CGD Podcast: The Future of Development Finance with Leslie Maasdorp

Sam Attridge: Hello and welcome to The CGD Podcast. I'm Sam Attridge. I'm a senior fellow here at the Center for Global Development, and I'll be co-hosting today's conversation with my colleague Nancy Lee, who is the Director of Sustainable Development Finance and a senior fellow here at CGD. Hi, Nancy.

Nancy Lee: Hi, Sam. Happy to be with you.

Sam: Today we're going to be talking about the future of development finance. There's no doubt that we're living through a period of real geopolitical turbulence, and development finance is increasingly being caught up in much bigger debates about economic security, supply chains, migration, climate, and national interest. If we look at Europe, we're seeing a much more explicit effort to connect development cooperation and finance with Europe's wider geostrategic, economic, and industrial priorities.

In the United States, the framing is different, but the direction of travel is perhaps even clearer: America first, with a strong focus on economic security, trade, and industrial competitiveness. All of this is happening at a time when aid budgets are being cut sharply, so we're seeing also a broader rethink of development cooperation and, for that matter, development finance. I've been, and as I'm sure my colleagues on this conversation have been, to countless conferences and roundtables over the past year asking about what comes next. I think the language is now familiar, moving from donors to investors, from aid to partnership, and from externally driven agendas to greater local ownership and empowerment.

What really strikes me is, what does all this mean for development finance institutions? I'll call these DFI in the conversation, because the list of things we're asking them to do, in my mind, just keeps growing, mobilize greater volumes of private capital, increase our investment in poorer and riskier markets, do more on climate, build local markets, support strategic supply chains, and so forth. At the same time, DFIs are expected to preserve their capital and generate returns. To me, that's quite a list. We're asking DFIs to be catalytic, commercial, geopolitical, and developmental all at the same time.

That leaves me with one big burning question, if you look under this car bonnet, has the engine actually been rerouted? Have the mandates, business models, incentives, and ways of working kept pace with everything we're now asking DFIs to do? That's really at the heart of the conversation that we're going to have today.

I'm delighted that we're joined by Leslie Maasdorp, who is the CEO of British International Investment, the UK's bilateral DFI. Leslie has a remarkable career across investment banking, government, and development finance. He's helped build the New Development Bank from the ground up as its vice president and chief financial officer, but he's also held senior leadership roles at Goldman Sachs, Barclays Capital, and Bank of America Merrill Lynch, and also served in South Africa's democratic government. Quite a CV. Hi, Leslie. It's a pleasure to have you with us.

Leslie Maasdorp: Thank you so much, Sam, for having me, and good to see you both again.

Sam: What we really want to do today is step back from individual institutions and ask some bigger questions. I'm going to go over to you, Nancy, to get us started.

Nancy: Thanks so much, Sam. Maybe I'll start with your points on economic security. DFIs, as you note, are increasingly being deployed as instruments of donor-country economic statecraft. Certainly that's the case in the US. Leslie, does that fundamentally compromise their development credibility? How do you protect the mandate when political priorities are shifting, as they certainly have been and may in the future in the UK? Most fundamentally, how do you convince UK stakeholders that BII serves their interests?

Leslie: Thanks very much, Nancy. We are indeed at a serious and very particular inflection point today. The old era of overseas development assistance is indeed over. The entire language and the discourse has changed quite fundamentally in the last few years, and the discourse around the Pearson Report, which gave birth to the 0.7% logic, that is now all part of an old era. This notion of developed countries having a moral obligation towards the Global South, all of this was obviously against the backdrop of the Cold War in the early '70s. That is not a world that exists today. Many of those emerging markets that were recipients of overseas development assistance are indeed significant geopolitical actors today. Just on that dimension, the world has changed quite fundamentally.

Secondly, as you've just asserted, I think it is now becoming mainstream that development finance is an instrument of modern state craft. It's pretty much part of the design of most of the G7 countries. I interact with the CEOs of the development finance institutions quite regularly, and what I hear in the nuance from all of them, the model through which they are expected to exercise their capital deployment is informed by domestic priorities. It's informed by what is a more aggressive domestic agenda to stimulate economic growth, to stimulate investment, to stimulate job creation.

It is not quite correct to say that development has been subordinated to national objectives, but it is a clear instrument of modern economic state craft. However, I would not see this as us going a step backwards, because the old model was no longer fit for purpose. It was too paternalistic. Its funding model was not sustainable. We needed to reinvent the development finance world in any event. These shocks came with the collapse of USAID, the change in political sentiment around the world.

A number of surveys have been done, Nancy, over the last year or so. Micro surveys in a number of developed countries. FT reported a few months ago, and one or two of them, where the attitudes of populations in the developed world have indeed shifted. People still care. Make no mistake, people do care. However, there is something different now where people want to ensure that their institutions and their tax dollars are first and foremost devoted to their own national security. The two can coexist, of course.

Nancy: Let's continue on this point about whether there's a trade-off between national interests and a complementarity between national interests and the development mandate. Maybe give an example where the two very clearly converge.

Leslie: There are very clear examples I can make of how national interests coincide with, or can live in a very harmonious way, with the development model. In, I think, around 2020 or so, BII made an investment into the second mobile operator in Ethiopia. Ethiopia had one mobile operator, which was a monopoly controlled by the government. By us supporting the second mobile operator, introduced competition in that market, the cost of data went down by nearly 60%, which means it was a net significant gain in the Ethiopian economy.

There was an investment made by BII together with Vodafone. Vodafone is a large UK mobile operator. We are teaming up with a domestic multinational, Vodafone. Vodafone grows. This is a country with over 110 million people. They have a new market that they've been given access to. At the same time, we are creating significant market-level impact through that investment. You can see the coincidence of both the domestic national agenda bringing a domestic corporate in, two, having market-level impact, three, stimulating competition. That gives you an example of the deals where what appears to be potentially contradictory objectives can be harmonized.

Nancy: I want to ask you about one particular aspect of your new strategy, which is the financial return target. Because, at least in the US, one thing that's very attractive about our development finance institution, the Development Finance Corporation, is that it earns money for the US Treasury and, by extension, the US taxpayer. You very explicitly, you've made that concrete by indicating a financial return target of 2.5%. How did you come to that decision to set that particular target when you are, of course, balancing a whole range of objectives? More activities in the least developed countries, a substantial amount of your commitments in fairly risky financial instruments like equity. You have the returns, but then you have all the other things that you have to achieve.

Leslie: Absolutely. Now, if you go back to the formation of BII, Nancy, you'll be interested to know that the mandate was defined as doing good without losing money. We've had an injunction to be commercially sustainable from day one. The theory of change from day one, and we are the oldest development finance institution in the world, has been to deploy capital in such a way that we stimulate the private sector. The private sector is the engine of growth in any economy. It's the engine of job creation. It produces the taxes that governments use to deploy to build the schools and hospital and the security infrastructure for a modern state. It's always been the case that we invest that private sector to make a profit.

However, we obviously set a bar of additionality. We have always had this concept. Today we use a very sophisticated impact framework where we assess every single transaction, not just through the lens of what do we achieve through that transaction in terms of number of jobs created, number of women that either directly employed or how many new entrepreneurs we've stimulated, or whether we've designed financial products to empower more women to come into the labor market and so on. All of those things were considered to be complementary to the other side of the coin of the commercial imperative. From day one, we needed to be commercially viable.

However, we are now stating explicitly the commercial return objective, because going forward, it's very clear that because this government is fiscally constrained, the UK and many of the peer institutions that I work with very closely are also fiscally constrained, which means that we cannot rely on or we have to reduce our vulnerability to capital inflows from the government. The only way for the development finance model to be sustainable in the medium to long term is for us to recycle and to generate the liquidity, which then enables us to do new investments and recycling, and increasing that velocity is actually at the heart of development finance today. We need to wean ourselves off the dependency of fresh capital inflows and design new financial structures that can make us more commercially viable.

Sam: Another area which is coming up in many of the meetings that I've been at, and there's some discomfort, is around critical minerals, obviously trying to secure these for their domestic interest. Do you have any views on how DFIs can still preserve, if you like, their development imperative in engaging in these sectors? Is BII feeling this pressure at all?

Leslie: As I said early on, is that development and the desire to improve and have more available resources for domestic security and defense, these two objectives are not mutually exclusive. We do not in any way want to project a competition for resources between development and defense, even though in practice, if you look at the UK, we moved from 0.5 to 0.3% in February 2025, and the cuts of 0.2 from development went directly into defense. Through that sense, it looks like there's a competition. What we do as development finance institution is what we call almost preemptive security.

We invest in dealing with the roots of instability in countries. Without development, you will have pockets of long-lasting instability, conflict, illicit finance, flows of illegal migration if we don't invest in some of these markets. Nancy asked earlier on about our commitment, for example, to invest in the least developed countries. You have to look at this concept of long-term self-interest when you configure development through a modern-day lens. It's in the UK and Europe and in the industrialized world's interest that we invest and create conditions of stability.

In the Sahel, in the DRC, in a lot of these fragile and conflict states, development and national security are complementary and necessary to function as one cohesive toolkit. As part of that endeavor, it is important to recognize that critical minerals supply chain resilience, friend-shoring, that entire domain of economic instruments to ensure that countries have the necessary inputs to reduce their own vulnerability to single-country supply chains where they could make themselves vulnerable. It is necessary for DFIs to support our governments in that endeavor.

Some of us have policies which makes it difficult for us to enter the critical minerals domain. Extractive industry, mining, for example. We don't do mining, but BII and other DFIs can contribute to the logistics and infrastructure associated with moving those minerals from the point of production to the ports, for example.

Sam: Many of our listeners will be familiar with this narrative around billions to trillions, which is essentially about using public money to try and mobilize vast sums of commercial capital that currently aren't invested in the markets that we care about. What gets measured gets done. I think mobilization has become this headline metric of success. How we judge the success of DFIs, I worry, like others, about the impact of setting volume targets and setting expectations about how much DFIs can mobilize.

An example of this, which reinforces my worry, Leslie, is you probably saw the NDP and DFI 2024 Mobilization Report, which reported a fantastic increase overall in mobilization, the highest that the system's ever mobilized, which is fantastic at around, I think it's 109 billion. Actually, when you scratch beneath the surface, you see this reduction of 36% in low-income countries. My question is, does chasing volume pull DFIs towards safer markets where private capital is perhaps easier to mobilize? Then do investment decisions end up looking more like a commercial bank than a development institution?

Leslie: The question you posed is at the heart of what we are thinking through in the design laboratories of every DFI today and when we meet together as an industry. We are at an inflection point now where we are still living through what is probably the most fundamental change in my view since Bretton Woods. If you just crudely divide development finance into two phases, you have Bretton Woods, and you have the moment today when the World Bank was created and all the other regional MDBs over the last 80 years.

They were able to tap into the capital markets, specifically the debt capital markets, where, on the back of very high credit ratings of the World Bank, the IFC, ADB, Asia Development Bank, and so on, they were able to use their callable capital guarantees from the developed countries to raise considerable amounts of money at rates that is considered much cheaper than it would have been if the developing countries were raising the money themselves.

Today what we are looking at is creating a completely new architecture where we can create an emerging markets development, if you like, asset class. In the past, over the last 80 years, we did individual transactions bespoke, there's no standardized templates. Everything was done on the back of the individual siloed balance sheets. Each institution working by itself, and us hoping we can, in an aggregate way, add market-level impact.

We are now, in a qualitative way, entering a new phase. The desire to use our capital in a catalytic way, de-risking, using it in such a way that we can crowd in hundreds of billions of dollars from institutional investors. Over the last 15 to 20 years, I would say we had ambition to crowd in private sector capital. What is finally happening now is us creating the necessary ecosystem-level changes that can enable us to bring in private sector capital, insurance capital, pension funds at scale.

That's quite a radical statement I've just made. If I'm saying the entire industry is changing, I can feel that this is happening in a number of ways. One, we are changing the incentives. Most of us now, BII, most of the DFIs, the World Bank, IFC, we're moving away from assessing our performance based on how much capital we've deployed in terms of volumes to how much have we mobilized. This is leading to change in the culture, to change in incentives. The first headline point I'm making is that even junior people who just start out, they realize the industry today is very different from before.

The second point is that there were a lot of missing elements that we have been working on for a very long time. One of them is the fact that there's a misperception around risk in emerging markets. If you look at the actual credit performance, if you look at historical data, let's take the last 30 years. GEMs was created around 2009 or so by the IFC and the European Investment Bank, which is essentially a database where we aggregated all the loans that have been made by DFIs and MDBs over a 25-30-year period. That data set have been improved and improved, and it's now much more usable.

We can see that the actual default rate is much lower in these emerging markets, and the recovery rates are much higher. As an asset class, we know that it is not as risky as institutional investors think it is when they look at emerging markets. Thirdly, pension funds, insurance capital, sovereign wealth funds, they cannot buy into individual assets in the way that we have originated these assets as DFIs and as World Bank. They can't do the due diligence on single projects. They need portfolio-level instruments or portfolio-level risk sharing to take place in order for them to participate. They need to see some form of credit rating endorsement when they buy into an instrument. Many pension funds can only buy investment-grade assets, for example. We have now gone to the drawing boards as an industry, and the IFC has just launched the Emerging Markets Securitization Program. We have consciously created something that becomes a tradable security.

You take illiquid portfolio of loans, you pool them together, you assign them different risk profiles, and with first-loss equity, where you essentially absorb the initial loss. In this case, IFC provided that first-loss cover together with FCDO, the UK Foreign, Commonwealth and Development Office program. You then create a structure that then becomes appealing for pension funds.

That structure that the IFC just did recently, one in October 2025 and one three weeks ago, gives you an example of the kind of structure we're now going to be replicating at scale, not just within IFC. Ajay Banga and the team are now working within the World Bank Group on a multi-institutional, multi-party asset class where we bring together DFIs and MDBs to create an asset class where pension funds can then co-invest alongside us.

In short, what I'm saying is that a new architecture is emerging, which will take time to mature, but the building blocks are in place. The ingredients of this was really captured by the Capital Adequacy Framework Report, which Nancy and others worked on, which showed that our industry have been too risk-averse. Nancy will tell you that when they did the Capital Adequacy Framework Report, it was very clear that the culture around risk that existed within MDBs, within the risk departments and treasuries. There was clearly room for change, and that is now finally happening.

I'm hugely optimistic that we're living through a transitional moment of creating a new emerging markets development asset class that will crowd in at different scale over the next number of years.

Sam: Coming back to the targets question, the new financial architecture that's evolving this move toward portfolio approaches, securitizations, the originate-to-share agenda, it's suited to very large institutions with large balance sheets. What does that mean for the harder work of building markets in frontier markets? I'm sure you can probably include some riskier assets or investments in these structures.

Leslie: Right.

Sam: It doesn't solve for doing the hard work in some of these frontier markets where there is a lack of opportunity in the first place.

Leslie: Absolutely.

Sam: I'm curious, one, because BII set out its new strategy, which is going after the scale agenda in Southeast Asia with, I think, British Climate Investment Partners. Developing local capital markets. Doubling down in the hardest markets. How does an institution set a volume target, or how does the international community set a volume target where we actually have a very thin evidence base? I don't think policymakers, or we know who we're mobilizing, how we're mobilizing. How can we intelligently set targets which don't have these negative spillover impacts on frontier markets?

Leslie: We recognize as BII that there are two distinct, separate, but connected aspects to private capital mobilization. The first one is the endeavor to crowd in from the BlackRocks and the Prudentials and the large pension funds, insurance capital, and the sovereign wealth funds. The second piece that has to be considered as a distinct area where new strategies are required is around the local or domestic resource mobilization. Specifically, the frontier or the least developed countries, which commercial capital considers too risky.

BII, in recognition that this entire drive towards private capital mobilization is most definitely going to lead as an unintended, but as a real outcome, DFIs and MDBs will gravitate towards the more middle-income countries and the more established markets. There's no question about it, which is why you need a dedicated target. We've put it at 25% for least developed countries. If we don't do that, we will be systematically neglecting the least developed countries because markets want stability, markets want performance metrics and data, and credit rating endorsement. They want standardized templates and a whole series of things which your least developed countries do not have.

These are two separate pieces, and we shouldn't conflate the two. We shouldn't look at least developed countries as competing for resources. We must look at them as two different pools, which require different strategies. When it comes to domestic resource mobilization, each country, of course, have their own pension fund rules, their own prudential and fiduciary models. Therefore, we cannot, as DFIs, in an uncoordinated-- we need a country-platform-style approach in how we're going to tap into those domestic pools. Something very different is required in the African markets as an example, but in frontier markets in general.

At BII, we started out by identifying a very clear and explicit strategy for the energy transition in Asia, where we know through British Climate Partners, a new vehicle that we've established, we'll be able to mobilize considerable commercial capital because of the sheer size of India, Vietnam, Indonesia, Philippines, and the energy transition. The investments that are possible now in solar, in wind, in battery storage. We know that we can mobilize significant volumes of commercial capital into those areas because we've done it successfully already.

It's a complementary strategy to the more difficult piece, which is the frontier markets. We're still trying to persuade many DFIs to come alongside us because we cannot do it alone. In many of these markets, there's elements of the local capital markets that's underdeveloped and it's too nascent. You need to establish almost a market infrastructure. Market infrastructure don't just appear magically. They are constructed. They need to be designed. In some instances, you don't need a public market like a stock exchange in every single country. You could have an exchange, which we have now in Ethiopia, for example, that could be a regional exchange. We need to look at things through a different lens.

There's a need now to come up with a new coordinated strategy for LDCs, and we are still at the beginning elements of that.

Nancy: This conversation is helping us understand the target that BII set in its new strategy for mobilization, because as you say, Leslie, it goes to the core of the evolution in DFIs and MDBs. I was a little bit surprised that the target roughly represents a one-to-one relationship between additional commitments and mobilization, because mobilization is largely a function of the mix of financial instruments that institutions deploy. Of course, BII has been a leader in some of the more risky financial instruments like equity, and if equity represents a significant share of our commitment, you're going to mobilize more than institutions that concentrate on senior lending, which tends to take up a greater share of the transaction.

You've also described that you have your target on least-developed countries and frontier markets. You do very much prioritize areas where the volume of mobilization is not front and center. Tell us a little bit more about how you came up with this one-to-one relationship between mobilization and capital.

Leslie: DFIs and MDBs, including BII, have been on this mobilization journey for some time, but it was not as intentional as it is today. Today, it is codified in clear targets. Next year, you can ask me the question whether in year 1, we were able to achieve the one-to-one ratio, et cetera. The same with the IFC and the same with all the other institutions. They've been on this journey. Because we did not have targets before, we had to set a beacon. I think a one-to-one ratio is, at a minimum, what we should consider as a barometer of success. Naturally, we want to exceed that target. It should be possible to exceed that target, and most of the DFIs are on that track.

The second point to make is that we're living in an era-- The reason why we could not set a more aggressive target is that we also now need to build the capability, the skill sets to be able to execute on this originate-to-distribute model. This has not been the model of BII in the past, and access to maturity has really been part of the fabric of the DFIs. It's only over the last few years, and specifically now that we are putting it into our strategy documents and putting numbers to it. That's the second point.

Thirdly, you are correct in saying that BII historically-- What differentiates BII is the fact that we have had appetite directed by our shareholder to deploy equity in some of these riskier markets. I was very pleased when we had the strategy long-range discussions that the government continued with that commitment. Wanting to make sure that we do not distort the development model by gravitating towards your more middle-income countries. In Africa, if you want to mobilize, you will probably be focusing more on South Africa, Kenya, Egypt, Nigeria, and ignore Burundi and DRC and Zambia and so on.

Then it's important to also look at the demonstration effect. What we have already done successfully in the beginning of this year, we created what was quite a sizable blended finance structure, a $1 billion fund. It's called ACE, Allianz Credit Emerging Markets Fund. Interestingly, this is with a large insurance company called Allianz. 40% of that $1 billion will be focused on Africa. I don't know, actually, of any other blended finance global structure, where an allocation to not emerging markets in general, but Africa in particular, is as high as 40%. What happened there? We came in with $40 million as part of the first $150 million concessional piece, if you like. The first piece is $150 million, and there's a combination of DFIs in that first tier. It's ourselves, IDB Invest, Global Affairs Canada, and Impact Fund Denmark.

That $150 million, we've been able to mobilize about six and a half times, so we got $850 million from institutional investors for the senior tranche. We have a billion-dollar fund, and 40% of it will be devoted to climate finance projects in Africa. Very unique structure. The one thing about blended finance, it's a proven instrument. However, it takes a while.

Sam: I just want to come back to a point you were talking about around this focus on the imperative now to mobilize and look at the local pools of capital, especially on the African continent. I think the AFC have just recently estimated, I think it's like $4 trillion that's sat on the African continent. There's a focus on how MDBs and DFIs can be tapping that capital. Not just mobilizing it, but being able to mobilize it in a way that creates markets and has a longer-lasting impact.

This is quite a complex endeavor. Not all countries, for example, if we look at Africa, are ready for this kind of approach. Again, there's potentially a conflict with volume targets, because initially, rather than giving a bank a loan, if you're encouraging it to issue a bond on the market and crowd another investors, your mobilization numbers may be lower, but you're laying the groundwork for capital market development to enable the intermediation of African savings into productive investment in Africa.

My question is, the mobilization, if it might be small now, but the payoff is greater in the long-term, how do you incentivize colleagues to do that harder work where the long-term benefit takes some time? Then the second part in this local capital mobilization thing is, how do you choose where you're going to place your bets? You need to allocate capital and resource. There's a lot of upstream work and partnership work that's required here.

Leslie: Thank you very much for that question, Sam. It's very clear to me that there's a clear and explicit recognition by these ministers of finance that it is necessary to design the architecture for us to be able to tap into the pools of savings in their countries. There's a much greater ownership on a recognition that countries themselves have to own their own development trajectory.

What the collapse of USAID has done, it has really placed front and center for these government policymakers that they cannot be dependent on outsiders or on donors for the health of their populations, for example. The HIV/AIDS program was generously funded by US taxpayers over the last two and a half decades or so. It's an amazing, highly successful program that is widely credited. That program was just literally stopped in one fine week in February 2025. Countries had to take now onto their own health budgets, these programs.

Point number two, they're willing to go the extra mile to do what is required to support initiatives for us to be able to tap into these institutional investor capital. Give you one small example. In Zambia and in Ghana, because of the massive shortage of funding for SMMEs, and SMMEs constitute 75% of companies contribute to the GDP of most African economies, these companies struggle to get growth capital, often even working capital from the banks. They employ between 1,500 people, some of them slightly more, but they're small businesses that are playing a vital role in the economic growth trajectory of these economies.

We set up a financial platform. The interesting thing about it is not just the lending platform where we provide loans to SMMEs, but we managed to get the pension fund to invest alongside us. The biggest pension fund in Zambia is called NAPSA, the National Pension Securities Authority, I think it's called. NAPSA made changes to the pension fund rules or the pension fund regulator, because the president in Zambia is very private sector minded and he understood the need for institutions and encouraged his policymakers to consider this.

To cut a long story short, it took a few years to do, but we managed to get the pension fund to invest alongside BII. We did the same in Ghana, where access to local pension fund invested alongside us in a similar platform. These are all demonstration effects. We now will be building on this to do other deals, but the seeds are there for this model. Again, if the number is 3 trillion of institutional capital, we want to tap into 5% of those flows. When we're talking here about 10%, 15%, 20% or 30%, 5% is the number. It is very doable.

The finance ministers are excited about this challenge. In the process, they are also contributing towards greater financial intermediation able to build and strengthen your domestic economy. If you get more of your own savings to go into productive investments, most of these funds, the money goes into fixed income, buying of sovereign bonds. Most of these pension funds, up to sometimes 70% is then being forced to buy government bonds. Why is that money not invested in the building of rail infrastructure, of port infrastructure, of renewable energy, and making the countries to be net energy exporters? For example, the sun is plentiful. We've got such solar resources on the African continent.

The ministers of finance, the local policymakers are working very closely with us. This is also signaling a change in the modalities of how we work. BII works for the private sector, but whenever I visit countries in Africa, I have occasion to meet the ministers of finance. The ministers focus on private sector investment and trade and so on. They want to have that conversation with us because they want to see, what are the bottlenecks domestically that they can remove to enable ourselves to work with the IFC, Africa Development Bank, Africa Finance Corporation on this agenda? There's compelling logic why they need to support us, and we've got an enabling environment today, in my view.

Nancy: I wanted to return to this whole question and challenge of market impact that you mentioned earlier, Leslie. You had an excellent example of Ethiopian Vodafone and the dramatic impact that investment had in introducing more competition and lowering the cost of data. Beyond market impact, it has systemic impact since digital access is so important to the entire economy. What are some other examples of market/systemic impact that you want your team to focus on as they develop investments? How do you get them to prioritize that at a time when they're also trying to do lots of other things, create successful transactions, commercially viable transactions, being in the right country? How do you get them to prioritize these broader impacts?

Leslie: A number of moving pieces, Nancy. First one, we should have already in earlier years, in my view, but we are now at the point where we cannot have slightly different impact frameworks within the DFI and MDB community. There is a clear need for greater harmonization, greater standardization, and a convergence in our approaches to ensure that we don't complicate the lives of our investee companies. Give you an example. If we invest in entrepreneur in the telecom space in Ethiopia, and let's say, EBRD is also invested in there, or FMO, or DEG, or Proparco, each one of us have our own unique reporting requirements on impact, and creates a bureaucratic machine. Our investees have to comply with the individual little nuances of our different reporting frameworks.

Secondly, we also recognize that there are different ways in which we can attribute the measures. If we make an investment, let's say, in Ethiopia, as we did in the telecom sector, a US company who probably invested in that pharmaceutical business in Ethiopia would probably have seen Vodafone entering. If a survey was done, they probably would say, "We drew a lot of comfort from the fact that a blue-chip company like Vodafone is invested in Ethiopia." One of the leading development finance institutions like BII is invested there. That gives them comfort.

Does that mean that I can attribute when we do our assessments here that we have stimulated more foreign direct investment, and as BII, we have stimulated that, or if EBRD did another investment in education sector or in the health sector, where does that attribution belong? We need a framework where we are able to aggregate these market-level ecosystem or systemic level changes that result as a consequence of the DFI initial investment.

In Africa, we have something called the Africa Resilience Investment Accelerator, ARIA, where together with FMO, together with Proparco, we go into countries like Sierra Leone, Burundi, DRC, and we invest alongside them. We don't go there alone. We go there with these others. It makes it simpler for us to look at these market-level impact metrics because we go with a standardized framework. Still, a fair bit of work is needed to get the market infrastructure right around market level impact, but we are making a lot of progress now, I believe, Nancy.

Nancy: Now, this is a very interesting point you make, because it almost suggests that if you prioritize market impact, that could be a force for encouraging the institutions to collaborate more with each other-

Leslie: Exactly.

Nancy: -because it's very difficult for them to claim credit for market impact if they don't collaborate with others. When you are perhaps in the process of moving on to your next challenge, what story would you like to tell about what BII has accomplished?

Leslie: Two aspects, Nancy. The first one, there is still clearly a need for the DFIs to maintain a market-level catalytic role in areas where there's still no commercial logic that exist. Let's take nature. Let's take adaptation and resilience. That's not investable class yet, but the physical risks right now suggest that, unless we invest in resilient infrastructure we'll be faced with, just look at the floods in Pakistan recently. It's a major important country for us that we invest in. Doing that work, which is not about supporting a single project, but doing the work which is about preparing the market.

I specifically mentioned natural capital. I also want to mention adaptation and resilience because this is the next frontier. I'd like BII over the next few years to be one of the leading institutions that does the work that eventually become mainstreamed. I just want to end off with one example. In 2018, at the G7 hosted by Canada, BII was one of the foundational DFIs that came up with the 2X concept. We were able to coalesce a lot of DFIs. We then created the criteria that have mainstreamed gender lens investment firstly within DFIs and then mainstream with the corporate.

That notion of starting something and getting it familiar as an asset class within the industry, then mainstreaming it, and let it have wings and fly, that, for me, is probably one of the biggest success stories of this institution historically prior to my arrival here. It should not lose that distinctive capacity to do things that is needed but there's no real commercial logic to it yet. I would like to see us, and it's probably three areas where I see that nature is the one that I already referenced because nature and climate are inseparable, nature biodiversity and so on. The second is adaptation and resilience. The third is development in the age of AI.

Those are the three things that I would like to see over the next number of years we play a role in. It's about crafting the AI for public good dimension. How do we make sure that these technologies are focused on the need to improve lives, the need to improve education, health infrastructure, and so on? There might not be commercial models yet. I want BII to continue on that path of doing things that others won't do. Commercial institutions won't do it. We have the unique capability to use financial acumen, the financial know-how of people here to contribute to the creation of the ecosystem that eventually others can adopt and help let it flourish.

Nancy: Really great examples of what's possible but also how you define success.

Sam: There's so much that needs to be done. We've spoken about the frontiers and the mobilization at scale agenda. For example, in Southeast Asia and established renewable energy technologies, the question I'm left with really, can you optimize for both of those kind of things in one institution and how do we deploy a very scarce resource, especially concessional resource, to be able to optimize for both of those? It's just a lingering question that I have, but we're on this journey. We're definitely going to work it out.

Leslie: Thank you very much, Sam, Nancy. I certainly enjoyed the conversation.

Nancy: So did we, Leslie. We thank you very much. For our listeners, we will have some more conversations with similarly pioneering leaders of development finance institutions and MDBs in the future.