Impact investing aims to generate positive social and environmental benefi ts alongside fi nancial and economic returns.
The Bank is well placed to embrace impact investing and contribute towards its standardisation and mainstreaming.  

Message from the President

As the New Development Bank enters the fourth year of its operations, it is indeed a pleasure to share with our stakeholders our performance in 2018 as well as some thoughts about the evolution of the Bank going forward.

Last year, we stated that sustainability remains the bedrock of our mission and that we would use 2018 as a springboard to build on our foundational focus on sustainable infrastructure financing. We committed ourselves to exploring new opportunities in sustainable development with our members. We foresaw the need to be imaginative and adaptable in our evolution. And we promised that as we moved forward, we would focus on “…leaner, lighter, cheaper technology and a significantly lower staff footprint”.

I am happy to say that we have made good progress in all of these areas.

Sustainability continues to be at the core of everything we do. Our members reaffirmed in the Johannesburg Declaration, in July 2018, their commitment to fully implementing the 2030 Sustainable Development Goals (SDGs) to provide equitable, inclusive, open, innovation-driven and sustainable development in the economic, social and environmental dimensions, in a balanced and integrated manner, towards the ultimate goal of eradicating poverty by 2030. The Bank continues to support these commitments.

Building on a base of 13 loans for USD 3.4 billion at the end of 2017, the Bank approved 17 more loans totaling about USD 4.6 billion in 2018, bringing the total loan book of the Bank to 30 projects, aggregating about USD 8 billion. Of this, in response to the need for non-sovereign lending in our member countries, the Bank approved four non-sovereign loans aggregating USD 1 billion in three countries in 2018, taking its total non-sovereign portfolio to USD 1.4 billion. Our lending now covers key areas of operations including:

– transport (27%);
– clean energy (27%);
– irrigation, water management and sanitation (18%);
– urban development (14%);
– environmental efficiency (8%);and
– social infrastructure (6%).

We have also invested in building a strong pipeline of projects for 2019 across a broader range of sectors with more diversification across our members.

The Bank received a AA+ international credit rating during the year, thereby joining the group of highly rated multilateral development banks (MDBs). This rating is a recognition of the well-struck balance between growth and prudence in the Bank’s future plans and enables us to mobilise financing from global and domestic capital markets at competitive rates and pass on the benefits to our clients.

We remain lean, efficient, and fit-for-purpose in our staffing in all areas. We are rapidly progressing towards implementing a fully cloud-based IT environment in the Bank, with several systems already in place and more in the process of being implemented. The Africa Regional Centre in Johannesburg is fully operational and we plan to open offices in Brazil and Russia this year.

Ongoing guidance and support from the Bank’s Governors and Directors and member country governments, for which we are deeply appreciative, has played a major role in our progress thus far. I also thank the Bank’s staff, whose hard work has made our progress possible, for their commitment and dedication.

Our members’ focus on sustainable development is built on the recognition that while their share of global GDP in purchasing power parity (PPP) terms increased from 27% to 33% in the 2010-18 period despite global and domestic challenges, concomitant pressures caused by growth on their natural resources and environment have also increased. Explicit acknowledgement of these problems is leading our members to invest both in sustainable infrastructure going forward as well as in undoing some of the damage that has come along with past rapid economic development. And the Bank is being called upon to assist.

We are responding. Since inception, the Bank has based its lending on a long-term, broad assessment of economic, environmental, social, and climate change impacts. The Bank’s initial projects were all in the renewable energy sector. This was more than a symbolic gesture; it conveyed the message of our founders that we are committed to a better and sustainable future for our member countries. The Bank looks to expand on the “do-no-harm” approach to incorporate a more transformative approach towards development. We are building in measurement and monitoring of the development impact of our lending into our projects.

We would now like to take this a step further and embrace the concept of “impact investing” in our project portfolio. Impact investing aims to generate positive social and environmental benefits alongside financial and economic returns. It aims to assess all the returns associated with a project, taking into account positive and negative externalities in addition to the project’s intrinsic returns. With its more holistic considerations in investment decisions and primary attention to “net positive impacts”, impact investing offers a hopeful alternative path to the traditional approach and its growth trajectory has already shown significant momentum, with the industry growing fivefold between 2013 and 2017. Through our investments, we would like to contribute to its further growth. Within the context of its mandate, the Bank is well placed to embrace impact investing and contribute towards its standardisation and mainstreaming. The Bank’s current approach to its portfolio is largely in line with the practices of the impact investing community and we look forward to building on this.

Looking ahead, I am excited about developments in several areas that will influence our future work. Last year, I had touched upon the possibilities of the Fourth Industrial Revolution and likely transformations that could be brought about by technology-led disruption. Some of these changes are already visible. Artificial Intelligence (AI) and machine learning are now a growing reality in our everyday lives and their spheres of influence are growing exponentially. 5G rollouts have already begun and, consequently, a ubiquitous Internet of Things is now a matter of when, not if. These technological developments are revolutionising finance, tele-medicine, education, and public services. Innovations to further green the global economy such as highly energy-efficient and driverless automobiles are now beginning to reach the mass market, even as the world grapples with the challenges of climate change. In the near future, is it conceivable that the auto-insurance industry, as we know it today, will cease to exist? Or that a significant fraction of healthcare is delivered remotely? Or that children will have near-universal access to high-quality internet-based education? I believe it is.

These changes have far-reaching consequences, and require a new way of thinking about the underlying infrastructure and our role in financing it. We need to take the opportunities presented by technological advances and make our infrastructure smarter, more sustainable, and climate resilient. We will actively explore avenues through which we can support our members in these areas and contribute to thought leadership on this issue.

As we increase focus on development impact as the cornerstone and key metric of our success, we will need to look differently at projects that we finance as well as develop a whole new set of skills in areas ranging from due diligence to project design to impact reporting. We will further strengthen these skills in our own staff and contribute to helping achieve scale through our investments.

The Bank will join the community of MDBs to help deliver on the billions-to-trillions agenda. We are well aware that even working together, MDBs can directly offer only a small part of the total resources required to achieve the SDGs that our members have signed on to. Crowding-in other investors, in particular the private sector, is critical if we are to make a significant contribution. To achieve this, designing new products that are appropriate for a broad spectrum of investors is essential. Also worth considering is the creation of robust secondary markets in our member countries, that will help meet the current demand for projects that suit investors’ needs. MDBs could act as originators of projects, play their important role in de-risking such projects, and take these projects to private investors in the market, thereby enabling recycling of their scarce capital. The Bank has set itself up to do this and will work with partners to contribute to this process.

The Bank is of the view that making a consistent and determined contribution to societal well-being is a matter of existential importance. We are committed to doing so in our member countries. We are on an exciting journey to contribute to making the world a better place for future generations and we look forward to partnering with interested stakeholders in this journey. 

Mr. K.V. Kamath
President of NDB