAL REPORT 2018 | 107 LIMITATIONS OF OUR REVIEW Lastly, in order to assess the final number of beneficiaries for gas distribution, power distribution Our review was limited to the Statements and the and water distribution indicators, IFC uses country Indicators identified in the table above and did not averages of number of people per household — ​ cover other disclosures in the Annual Report. which are four for non-IDA countries and five for IDA countries. These averages have been defined in Our tests were limited to document reviews and the past and in accordance with other Multilateral interviews at IFC’s headquarters in Washington, D.C. Development Banks but they may differ from the Within the scope of work covered by this statement, demographic evolution of certain countries. we did not participate in any activities with external stakeholders or clients and only conduct limited Development Outcome Tracking System (DOTS) scores testing aimed at verifying the validity of information on a sample of individual projects. DOTS, the current ex-post rating system that assesses IFC projects’ development impact, is currently INFORMATION ABOUT THE REPORTING reviewed and will be progressively replaced by an CRITERIA AND THE STATEMENT end-to-end approach (from ex-ante to ex-post) PREPARATION PROCESS named the Anticipated Impact Measurement and Monitoring (AIMM) system. With regards to the Reporting Criteria and the Statement preparation policies and principles, we For investment services, DOTS scores reflect the wish to make the following comments: degree to which investment projects deliver outcomes during portfolio supervision. These outcomes are Development Reach indicators grouped into four performance areas: Reach indicators sum up the development ••They are a mix of development outcomes (Economic achievement of IFC’s clients. Thus, Reach figures do Performance and Private Sector Development not show the additional development benefit brought Impact), financial return (Financial Performance) by IFC’s investments. and management of environmental and social risks (Environmental & Social Performance). Developing Furthermore, these indicators are based on AIMM, the new framework will focus solely on information provided by individual clients and are development outcomes, other aspects being therefore subject to the following precautions: addressed separately. ••They are assessed relative to the development •• Even if IFC engages its clients during the impact claims asserted ex-ante. IFC is developing reporting campaign, in some cases, data from the rules governing how ex-ante AIMM scores evolve client cannot be obtained. Thus, the perimeter of during portfolio supervision and these rules will the Reach indicators might vary from one year to allow IFC to eventually replace DOTS ratings with another, depending on clients’ responsiveness. For portfolio AIMM scores. microfinance loans, SME loans and trade finance indicators, IFC applies conservative extrapolations, Climate-related investments which leads to a certain margin of error, acceptable to us. Other Reach indicators are not extrapolated As part of the World Bank Group Climate Change and may therefore be underestimated. Action Plan, IFC is strongly committed to reaching •• At the time of their receipt, the consistency of the the four climate-related targets set in its 2016 collected data may vary from IFC definitions and Climate Implementation Plan. With the progress of calculation guidelines. IFC performs consequently knowledge and in coordination with other Multilateral a series of advanced controls and follow-ups, Development Banks, IFC has refined periodically especially for the biggest contributors. These the definitions and typology used for identifying, controls are even more important for microfinance promoting, and tracking climate-related investment loans, SME loans and trade finance indicators, and advisory projects. While the typology has been where such misinterpretations have been identified stable for the past two years, these fine-tunings can by IFC. make it harder to compare the figures year over year, although IFC indicates when methodology has changed and specifies its impact on the figures. IFC ANNUAL REPORT 2018 | 108 IFC has developed ex-ante GHG calculation tools that allow IFC and its clients to assess, when feasible, the potential greenhouse gas emissions savings of the projects invested. These tools are regularly upgraded and customized to specific sectors and activities. Currently, the actual reductions are not systematically tracked ex-post and IFC does not monitor the gross emissions and the net emissions (compared to a baseline) of its annual commitments, although it intends to begin doing that next year. Given the difficulties associated with data availability in its areas of operation and the current methodological debates, IFC is not yet able to assess the compatibility of its annual commitments with a global warming of no more than 2°C above pre-industrial temperatures, as per the recommendations of the Task Force on Climate-related Financial Disclosures. However, IFC is gradually applying a shadow carbon price to the economic analysis associated with investment decisions. CONCLUSION Based on our review, nothing has come to our attention 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 8, 2018 The Independent Auditor ERNST & YOUNG et Associés Caroline Delérable Partner, Sustainable Performance & Transformation IFC ANNUAL REPORT 2018 | 109 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 investment Global climate for emerging markets equities, fluctuations in currency and 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 Level of the Board of Governors-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. IFC ANNUAL REPORT 2018 | 110 Global equity markets in emerging economies have balances. FY17 income from loans was positively been volatile in recent years but there was an overall impacted by a onetime recognition of interest improved operating environment in FY18, despite a income as a result of a full prepayment of a loan. decline in the fourth quarter of FY18 (FY18 Q4). IFC’s However, IFC also recorded higher borrowing charges, major investment currencies remained relatively consistent with the increase in interest rates, and lower stable against IFC’s reporting currency, the US$, income from liquid asset trading activities. Specific through much of FY18 until significant depreciation in provisions for losses on loans declined substantially in a number of such currencies during FY18 Q4. Overall FY18, led by project-specific developments, but was commodity prices rose during FY18, although there offset by an increase in general provisions on loans as were mixed results across the various sectors. FY17 included a one-time release of $156m from the implementation of a new risk rating system. The market volatility, together with project-specific developments, impacts the valuations of IFC’s IFC has reported income before net unrealized gains investments and overall financial results. IFC and losses on non-trading financial instruments recorded higher income from equity investments accounted for at fair value, grants to IDA and net and associated derivatives in FY18, compared to gains and losses attributable to non-controlling FY17, driven largely by lower impairments. IFC also interest of $1,272 million in FY18, as compared to recorded higher income from loans and guarantees $1,129 million in FY17. The $143 million increase in FY18 due to the increase in interest rates and an increase in when compared to FY17 was principally a result of income from debt securities driven by higher average the following: Change in income before net unrealized gains and losses on non-trading financial instruments accounted for at fair value, grants to IDA and net gains and losses attributable to non-controlling interests FY18 vs FY17 (US$ millions) INCREASE (DECREASE) FY18 VS FY17 Higher foreign currency transaction gains on non-trading activities $      311 Lower other-than-temporary impairments on equity investments and debt securities 150 Higher income from loans and guarantees, realized gains and losses on loans and associated derivatives 79 Higher debt securities income 66 Higher unrealized gains on equity investments and associated derivatives, net 50 Higher other income 50 Lower pension expenses 49 Higher administrative expenses (67) Lower realized gains on equity investments and associated derivatives, net (81) Lower income from liquid asset trading activities (146) Higher charges on borrowings (329) Other, net 11 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 $      143 IFC ANNUAL REPORT 2018 | 111 IFC’s net income (loss) for each of the past five fiscal years ended June 30, 2018 is presented below (US$ millions): IFC’s net income (loss), fiscal years 2014–2018 Fiscal year ended June 30 (US$ millions) 2014 1,483 2015 445 2016 (33) 2017 1,418 2018 1,280 Income Available for Designations (a non-GAAP measure)1 was $1,318 million, compared with $1,233 million in FY17 and $770 million in FY16. 1. Income available for designations generally comprises net income excluding unrealized gains and losses on investments and unrealized gains and losses on other non-trading financial instruments, income from consolidated VIEs, and expenses reported in net income related to prior-year designations. Reconciliation of reported net income to income available for designations (US$ millions) FY18 FY17 FY16 Net income (loss) attributable to IFC $ 1,280 $ 1,418 $ (33) Add: Net gains (losses) attributable to non-controlling interests – 4 (1) Net income (loss) $ 1,280 $ 1,422 $ (34) Adjustments to reconcile Net Income to Income Available for Designations Unrealized losses and (gains) on borrowings 93 (74) (62) Grants to IDA 80 101 330 Advisory Services Expenses from prior year designations 60 64 57 Unrealized (gains) and losses on investments (198) (287) 470 Other 3 7 9 Income Available for Designations $ 1,318 $ 1,233 $ 770 Based on the new Board-approved distribution policy, subject to the conditions, a designation of up to the maximum amount available for designation $115 million of IFC’s retained earnings for grants to was $230 million. On August 9, 2018, the Board of IDA. These designations are expected to be noted Directors approved a designation of $70 million of with approval by the Board of Governors, and, subject IFC’s retained earnings for IFC’s CMAW, $45 million to the above conditions, concluded, in FY19. of IFC’s retained earnings for Advisory services, and, IFC ANNUAL REPORT 2018 | 112 Selected financial data as of and for the last five fiscal years (US$ millions) AS OF AND FOR THE YEARS ENDED JUNE 30 2018 2017 2016 2015 2014 Consolidated income highlights: Income from loans and guarantees, including realized gains and losses on loans and associated derivatives $ 1,377 $ 1,298 $ 1,126 $ 1,123 $ 1,065 Provision for losses on loans, guarantees, accrued interest and other receivables (90) (86) (359) (171) (88) Income from equity investments and associated derivatives 853 707 518 427 1,289 Income from debt securities, including realized gains and losses on debt securities and associated derivatives 363 282 129 132 89 Income from liquid asset trading activities 771 917 504 467 599 Charges on borrowings (1,041) (712) (409) (258) (196) Other income 578 528 501 505 461 Other expenses (1,662) (1,617) (1,464) (1,423) (1,418) Foreign currency transaction gains and losses on non- trading activities 123 (188) (46) 53 (19) Income before net unrealized gains and losses on non- trading financial instruments accounted for at fair value and grants to IDA 1,272 1,129 500 855 1,782 Net unrealized gains and losses on non-trading financial instruments accounted for at fair value 88 394 (204) (106) (43) Income before grants to IDA 1,360 1,523 296 749 1,739 Grants to IDA (80) (101) (330) (340) (251) Net income (loss) 1,280 1,422 (34) 409 1,488 Less: Net (gains) losses attributable to non-controlling interests – (4) 1 36 (5) Net income (loss) attributable to IFC $ 1,280 $ 1,418 $ (33) $ 445 $ 1,483 AS OF AND FOR THE YEARS ENDED JUNE 30 2018 2017 2016 2015 2014 Consolidated balance sheet highlights: Total assets $ 94,272 $ 92,254 $ 90,434 $ 87,548 $ 84,130 Liquid assets1 38,936 39,192 41,373 39,475 33,738 Investments 42,264 40,519 37,356 37,578 38,176 Borrowings outstanding, including fair value adjustments 53,095 54,103 55,142 51,265 49,481 Total capital $ 26,136 $ 25,053 $ 22,766 $ 24,426 $ 23,990 of which Undesignated retained earnings $ 23,116 $ 21,901 $ 20,475 $ 20,457 $ 20,002 Designated retained earnings 190 125 133 184 194 Capital stock 2,566 2,566 2,566 2,566 2,502 Accumulated other comprehensive income (loss) (AOCI) 264 458 (431) 1,197 1,239 Non-controlling interests – 3 23 22 53 1. Net of securities sold under repurchase agreements, payable for cash collateral received and associated derivatives. IFC ANNUAL REPORT 2018 | 113 KEY FINANCIAL RATIOS 2018 2017 2016 2015 2014 Financial ratiosa: Return on average assets (GAAP basis) b 1.4% 1.6% 0.0% 0.5% 1.8% Return on average assets (non-GAAP basis) c 1.4% 1.3% 0.5% 1.3% 1.8% Return on average capital (GAAP basis) d 5.0% 5.9% (0.1)% 1.8% 6.4% Return on average capital (non-GAAP basis) e 5.1% 4.9% 1.8% 4.6% 6.5% Overall liquidity ratio f 100% 82% 85% 81% 78% External funding liquidity levelg N/A N/A 504% 494% 359% Debt to equity ratio h 2.5:1 2.7:1 2.8:1 2.6:1 2.7:1 Total reserves against losses on loans to total disbursed portfolio i 5.1% 6.1% 7.4% 7.5% 6.9% Capital measures: Total Resources Required ($ billions) j 20.1 19.4 19.2 19.2 18.0 Total Resources Available ($ billions) k 24.7 23.6 22.5 22.6 21.6 Strategic Capital l 4.6 4.2 3.3 3.4 3.6 Deployable Strategic Capitalm 2.2 1.8 1.0 1.1 1.4 Deployable Strategic Capital as a percentage of Total Resources Available 9% 8% 4% 5% 7% 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. 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 committed 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 to maintain IFC’s triple-A rating. TRR is the sum of the economic capital requirements for IFC’s different assets, and it is determined by the absolute size of the committed portfolio, the product mix (equity, loans, short-term finance, and 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. IFC ANNUAL REPORT 2018 | 114 COMMITMENTS In FY18, the Long-Term Finance program was $11,630 million, as compared to $11,854 million in FY17 and Core Mobilization was $11,671 million, as compared to $7,462 million for FY17, a total increase of 21%. In addition, the average outstanding balance for Short-Term Finance was $3,435 million at June 30, 2018, as compared to $3,185 million at June 30, 2017. CORE MOBILIZATION Core Mobilization is financing from entities other than IFC that becomes available to clients due to IFC’s direct involvement in raising resources. IFC finances only a portion, usually not more than 25%, of the cost of any project. All IFC-financed projects, therefore, require other financial partners. FY18 and FY17 long-term finance and core mobilization (US$ millions) FY18 FY17 Total Long-Term Finance and Core Mobilization $23,301 $19,316 Total Long-Term Finance $11,630 $11,854 Total Core Mobilization $11,671 $ 7,462 IFC ANNUAL REPORT 2018 | 115 Asset Management Company (AMC) Funds managed by AMC and their activities FY18 vs FY17 (US$ millions unless otherwise indicated) THROUGH JUNE 30, 2018 TOTAL FUNDS RAISED SINCE INCEPTION FOR THE YEAR ENDED JUNE 30, 2018 INVESTMENT FROM CUMULATIVE COMMITMENTS INVESTMENT FROM OTHER INVESTMENT MADE BY DISBURSEMENTS TOTAL IFC INVESTORS COMMITMENTS** FUND*** MADE BY FUND Investment Period IFC Catalyst Fund, LP, IFC Catalyst Fund (UK), LP and IFC Catalyst Fund (Japan), LP (collectively, Catalyst Funds) $       418 $       75 $        343 $       379 $ 73 $ 70 IFC Global Infrastructure Fund, LP (Global Infrastructure Fund)* 1,430 200 1,230 891 23 44 China-Mexico Fund, LP (China-Mexico Fund) 1,200 – 1,200 320 – 75 IFC Financial Institutions Growth Fund, LP (FIG Fund) 505 150 355 133 – – IFC Global Emerging Markets Fund of Funds, LP and IFC Global Emerging Markets Fund of Funds (Japan Parallel), LP (collectively, GEM Funds) 800 150 650 397 189 120 IFC Middle East and North Africa Fund, LP (MENA Fund) 162 60 102 52 25 2 Women Entrepreneurs Debt Fund, LP (WED Fund) 115 30 85 87 19 32 IFC Emerging Asia Fund, LP (Asia Fund) 693 150 543 90 20 11 Post Investment Period IFC Capitalization (Equity) Fund, L.P. (Equity Capitalization Fund) 1,275 775 500 1,226 – – IFC Capitalization (Subordinated Debt) Fund, L.P. (Sub-Debt Capitalization Fund) 1,725 225 1,500 1,614 – – IFC African, Latin American and Caribbean Fund, LP (ALAC Fund) 1,000 200 800 876 – 25 Africa Capitalization Fund, Ltd. (Africa Capitalization Fund) 182 – 182 130 – – IFC Russian Bank Capitalization Fund, LP (Russian Bank Cap Fund)**** 550 250 300 82 – – Total $10,055 $2,265 $7,790 $6,277 $349 $379 * Includes co-investment fund managed by AMC on behalf of Fund LPs. ** Net of commitment cancellations. *** Excludes commitment cancellations from prior periods. **** The Russian Bank Cap Fund has completed the exit from all its investments and was liquidated during FY18. IFC ANNUAL REPORT 2018 | 116 THROUGH JUNE 30, 2017 TOTAL FUNDS RAISED SINCE INCEPTION FOR THE YEAR ENDED JUNE 30, 2017 INVESTMENT FROM CUMULATIVE COMMITMENTS INVESTMENT FROM OTHER INVESTMENT MADE BY DISBURSEMENTS TOTAL IFC INVESTORS COMMITMENTS** FUND*** MADE BY FUND IFC Capitalization (Equity) Fund, L.P. (Equity Capitalization Fund) $1,275 $       775 $        500 $1,226 $       – $       – IFC Capitalization (Subordinated Debt) Fund, L.P. (Sub-Debt Capitalization Fund) 1,725 225 1,500 1,619 – – IFC African, Latin American and Caribbean Fund, LP (ALAC Fund) 1,000 200 800 901 36 14 Africa Capitalization Fund, Ltd. (Africa Capitalization Fund) 182 – 182 130 – – IFC Russian Bank Capitalization Fund, LP (Russian Bank Cap Fund)**** 550 250 300 82 – – IFC Catalyst Fund, LP, IFC Catalyst Fund (UK), LP and IFC Catalyst Fund (Japan), LP (collectively, Catalyst Funds) 418 75 343 306 49 48 IFC Global Infrastructure Fund, LP (Global Infrastructure Fund)* 1,430 200 1,230 868 189 151 China-Mexico Fund, LP (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) 800 150 650 207 99 44 IFC Middle East and North Africa Fund, LP (MENA Fund) 162 60 102 27 15 15 Women Entrepreneurs Debt Fund, LP (WED Fund) 110 30 80 70 40 45 IFC Emerging Asia Fund, LP (Asia Fund) 440 150 290 69 67 70 Total $9,797 $2,265 $7,532 $5,958 $675 $467 * Includes co-investment fund managed by AMC on behalf of Fund LPs. ** Reported net of commitment cancellations in FY18. FY17 amounts have been updated for consistency with the FY18 methodology. *** Excludes commitment cancellations from prior periods. **** The Russian Bank Cap Fund has completed the exit from all its investments and was liquidated during FY18. IFC ANNUAL REPORT 2018 | 117 LETTER TO THE BOARD OF GOVERNORS The Board of Directors of IFC has had this annual report prepared in accordance with the Corporation’s by-laws. 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, 2018, IFC expanded its sustainable development impact through private sector investments and advice. IFC ANNUAL REPORT 2018 | 118 Stay Connected WEB & SOCIAL MEDIA RESOURCES IFC’s website, www.ifc.org, provides comprehensive information on every aspect of our activities. It includes contact information for offices worldwide, news releases and feature stories, data on results measurement, disclosure documents for proposed investments, and key policies and guidelines. The online version of IFC’s 2018 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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