Annual Report –– 2021 About MIGA Our mandate is to promote cross-border private investment in developing countries by providing guarantees (political risk insurance and credit enhancement) to investors and lenders. In FY21, MIGA issued US$5.2 billion in new As of June 2021, we have also issued US$5.6 guarantees across 40 projects. These billion of guarantees through our COVID-19 projects are expected to provide 784,000 Response Program and anticipate an expan- people with new or improved electricity sion to US$10–$12 billion over the coming service, create over 14,000 jobs, generate years, a testament to the countercyclical over US$362 million in taxes for the host role that MIGA can play in mobilizing private countries, and enable about US$1.3 investment in the face of the pandemic. billion in loans to businesses—critical as countries around the world work to A member of the World Bank Group, MIGA is keep their economies afloat. Of the 40 committed to strong development impact projects supported during FY21, 85 percent and promoting projects that are eco- addressed at least one of the strategic nomically, environmentally, and socially priority areas, namely, IDA-eligible countries sustainable. MIGA helps investors mitigate (lower-income), fragile and conflict- the risks of restrictions on currency con- affected situations (FCS), and climate version and transfer, breach of contract by finance. governments, expropriation, and war and civil disturbance, as well as offering credit enhancement on sovereign obligations. World Bank Group Global Commitments In fiscal 2021, the World Bank Group delivered record levels of financing at an unprecedented pace; conducted in-depth analysis and research; and partnered with governments, the private sector, and other institutions to help developing countries address the wide-ranging impacts of the COVID-19 pandemic and work toward a green, resilient, and inclusive recovery. Total US$98.8 billion in loans, grants, equity investments, and guarantees to partner countries $10.9 billion and private businesses* Europe & Central Asia $6.2 billion Middle East & North Africa World Bank Group $15.6 billion South Asia $13.5 billion East Asia & Pacific $35.2 billion Africa $17.5 billion Latin America & the Caribbean * Total includes multiregional and global operations. Regional breakdowns reflect World Bank country classifications 2 Message from the President World Bank Group Since the start of the COVID-19 and weak governance. And though I am hopeful for the global economy to rebound, many of the world’s poorest pandemic, the World Bank Group countries are being left behind, with inequality widening has worked hard to help countries both within and between countries. We are committed to working with our partners to find solutions to these urgent fight the pandemic’s health, economic, challenges—including by promoting transparency, human and social impacts. rights, and a rule of law that extends accountability to all institutions. We are working to save lives, protect the poor and vulnerable, support business growth and job creation, and rebuild in better ways toward a green, resilient, and From April 2020 through the end of fiscal 2021, the Bank Group inclusive recovery. committed over $157 billion—the largest crisis response in any such period of our history. We have helped countries Ensuring safe, fair, and widespread immunization will be key address the health emergency, procure billions of dollars to curb the pandemic and advance recovery: we are sup- of medical supplies, deploy COVID-19 vaccines, strengthen porting countries’ access to COVID-19 vaccines, including health systems and pandemic preparedness, protect the through COVAX and directly from manufacturers. The World poor and vulnerable, support businesses, create jobs, pro- Bank has expanded its financing available for COVID-19 mote growth, and expand social protection. vaccines to $20 billion over two years—in fiscal 2021 alone, we committed $4.4 billion for 53 countries. Working with Despite this unprecedented global effort, the pandemic WHO, Gavi, and UNICEF, we developed mechanisms for has reversed gains in global poverty reduction for the first safe distribution in 140 low- and middle-income countries. time in a generation, pushing nearly 100 million people We are partnering with the African Union and the Africa into extreme poverty in 2020. I remain deeply concerned Centers for Disease Control to support the Africa Vaccine about fragile states, which have been particularly hard-hit Acquisition Trust (AVAT) in order to help countries purchase by unsustainable debt burdens, climate change, conflict, and deploy COVID-19 vaccines for up to 400 million people 3 across Africa. And we are working with the IMF, WHO, WTO, In fiscal 2021, IBRD committed $30.5 billion to client coun- and other partners to track, coordinate, and advance deliv- tries, and IDA committed $36.0 billion on grant and highly ery of vaccines to developing countries. concessional terms to the poorest countries. I welcomed the G20’s endorsement of advancing IDA’s 20th replenishment IFC is doing vital work to build resilient health systems and cycle to 2021, which will provide the poorest countries with expand the manufacturing and supply chains for COVID-19 more resources to overcome the crisis and work toward vaccines. Through its Global Health Platform, IFC commit- recovery. I am also pleased that, after nearly three decades, ted $1.2 billion to support vaccine manufacturing capacity, Sudan cleared its arrears to IDA in March, enabling full reen- including in Africa, and the production of essential services gagement with the Bank Group and paving the way for the and medical equipment, including test kits and personal country to access nearly $2 billion in IDA financing. protective equipment. IFC-led investments include the mobilization of a €600 million financing package to boost IFC delivered a strong fiscal performance, reaching a record COVID-19 vaccine production in South Africa, support to high of $31.5 billion in financing, including $23.3 billion in vaccine manufacturers in Asia, and investments in medical long-term finance and $8.2 billion in short-term finance. IFC equipment manufacturers and suppliers. also scaled up its short-term financing offerings and kept trade flowing. With COVID-19 severely impacting private To address many countries’ risk of debt distress, we’ve enterprises across emerging markets, IFC provided criti- played a key role in the G20’s Debt Service Suspension Ini- cal support through liquidity and trade financing, allowing tiative, alongside the IMF. The effort has helped more than companies to remain in operation, preserving jobs, and 40 countries to suspend debt service payments in excess of enabling long-term private sector intervention once pan- $5 billion, freeing up fiscal space as countries combat the demic impacts subside. We are accelerating the execution crisis. While I am pleased the initiative has been extended of the IFC 3.0 strategy to create more investible projects to the end of 2021, more needs to be done, particularly to in places where they are needed most, particularly in IDA reduce the stock of debt in the poorest countries. With the and FCS markets, and build a pipeline of investments in a IMF, we are helping implement the G20 Common Framework post-pandemic world. World Bank Group for Debt Treatments, which aims to reduce countries’ debt burdens for the long term. In February, I was pleased to announce the appointment of Makhtar Diop as IFC’s Managing Director and Executive As the world emerges from the pandemic, climate change Vice President. His leadership and experience will enable will remain a central challenge. The World Bank Group is the the World Bank Group to build on the unprecedented speed largest multilateral provider of climate finance for devel- and scale of our response to the global crisis and support oping countries. Over the past five years, we have delivered vital recovery efforts through the private sector. over $83 billion–in fiscal 2021 alone, our climate finance totaled over $26 billion. Our new Climate Change Action MIGA issued $5.2 billion in guarantees to help coun- Plan, launched in June, seeks to integrate climate through- tries achieve their development goals. These efforts are out development efforts, with a focus on greenhouse gas expected to provide 784,000 people with new or better elec- reduction and successful adaptation. The plan commits tricity service, support about 14,600 jobs, generate over $362 us to 35 percent of Bank Group financing having climate million in taxes for countries, and enable about $1.3 billion co-benefits over the next five years; 50 percent of IBRD and in loans, including to local businesses. MIGA continued to IDA climate financing will support adaptation and resil- make progress across its strategic priority areas, with 85 ience. We will align all World Bank financing with the goals percent of its projects in fiscal 2021 dedicated to climate of the Paris Agreement starting on July 1, 2023. For IFC and mitigation and adaptation, projects in fragile and con- MIGA, 85 percent of Board-approved real sector opera- flict-affected settings, and IDA countries. tions will be aligned starting July 1, 2023, and 100 percent starting July 1, 2025. We will support countries’ preparation As part of our ongoing commitment to fight racism and and implementation of Nationally Determined Contribu- racial discrimination in our workplaces and our work, our tions and long-term strategies; these, in turn, will inform senior management and I welcomed 80 recommendations our Country Partnership Frameworks. And we will support submitted in fiscal 2021 by the Bank Group’s Task Force on countries’ transition away from coal to affordable, reliable, Racism. The first set of 10 foundational recommendations and cleaner alternatives for electricity. Our efforts will help are already being implemented, and more are under review. countries grow their economies while reducing emissions, I am grateful to all those who have come forward to engage adapting to climate change, building resilience, and pro- on this important topic as we continue to work for tangible, tecting natural resources, including biodiversity. meaningful, and long-lasting change. 4 Annual Report 2021 Over the past year, our staff have gone above and beyond to support our clients, even as we transitioned to home- based work and coped with the pandemic’s impact on our own lives, families, and communities. They have ensured the highest quality standards even as we stepped up our support to clients. I am grateful for this commitment to our mission, and I look forward to welcoming staff back to our offices as circumstances permit. There is no path to sustainable, long-term growth without continuous progress in reducing poverty and inequality. With the dedication of our staff, the support of our partners, and our relationships with countries, I am confident that we will help countries overcome this crisis and return to the path of inclusive, sustainable growth. World Bank Group David Malpass President of the World Bank Group and Chairman of the Board of Executive Directors 5 World Bank Group 6 Annual Report 2021 Message from the MIGA Board of Directors Evangelia Bouzis, United States; Takashi Miyahara, Japan; Richard Hugh Montgomery, United Kingdom; Arnaud Buissé, France; Gunther Beger, Germany; Abdelhak Bedjaoui, Algeria; Louise Levonian, Canada; Monica E. Medina, Peru; Nigel Ray, Australia; Nathalie Francken, Belgium; Merza Hussain Hasan, Kuwait (Dean); Rajesh Khullar, India; Alphonse Ibi Kouagou, Benin; Taufila Nyamadzabo, Botswana; Abraham Weintraub, Brazil; Mohd Hassan Ahmad, Malaysia; Junhong Chang, China; Eva Valle Maestro, Spain; Koen Davidse, The Netherlands (Co-Dean); Geir H. Haarde, Iceland; Matteo Bugamelli, Italy; Abdulmuhsen Saad Alkhalaf, Saudi Arabia; Roman Marshavin, Russian Federation; Katarzyna Zajdel-Kurowska, Poland; Armando Manuel, Angola The past year has been immensely challenging around Assisting the poor the world—especially for developing countries—as the COVID-19 pandemic reversed decades of progress in To help start the process of recovery, the Bank Group reg- ending extreme poverty, achieving shared prosperity, and istered a historic increase in the delivery of lending for reducing inequality. The World Bank Group responded projects and initiatives to assist low- and middle-income swiftly and extensively to the health, economic, and social countries, including small states, in tackling multifaceted impacts of the crisis to help spur recovery. But more needs challenges, safeguarding human capital, and providing to be done to address the needs of the marginalized and social safety nets to target their most vulnerable people. those who live in the poorest areas. The Board discussed and approved several important initiatives and programs Given the immense financing needs, we agreed to bring in support both of countries’ immediate needs and of forward the IDA20 replenishment process, which we long-term development goals. expect will be completed by December 2021. At the 2021 Spring Meetings, the Development Committee also asked the Bank to scale up its work to address rising levels Vaccines of food insecurity and to support countries in achiev- ing SDG 2, and nutrition for all, along with other partners. We have made key and timely decisions on proposals by Bank Group management to respond to the pandemic and finance vaccination efforts, including mechanisms for prompt delivery. The Bank Group is partnering with WHO, COVAX, UNICEF, and others, including private manufacturers, to help facilitate trans- parent, affordable, and fair access to vaccines for developing countries and to continue strengthening global preparedness for future pandemics. 7 Green, resilient, and inclusive Private sector development Recognizing growing credit constraints, the private sector is a critical player in helping client countries attain their de- The Bank Group continues to support countries in achiev- velopment goals, create and develop markets, mobilize re- ing the twin goals of ending extreme poverty and boosting sources, and respond to COVID-19, including through IFC’s shared prosperity. In responding to the COVID-19 crisis, Global Health Platform and MIGA’s response programs. We the Bank Group has an opportunity to help low- and mid- expect the Bank Group to keep building partnerships across dle-income countries build the foundations for a strong and a common strategic framework to help generate private durable recovery based on a framework that we discussed, sector solutions that address development challenges. which supports green, resilient, and inclusive development. We believe that this, in turn, can help address the longer-term challenge of climate change. Racial justice There were important efforts this year to address racial injus- Climate tice within the Bank Group and with our clients, including a set of recommendations put forth by the End Racism Task Force We hope that the ambitious new targets for climate financing to fight racism and racial discrimination. We look forward outlined in the Climate Change Action Plan 2021–25 and the to implementation of these recommendations through an alignment of the Bank Group’s financing with the Paris agree- action plan that will reaffirm this institutional value, which is ment—complemented by the approach to green, resilient, embedded in the Bank Group’s Code of Ethics. and inclusive development and efforts to build long-term resilience for food security—will help deliver on the twin goals and the Sustainable Development Goals. Accountability mechanisms We also reaffirmed the importance of accountability mech- Knowledge framework anisms for people and communities who believe that they have been, or are likely to be, adversely affected by We welcomed the discussion of the new Strategic Framework Bank Group projects and investments. We have approved for Knowledge, which strives to better integrate knowledge enhancements to the Bank Group’s social and environ- into solutions for clients and the global community. We look mental accountability framework, including changes to the forward to implementation of this framework, which will World Bank Inspection Panel’s toolkit and to the reporting line strengthen the Bank Group’s role as a source of solutions. of the Compliance Advisor Ombudsman for IFC and MIGA. Debt Leadership, staff, and return to office As countries face increasing debt burdens, our Gover- November 2020 marked the transition to a new term for the Board nors, together with the IMF, have given the Bank Group a of Executive Directors, and in February we welcomed Makhtar mandate to address fiscal and debt distress in IDA coun- Diop as IFC Managing Director and Executive Vice President. tries in a way that supports green, resilient, and inclusive development and poverty reduction. We are hopeful that We look forward to the widespread availability of COVID-19 the G20 Common Framework, along with extension of the vaccines across the globe, the safe return of the Bank Group’s Debt Service Suspension Initiative to the end of 2021, will staff to the office, and the overall return to a new normal. Our allow beneficiary countries to dedicate more resources utmost appreciation goes to the staff for their ongoing ded- to tackling the crisis, investing in health care and education, ication to the Bank Group’s mission and their perseverance promoting growth, and improving their long-term approaches and hard work over the past year, despite the immense and on debt. sudden change in their working environments. The World Bank Group remains ready to help our clients on the path to recovery. We hope that the new fiscal year brings good health and strong development outcomes for all. 8 Annual Report 2021 Message from Hiroshi Matano Executive Vice President A year-and-a-half into the global MIGA’s role amid the pandemic is to encourage private inves- tors to stay the course and offer greater stability by helping COVID-19 pandemic, we have manage and mitigate country risks. Working with our clients accomplished much - and much and partners, we mobilized US$5.5 billion in financing (from private and public sources) through issuances of nearly remains to be done. US$5.2 billion in guarantees to cross-border private investors in FY21 ($7.6 billion since April 2020). A quarter of our guaran- As the World Bank Group charts a path for green, resilient, and tees supported projects in IDA (lower-income) countries and inclusive development, MIGA has been focusing on its ongoing fragile situations, and 26 percent of our issuances contrib- response to the pandemic along with the other challenge of uted to climate change adaptation or mitigation. As a result, our time: climate change. our issuances in FY21 are expected to help provide access to power to some 784,000 people, support nearly 14,600 jobs and At the time of writing this message, the coronavirus has enable US$1.3 billion in loans, including to small and medium infected over 220 million people. Concurrently, global CO2 enterprises (SMEs) and climate-related activities. emissions continue unabated, and infrastructure in developing countries is particularly vulnerable to extreme weather events. We kept investors engaged by devising innovative uses of our products—and with the help of the Board, streamlining project During the pandemic, global investors in FY21 held back and approval procedures. turned inward to domestic markets, which was reflected in the dramatic drop in 2020 of global foreign direct investment We applied our unique approach to capital optimization on (FDI) flows by some 42 percent. As we begin to see recovery voluntary cash reserves, and issued our first-ever support for in advanced economies, MIGA is working on bringing invest- mini- and off-grid solutions in Africa. ment back, and doubling down on supporting the World Bank Group’s mission of ending extreme poverty and boosting shared prosperity in a sustainable way. 9 We also used our credit enhancement product to get financial be sharing for the first time MIGA’s climate-related disclosures, institutions to support countries that could take on noncon- in accordance with the specifications of the Task Force on cessional borrowing. Through projects like Banco Nacional Climate-related Financial Disclosures (TCFD) (see Annex 1). de Panamá, we helped financial institutions—in this case, Goldman Sachs Group Inc.—secure affordable financing I am also appreciative that MIGA, working closely with the IFC from institutional investors. We also ventured into new terri- and the Compliance Advisor Ombudsman (CAO), was able tory by supporting the upgrading of two public hospitals in this year to help develop and garner Board approval for a The Bahamas. robust and comprehensive new IFC/MIGA Independent Accountability Mechanism Following interest expressed by govern- Our issuances in Policy that further extends our leadership ments and investors, MIGA put together its in environmental and social sustainability. FY21 are expected to first crisis response guarantee package. With the help of our Board, we expedited help provide access Moreover, project finance is trickling back, approval processes, instituting a fast-track to power to some although differently than before the pan- COVID-19 Response Program that allowed 784,000 people, demic. Many investors who had cash flow for projects to go from early screening to support nearly issues during the pandemic are selling Board approval in 51 days, compared with assets in emerging markets, and new 129 days for regular COVID-19 response 14,600 jobs and investors are acquiring these assets rather projects. enable US$1.3 billion than building greenfield projects. We are in loans, including to seeing increasing demand for political risk In addition to speed, we supported gov- small and medium insurance for acquisitions and brownfield ernments by encouraging our clients, investments. enterprises (SMEs) when feasible, to provide leeway on pay- ments. This type of collaboration was and climate-related For example, we signed a project in FY21 critical for protecting some of the most activities. with Kasada, a billion-dollar private equity vulnerable in our member countries from fund that is acquiring and upgrading 20 the worst financial blows of the pandemic. hotels in Sub-Saharan Africa and support- ing jobs in an industry badly hit by COVID-19. Similarly, new The US$6.5 billion COVID-19 Response Program we launched investors are coming into the power sector to acquire existing in April 2020 proved fit for purpose, leading to the issuance projects and then upgrade plants and machinery. of US$5.6 billion in guarantees for COVID-19 projects and an anticipated expansion of the program to US$10–12 billion over Although we are living through challenging times, I am heart- the coming years. The program truly has been a testament ened that, working with our clients, we are helping individuals to the countercyclical role that MIGA can play in mobilizing weather the pandemic. I remain optimistic that we will stay the private investment in the face of global crises. course on meeting the World Bank Group’s mission. While we helped deliver results on the ground during the pan- I am particularly proud of our staff, who came together under demic, we also took important steps in FY21 that position us difficult circumstances to meet the challenge. I thank our cli- to help address global challenges in the coming years. We ents and Board, who have remained steadfast partners and secured Board approval for Trade Finance guarantees—our helped us deliver results through the pandemic. first entirely new product line since 2010, when we launched our Non-Honoring of Financial Obligations product. While the challenges ahead are many, we have the capac- ity to tackle them head-on. I am confident that the building We also contributed to the launch of the World Bank Group’s blocks we are putting together now, will help us to not only second Climate Change Action Plan (2021–25), issuing US$1.36 recover from the pandemic but also to take on the other key billion of guarantees—or 26 percent of our FY21 issuance—in challenges of our time—including, most immediately, climate support of climate change mitigation or adaptation. Going change. forward, 85 percent of MIGA's Board-approved real sector operations will be aligned with the Paris Agreement by July 1, 2023, reaching 100 percent by 2025. To get there, we will hire more climate experts and help build client capacity on climate Hiroshi Matano opportunities and vulnerabilities. Reflecting the importance Executive Vice President with which MIGA views the climate challenge, I am pleased to Multilateral Investment Guarantee Agency 10 Annual Report 2021 The Institutions of the World Bank Group The World Bank Group is one of the world’s largest sources of financing and knowledge for developing countries. It consists of five institutions with a shared commitment to reducing poverty, increasing shared prosperity, and promoting sustainable growth and development. IBRD ICSID International Bank for Reconstruction International Centre for Settlement of and Development (IBRD) lends Investment Disputes (ICSID) provides to governments of middle-income and international facilities for conciliation creditworthy low-income countries. and arbitration of investment disputes. MIGA IDA Multilateral Investment Guarantee International Development Association Agency (MIGA) provides political risk World Bank Group (IDA) provides financing on highly insurance and credit enhancement to concessional terms to governments investors and lenders to facilitate foreign of the poorest countries. direct investment in emerging economies. IFC International Finance Corporation (IFC) provides loans, equity, advisory services, and mobilizes additional capital from other sources to stimulate private sector investment in developing countries. 11 World Bank Group Financing for Partner Countries World Bank Group Commitments, Disbursements, and Gross Issuance By fiscal year, millions of dollars 2017 2018 2019 2020 2021 World Bank Group Commitmentsa 68,274 74,265 68,105 83,574 98,830 Disbursementsb 43,853 45,724 49,395 54,367 60,596 IBRD Commitmentsc 22,611 23,002 23,191 27,976 30,523 Disbursements 17,861 17,389 20,182 20,238 23,691 IDA World Bank Group Commitmentsc 19,513d 24,010e 21,932e 30,365e 36,028e Disbursements 12,718d 14,383 17,549 21,179e 22,921e IFC Commitmentsf 18,345 19,027 14,684 17,604 20,669 Disbursements 10,355 11,149 9,074 10,518 11,438 MIGA Gross Issuance 4,842 5,251 5,548 3,961 5,199 Recipient-Executed Trust Fund Commitments 2,962 2,976 2,749 3,641 6,411 Disbursements 2,919 2,803 2,590 2,433 2,546 a. Includes IBRD, IDA, IFC, Recipient-Executed Trust Fund (RETF) d. Figures include the commitment and disbursement of a $50 commitments, and MIGA gross issuance. RETF commitments million grant for the Pandemic Emergency Financing Facility. include all recipient-executed grants, and therefore total WBG commitments differ from the amount reported in the WBG Cor- e. Commitments and disbursements exclude IFC-MIGA Private porate Scorecard, which includes only a subset of trust funded Sector Window (PSW) activities. activities. f. Includes long-term commitments for IFC’s own account and b. Includes IBRD, IDA, IFC, and RETF disbursements. short-term finance commitments. Does not include funds mobilized from other investors. c. Amounts are net of full terminations and cancellations approved in the same fiscal year. 12 Annual Report 2021 MIGA’s Global Reach and Country Results FY21 Gross Issuance: $5,199 million Latin America and the Caribbean $2,457.5 M Country Results for Selected Countries* *Figures reflect projects signed in FY15–21 Ecuador $22.3 M Locally procured goods Colombia $180.5 M Taxes and fees 13 Kosovo $159.5 M Total loans supported Egypt, Arab Rep. 11,717 Jobs supported (permanent and temporary) Europe and Central Asia $1,706.5 M East Asia and Pacific $522.7 M Bangladesh 9,664,349 People provided with new or improved electricity service Sub-Saharan Africa $512.5 M Zambia Rwanda 589,248 275,000 Kenya GHG avoided People provided with new or 93,750 (tCO2e/yr) improved electricity service GHG avoided (tCO2e/yr) 14 Annual Report 2021 MIGA’S Expected Development Results from Projects Signed in FY21 14,597 $54 Million Total employment supported Locally procured goods per year (permanent + temporary) $362 Million 1,580 MW Taxes and fees paid per year Power - installed capacity to host governments 11,671 GWhs 784,000 People provided with new Expanded power generation or improved electricity service per year 306,027 $1.3 Billion GHG emissions avoided (tCO2e/year) Volume of loans supported $5.5 Billion Private financing mobilized 16 Annual Report 2021 MIGA’s COVID-19 Response Program The COVID-19 pandemic continues to inflict high and rising human and economic costs worldwide. The impact of the crisis on emerging markets and developing economies (EMDEs) is expected to be particularly severe. The World Bank Group’s most recent Global Economic Prospects report projects that while growth for advanced economies is expected to reach 5.4 percent this year—the fastest in nearly five decades—recovery among EMDEs will be more subdued. Gains in this group of economies will not be sufficient to recoup losses incurred in 2020. The COVID-19 pandemic has also worsened an ongoing decline of FDI in all EMDEs. The crisis is presenting a new, The World Bank Group’s unprecedented source of investor risk that is depressing busi- Support for Countries during ness confidence to historic lows. Global FDI fell by 42 percent in 2020, from US$1.5 trillion in 2019 to an estimated US$859 the COVID-19 Crisis billion—the lowest level since the 1990s. The World Bank Group has mounted a broad and decisive response to the pandemic—the MIGA launched its COVID-19 Response Program, a US$6.5 bil- largest in our history. From April 2020 through the lion facility, in April 2020 to respond to these unprecedented end of fiscal 2021, Bank Group financing totaled challenges. It consists of three stages: (1) the first response, over US$157 billion. The scale of this response to address the immediate needs of the public and financial reflects the Bank Group’s strong financial position, sectors; (2) a recovery phase, to support the restoration of underpinned by the 2018 IBRD and IFC General economic activity in the real sectors and private enterprise Capital Increases and the IDA19 Replenishment. in the short and medium term; and (3) long-term resilience, It includes: to support investment across the public and private sectors. As of June 30, 2021, the agency has issued guarantees totaling US$45.6 billion in financing from IBRD for middle-income countries US$5.6 billion in support of 38 projects across Latin America, Sub-Saharan Africa, East Asia and the Pacific, and Europe and Central Asia. All of these projects have been highly impactful, US$53.3 billion helping host countries to bolster their medical response to the of IDA resources on grant and highly concessional COVID-19 crisis and helping governments and private sector terms for the poorest countries, with built-in debt clients to mitigate the economic impact of the crisis by pro- relief for countries at risk of debt distress viding working capital support to micro, small, and medium enterprises (MSMEs), corporates, and individuals. US$42.7 billion1 from IFC to private companies and financial In June 2021, MIGA’s Board unanimously approved the exten- institutions sion of the COVID-19 Response Program by two years—from June 30, 2021, to June 30, 2023—and its expansion from US$6.5 billion to an indicative amount of US$10–12 billion. This US$7.6 billion additional capacity allows the agency to expand the use of in guarantees from MIGA to support private sector guarantees to support relief, recovery, and ultimately resil- investors and lenders ience in developing countries. US$7.9 billion from recipient-executed trust funds. 1. Includes long-term commitments from IFC’s own account, short-term finance commitments, and core mobilization. 17 MIGA’s COVID-19 Response Program – Pillars 1 2 3 Procuring Urgent Countering Adverse COVID-19 Medical Economic Impacts during Complementing Supplies and Services the COVID‑19 Crisis IFC Trade Finance Supporting host governments in pur- Credit enhancement program Supporting trade finance to enhance chasing needed medical goods and Supporting governments at eligible the flow of goods and services through services (for example, COVID-19 testing sovereign, sub-sovereign, or state-owned global supply chains, including for crit- kits, hospital gowns, masks, ventilators, enterprise levels to provide short-term ically needed commodities, especially and medicines) funding and working capital support to in IDA-eligible countries and fragile and SMEs, corporates, and individuals during conflict-affected situations (FCS) the crisis Capital optimization Supporting financial institutions in extending lending in host countries by freeing up risk-weighted assets locked up in maintaining their mandatory reserves with central banks 18 Annual Report 2021 MIGA’s COVID-19 Response Program—Projects, FY21 Albania, Bosnia and The Bahamas Herzegovina, Georgia, Kosovo, Moldova, Bahamas Public Hospitals North Macedonia, Serbia, Authority (PHA) and Small Ukraine Business Development Center (SBDC) ProCredit MIGA is backing ProCredit’s investments in its subsidiaries in MIGA-supported investments will help modernize The Bahamas’ Albania, Bosnia and Herzegovina, Georgia, Kosovo, Moldova, public health system and support MSMEs at a crucial juncture for North Macedonia, Serbia, and Ukraine at a time of economic the country. The US$119 million in guarantees to Banco Santander stress and uncertainty due to the COVID-19 pandemic. Lend- AG will help the Bahamas Ministry of Finance upgrade two public ing supported by MIGA’s guarantees will be directed at SMEs, hospitals, procure medical equipment, and fund its project which are key drivers of growth and jobs in these countries. Of the management costs. In addition, the project will support loan freed-up capital, 100 percent will be allocated by the subsidiaries guarantees to MSMEs to preserve jobs, improve productivity, toward climate finance lending, a core competence of ProCredit. stimulate economic activity, and promote resilience. Albania, Belarus, Indonesia Bosnia and Herzegovina, Kosovo, Serbia PT Perusahaan Listrik Negara (PLN/Persero) Raiffeisen Bank International (RBI) MIGA has issued guarantees to RBI aimed at reducing the risk- A MIGA-covered loan facility will provide liquidity to fund PLN’s weighted assets at the consolidated group level and supporting working capital for tariff payments under the power purchase its lending operations in countries severely affected by the pan- agreements to procure electricity from seven renewable energy demic. MIGA’s engagement will support a greener recovery by subprojects. Support from MIGA will help to sustain these proj- helping the group to establish processes and a framework for ects during the crisis and protect them during the consequent climate finance lending. Of MIGA’s coverage, 10 percent will be financial stress. provided to RBI’s subsidiary in Kosovo (an IDA and FCS country), and 12 percent of the freed-up capital will be allocated to climate finance lending by the subsidiaries. 19 Panama Mexico Banco Nacional Bancomext de Panamá (BNP) MIGA issued guarantees covering loan facilities totaling US$510 MIGA-covered loan facilities to Bancomext support the gov- million from Goldman Sachs Group Inc. and other international ernment of Mexico’s COVID-19 response by providing working lenders to BNP. The MIGA-guaranteed loans will be used to capital loans to export-oriented businesses in the tourism, ser- finance a US$1 billion trust fund established by the Ministry of vices, automotive, and logistics sectors, among others. Such Economy and Finance and BNP to provide emergency liquidity liquidity is intended to provide much-needed support to reduce to the Panamanian economy and help the country mitigate the the impact of the crisis, helping to preserve employment, supply effects of the COVID-19 pandemic. chains, and potentially solvency. Peru Paraguay Banco Santander Banco Nacional Peru S.A. de Fomento (BNF) MIGA’s guarantees are reducing the regulatory risk-weighting In December 2020, MIGA issued guarantees of up to US$101 million applied to Santander Group’s mandatory reserves at the consoli- to Citibank NA and Commerzbank AG for their loans to Banco dated level, freeing up capital for its subsidiary in Peru. The entirety Nacional de Fomento (BNF) of Paraguay. The guarantees support of the benefits resulting from this increase are expected to target BNF’s efforts to stem the impacts of the COVID-19 pandemic projects related to climate finance activities and are intended to on Paraguay’s export-oriented sectors, which represent over support a green recovery following the devastating impacts of the 35 percent of the country’s gross domestic product (GDP). The COVID-19 crisis. Climate finance will include lending to businesses guarantees are also helping BNF secure its first USD funding from in the field of renewable energy, energy efficiency, and mass urban international financial markets and will strengthen its efforts to transport transactions. provide credit support to a wide range of sectors in Paraguay while delivering strong development impact. 20 Annual Report 2021 Highlighted Projects A Closer Look at MIGA Projects in FY21 Growing Off-grid solar is among the most promising technologies that can help increase access to electricity in rural areas the Off-Grid where grid-connected power is scarce. To stimulate the growth of the market, MIGA issued guarantees to cover investments in an innovative company, Bboxx, helping it Solar Market expand its operations in the Democratic Republic of Congo, Kenya, and Rwanda. Bboxx is a next-generation utility that in Central and designs, manufactures, distributes, and finances decentral- ized solar-powered systems across Africa. The project will East Africa increase access to affordable, reliable clean energy; spur local economic activity; reduce greenhouse gas emissions; and help create high-quality jobs. Bboxx is a next-generation utility that designs, manufactures, distributes, and finances decentralized solar-powered systems across Africa. 22 Annual Report 2021 Supporting the First Upgrading Round of Solar Public Hospitals Independent Power in The Bahamas Producers (IPPs) Hurricane Dorian in 2019, followed by the COVID-19 pandemic, in Burkina Faso exerted dual pressures on the public hospital facilities in The Bahamas, triggering chronic bed shortages, lengthening wait times for patients, and limiting access to appropriate With one of the lowest electrification rates in Sub-Saha- diagnostic tools. In response, MIGA issued guarantees for ran Africa (20 percent, compared with 48 percent for the US$118.56 million to Banco Santander S.A. of Spain for its region overall) and a high level of unmet demand, Burkina loans to the Ministry of Finance of the Commonwealth of Faso is striving to address its energy access challenges and The Bahamas. Proceeds from the MIGA-guaranteed loan enhance its energy security. The country currently has 357 will support (a) the Public Hospitals Authority’s moderniza- MW of installed capacity, mostly from aging and expensive tion of the public health system to respond to COVID-19 and heavy fuel oil (HFO) generation, and is using imports from build post-pandemic resilience; and (b) MSMEs hit hard by Côte d’Ivoire and Ghana to serve base demand. MIGA has the pandemic. stepped in to provide guarantees for a project comprising the construction, ownership, operation, and maintenance of a solar photovoltaic (PV) energy-generating facility that would add 30 MW of capacity. The project will be part of the country’s first round of solar IPPs and will support the coun- try’s transition to renewable energy while boosting private sector confidence to invest in Burkina Faso. 23 Increasing Lending Supporting for Small Businesses the Tourism and across Eastern Europe Hospitality Sector in Sub-Saharan Africa MIGA guarantees are providing capital relief to the ProCre- dit Group, a key SME-focused lending institution in Eastern Europe. The guarantees help the bank to increase its lending The tourism and hospitality sectors in Sub-Saharan Africa capacity at a time of economic stress and uncertainty due have faced significant disruption from the global COVID-19 to the COVID-19 pandemic into its subsidiaries in Albania, pandemic, leading to considerable unemployment, business Bosnia and Herzegovina, Georgia, Kosovo, Moldova, North closures, and the suppression of local economic growth. In Macedonia, Serbia, and Ukraine. This lending is directed at June 2021, MIGA signed a Master Contract of Guarantee with SMEs, which are key drivers of growth and jobs in the region. Kasada Hospitality Fund LP (Kasada) for its existing and future In addition, 100 percent of the freed-up capital is allocated equity, quasi-equity, and/or shareholder loans for brownfield by the subsidiaries toward climate finance lending, a core and greenfield hotel projects in up to 10 Sub-Saharan African competency of ProCredit. countries: Cameroon, Côte d’Ivoire, Ethiopia, Ghana, Kenya, Namibia, Nigeria, Rwanda, Senegal, and Uganda. The project is expected to create 13,000 to 27,000 direct jobs, with spillover into indirect and induced job creation in the tourism supply chain. As well, it will help direct capital to a sector that has been severely affected by the pandemic. 24 Annual Report 2021 Business and Operational Review Guarantee portfolio exposure 21.2 17.8 7.9 6.8 FY17 FY18 25 Against the backdrop of the COVID-19 pandemic and declining FDI, MIGA continued to mobilize private investment into developing economies and increased its gross outstanding guarantee portfolio from the prior fiscal year. In FY21, the agency issued US$5.2 billion in new guarantees in support of 40 projects. Twenty-five percent of the gross issuance was in IDA and/or FCS countries, and 26 percent was in projects that support climate finance. MIGA’s gross outstanding exposure stands at US$23 billion and net exposure at US$9.1 billion. 23.3 23.0 22.6 Gross guarantee portfolio exposure ($B) 9.2 9.1 8.3 Net guarantee portfolio exposure ($B) FY19 FY20 FY21 26 Annual Report 2021 Priority Areas Strategic Priority In its FY21-23 strategy, MIGA set out a goal to deepen its commitment Areas across two critical areas: Increasing its Increasing support for projects engagement in that address IDA/FCS countries climate change IDA and FCS Climate Change IDA (low-income) countries and fragile and conflict-affected MIGA is leveraging the use of its guarantees to mobilize situations (FCS) continue to be severely affected by the financing for projects that support climate mitigation and/ COVID-19 pandemic. In FCS, in particular, COVID-19 threatens or adaptation. In FY21, the agency issued US$1.35 billion of to reverse hard-won advancements in poverty reduction and guarantees supporting climate adaptation and mitigation development. Estimates show that an additional 20 million projects in 22 countries across four regions, representing 26 people in FCS were pushed into extreme poverty as a result percent of the total new business volume. Projects signed of COVID-19. By 2022, the GDP in FCS is predicted to be 8.6 in FY21 will help avoid an estimated 306,027 tons of carbon percent below prepandemic levels. dioxide equivalent (tCO2e) per year. Among the notable cli- mate projects this year are Bboxx and Escotel in Sub-Saharan Before and throughout the crisis, MIGA has continued to sup- Africa, which are helping expand distributed off-grid renew- port projects in IDA countries and FCS. In FY21, 50 percent of able energy. Combined, these projects will reduce emissions all projects were in IDA countries or FCS. Guarantees totaling by up to 2.1 million tCO2e over the next eight years. In addition, US$1.3 billion were issued to support projects in IDA-eligible MIGA is helping accelerate climate lending in Eastern Europe countries, and guarantees totaling US$187 million backed with ProCredit and Raiffeisen Bank International and in Peru investments in IDA countries affected by fragility, conflict, with Banco Santander. Freed-up capital from MIGA guaran- and violence, such as Cameroon, the Democratic Republic tees will help bank subsidiaries increase climate finance and of Congo, Kosovo, and Liberia. green lending to businesses and residential clients. MIGA leverages the IDA Private Sector Window (PSW) to further To increase its climate action, the World Bank Group expand operations into IDA-eligible countries, many of which announced a new Climate Change Action Plan (CCAP) to are FCS. In FY21, MIGA issued eight IDA PSW-supported guar- guide its interventions from 2021 through 2025. The CCAP pro- antees in Burkina Faso, the Democratic Republic of Congo, vides a bold strategic road map for tackling climate change Ethiopia, Liberia, Myanmar, Rwanda, and Sierra Leone for a and helping client countries to fully integrate their climate total of US$131 million, of which US$40 million was ceded to and development goals. MIGA’s products have helped IDA using a shared first-loss structure. cross-border investors protect their long-term investments in climate mitigation and adaptation activities across diverse markets and regions. As one of the few institutions that pro- vides long-maturity guarantees, MIGA will be instrumental in fostering the lock-in of transformational climate action. This fiscal year, 85 percent of MIGA The CCAP also sets forth MIGA’s goal to align its future portfo- lio with the Paris Agreement: 85 percent of Board-approved projects addressed one or more real sector operations will be aligned starting July 1, 2023, and strategic priority areas. 100 percent of these starting July 1, 2025, two fiscal years later. 28 Annual Report 2021 Innovation Regulatory Relief As part of its COVID-19 Response Program, MIGA continued Innovation makes it possible for MIGA to using its capital optimization product in FY21 to provide reg- do more with its limited range of products, ulatory relief to banks. Delivery of this product allowed banks to maintain lending during the challenging economic times broaden its development impact, and caused by the COVID-19 pandemic. MIGA has made signif- evolve alongside a dynamic investment icant progress during the year in linking the delivery of its capital optimization product to scale-up climate finance by market in developing economies. While our client financial institutions, and further expansion of this keeping a finger on the pulse of these approach is planned in the future. The agency is also looking into whether a similar product can be tailored for the needs markets, the agency has cultivated new of institutional investors and insurance companies. innovations that will help to deliver the best possible development outcomes for countries and help its clients further their investment potential. Application to New Technologies MIGA issued its first-ever support for minigrid (off-grid) solar solutions in Africa. (See discussion of the Bboxx proj- ect in the Highlighted Projects section.) The guarantees MIGA Trade Finance Guarantees will help Rwanda and the Democratic Republic of Congo achieve their power access goals with distributive technol- ogies, which offer an affordable and scalable solution for Global trade finance is an essential input that helps facilitate hard-to-reach populations. global trade—a key driver of economic growth, job creation, and poverty reduction. However, the COVID-19 pandemic has negatively exerted pressure on banks, primarily state-owned enterprise (SOE) banks, to support trade finance. This is of particular concern in developing countries and the Africa region, where SOEs play a critical role in the provision of import and export trade finance. To address this need, MIGA partnered this year with the IFC to provide trade finance support for SOE banks. MIGA will provide trade finance guarantee capacity to the IFC for coverage against the risk of nonpayment by an SOE bank on trade finance transaction guarantees issued by the IFC under its Global Trade Finance Program (GTFP). The MIGA Trade Finance Guarantees will cover the IFC against the non- payment risk of SOE banks in IDA-eligible countries, FCS, and other low-income EMDEs. The guarantees will help facilitate global trade as countries aim to recover from the COVID-19 pandemic. By targeting IDA, FCS, and other low-income countries, the new guarantees will support countries where trade has been negatively affected the most by the global economic shock. 29 Reinsurance The agency continued to use reinsurance capacity, ceding Since 1997, MIGA has successfully US$3.5 billion of new business during FY21 to the reinsurance leveraged reinsurance as a tool to use market in line with the strategy of preserving capital to fund future growth. As of June 30, 2021, US$13.6 billion (59 percent) its capital efficiently and manage the risk of the outstanding gross portfolio was reinsured. Over the profile of its portfolio. The primary benefits past five years, MIGA has increased the use of reinsurance in its guarantee portfolio, allowing the agency to support its of reinsurance accrue to MIGA’s clients— growth trajectory through increased guarantee capacity first, to the investors, who gain access without the need for additional capital from its shareholders. to increased capacity to insure eligible projects in developing countries; and second, to client countries that benefit from higher FDI. Portfolio Reinsurance ($B) and Rate (%) 20 70% 59% 60% 14.9 15 13.3 13.2 13.6 11.0 40% 10 30% 20% 5 10% 0 0% FY17 FY18 FY19 FY20 FY21 Outstanding reinsurance Portfolio reinsurance rate 30 Annual Report 2021 Leveraging MIGA’s Partnerships for Greater Development Impact Expanding collaboration that encourages productive use of political risk insurance is essential for unlocking material private capital, which in turn contributes to achieving the Sustainable Development Goals, boosting shared prosperity, and ending extreme poverty. To this end, MIGA works to enhance coordination with international finance institutions (IFIs), industry partners, and across the World Bank Group. Partnerships with International Industry Finance Institutions Partnerships MIGA works with IFIs and multilateral development banks Partnering with others in insurance and development finance (MDBs) to leverage political risk insurance and mobilize is essential to deliver results on the ground. MIGA serves as private capital for development. In 2018, the G20 Eminent cochair of the Insurance Development Forum (IDF), a pub- Persons Group on Global Financial Governance recom- lic-private partnership that brings together private and mended that MIGA apply its position as a global risk insurer public insurance companies to optimize the use of insurance in development finance to work with other IFIs. Since then, to build greater resilience. The agency is also a member the agency has taken key steps with other MDBs and IFIs to of the Berne Union of global export credit and investment help realize these recommendations. insurance providers. The Berne Union actively facilitates cross-border trade by supporting international acceptance On December 8, MIGA hosted a global, virtual event titled of sound principles in export credits and foreign investments. "Working Together to Unlock Foreign Direct Investment (FDI)" to mark the launch of its new handbook "Expanding Politi- In addition, this year MIGA and Nippon Export and Invest- cal Risk Insurance: A Partnership Approach to Grow Private ment Insurance (NEXI), the official export credit agency of Investment." The event featured senior representatives from Japan, signed a Cooperative Agreement to strengthen MDBs, who discussed best practices and the cooperation collaboration in support of FDI from Japanese investors in needed to grow private sector investment in developing developing countries by providing coinsurance and rein- countries. surance. The partnership builds from a 2018 memorandum of understanding (MOU) and leverages the expertise of each organization to collaborate throughout the various stages of project development, including marketing, due diligence, and underwriting for coinsurance and reinsurance opportunities. 31 Expanding Political Risk Insurance: A Partnership Approach to Grow Private Investment offers guiding principles for systematic and effective partnerships among members of the development community. The handbook showcases project typologies that reflect successful MDB collaboration and that are replicable and scalable. Knowledge Partnerships MIGA and the International Law Institute (ILI), a capaci- Partnerships with external organizations serve an essen- ty-building and technical assistance institute, signed an MOU tial role in furthering MIGA’s Gender Strategy (discussed to train stakeholders from developing countries on political in Gender Initiatives) and expanding the knowledge base risk insurance products; optimal structures for public-private on gender-related issues. In June 2021, MIGA also became partnerships requiring MIGA products; and other issues that a founding member of the 2XCollaborative initiative. The arise in the context of political risk insurance, cross-border 2XCollaborative is a global industry body designed to serve transactions, dispute resolution, and governance. A key com- capital providers in making gender-focused investments. Its ponent focuses on jointly developing and conducting a legal, mission is to convene and equip investors with resources to economic, and policy capacity-building curriculum and increase the volume and impact of capital directed toward certificate program related to political risk insurance (PRI). women’s economic empowerment. Similarly, MIGA con- The collaborative effort will increase the institutional capacity firmed its participation in the 2X Challenge, as an observer. of government officials, legal practitioners, private sector The 2X Challenge is a joint commitment to invest into 2X officers, and members of multilateral and other international eligible businesses under a joint time-bound volume target. development organizations. 32 Annual Report 2021 Environmental, Social, and Governance (ESG) at MIGA Investor interest in ESG has grown exponentially in recent years. Currently, assets under management globally that abide by ESG principles exceed an estimated US$1 trillion. MIGA backs investments in projects that deliver positive environmental and social returns by helping clients better understand ESG-related impacts and returns and ensuring that ESG considerations are part and parcel of the agency’s project portfolio. ESG integration at MIGA: MIGA helps investors raise the bar on ESG objectives: • Prescreening all projects for social and environmental impact • Ensuring that investments meet vigorous and • Gathering development effectiveness indicators internationally recognized standards (see MIGA's E&S from clients Performance Standards on p. 37) • Applying MIGA's Impact Performance Assessment • Working with clients to continually monitor and report on and Comparison Tool (IMPACT) framework to assess E&S impacts a project's expected development impact • Allowing clients to enter markets they otherwise would • Ensuring that projects meet the MIGA Performance not have been able to reach, which can bring high Standards on Environmental and Social development returns. (E&S) Sustainability • Verifying ESG impact through ex post evaluations • Assessing climate risk. 33 Measuring and Evaluating Development Impact Assessing impact is critical to understanding the reach and Development Effectiveness results of the projects we support. From project origination to project close and after, MIGA implements several frame- Indicator System works and tools that measure, track, monitor, and evaluate ESG performance. MIGA's Development Effectiveness Indicator System (DEIS) helps measure and track the development impact of Despite COVID-19 restrictions, MIGA was able to perform proj- projects that the agency insures. Through this system, MIGA ect assessments, monitoring work and evaluations. This year measures a common set of indicators across all projects: the agency conducted 37 virtual site visits for environmental investment-supported, direct employment, locally procured and social monitoring. In addition, MIGA performed 9 project goods, and taxes and fees paid to host governments, evaluations. among others. It also measures sector-specific indicators and puts into place a process to measure projects' actual development outcomes three years from the time of IMPACT Framework contract signing. The Impact Performance Assessment and Comparison Tool (IMPACT) assesses expected project-specific outcomes as Evaluation well as beyond-the-project effects on foreign investment. The framework complements the agency’s broader results measurement system. IMPACT has the following objectives: Since FY12, all projects have been evaluated by MIGA and • Perform ex ante assessments of development impact for individual projects the World Bank Group's Independent Evaluation Group (IEG), • Enable comparative analysis an independent evaluation body. The evaluations assess • Inform project prioritization based on assessment of the achievement of the development outcomes of proj- expected development impact ects supported by MIGA through Project Evaluation Reports • Align with the IFC’s Anticipated Impact Measurement and (PERs). MIGA conducts self-evaluations that are then vali- Monitoring (AIMM) framework and coordinate dated by the IEG. Project evaluations are useful for not just development impact ratings for IFC-MIGA joint projects assessing the results but also for generating lessons for fu- • Follow an agile approach to integrate IMPACT efficiently ture projects. MIGA actively uses evaluation findings in staff with MIGA’s existing guarantee processes. learning events. 34 Annual Report 2021 Integrity MIGA Climate-Related Financial Disclosure Integrity and reputational risk management are key to MIGA’s role as a development partner. MIGA considers integrity and reputational risk in its clients and projects, subscribing to the World Bank Group’s Anti-Corruption Guidelines, which identify fraud, corruption, collusion, coercion, and obstruction as major impediments to development and are considered In this Annual Report, MIGA is issuing its first disclosure sanctionable practices. under the guidelines recommended by the Task Force on Climate-related Financial Disclosures (TCFD). It comes at MIGA’s integrity team conducts due diligence as part of busi- the end of the landmark WBG Climate Change Action Plan ness development and underwriting and monitors projects in 2016-2020, and the adoption in June 2021 of the second WBG the portfolio for potential emerging integrity or reputational Climate Change Action Plan 2021-2025, which is shaping the risk flags. In this work, MIGA uses on-site evaluations, market WBG’s climate action agenda for the next five years. For the soundings, experience with the client, World Bank and IFC full disclosure, see Annex 1. local knowledge, and desktop resources, including propri- etary databases. In FY21, MIGA continued to share integrity best practices through collaboration with other World Bank Group members and development partners, and at various integrity-focused forums. 35 MIGA Performance Standards MIGA Performance Standards on Environmental and Social (E&S) Sustainability Performance Standard 1: Performance Standard 5: Assessment and management of Land acquisition and i  nvoluntary resettlement environmental and social risks and impacts Applies to physical or economic displacement Underscores the importance of identifying E&S risks and resulting from land transactions such as expropriation impacts and of managing E&S performance throughout or neglected settlements the life of a project Performance Standard 2: Performance Standard 6:  orking conditions Labor and w Biodiversity conservation and sustainable Recognizes that the pursuit of economic growth through management of living natural resources employment creation and income generation should be Promotes the protection of biodiversity and the balanced with protection of basic rights for workers sustainable management and use of natural resources Performance Standard 3: Performance Standard 7: Resource efficiency and  pollution prevention Indigenous peoples Recognizes that increased industrial activity and Aims to ensure that the development process fosters urbanization often generate higher levels of air, water, and full respect for indigenous people land pollution and that there are efficiency opportunities Performance Standard 4: Performance Standard 8: Community health, s  afety, and security Cultural heritage Recognizes that projects can bring benefits to Aims to protect cultural heritage from adverse impacts communities but can also increase potential exposure to of project activities and support its preservation risks and impacts from incidents, structural failures, and hazardous materials Benefits of the Performance Standards Create value for business Social license to operate Sustainability has become an important factor in The Performance Standards help clients maximize local business strategies. Many companies recognize that development benefits and encourage the practice of by addressing E&S issues they can save on costs, good corporate citizenship. Enhanced brand value and improve their brands and reputation, and strengthen reputation may also be attractive to new investors or stakeholder relations. financiers. Realize opportunities and guard against Gain an international stamp of approval unforeseen risks The “Equator Principles,” which have been adopted Implementing the Performance Standards helps by over 75 of the world’s leading financial institutions companies identify and guard against interruptions in developed and developing countries, are based in project execution, brand protection, and/or access on the Performance Standards. These principles are to international markets. estimated to cover over 70 percent of project finance debt in emerging markets. Improve financial and operational performance Implementation of the Performance Standards can help optimize inputs such as water and energy, as well as minimize emissions, effluents, and waste, leading to a more efficient and cost-effective operation 36 Annual Report 2021 Gender Initiatives MIGA Gender Leadership The COVID-19 pandemic has widened Award existing gender gaps. Globally, female- Each year, MIGA hosts owned businesses were almost 6 percent the Gender Leadership Award (formerly the more likely to close than male-owned Gender CEO Award) to recognize a leader who has a proven track businesses2, and 31 percent of female record of furthering women’s advancement business owners spent six or more hours and gender equality while contributing to the World Bank Group’s twin goals of reducing on domestic tasks (compared with 26 poverty and boosting shared prosperity. percent of male owners)3. A World Bank In March 2021, Audra Low, Chief Executive Officer Group survey conducted in January 2021, and Executive Director at Clifford Capital, was presented as the awardee. Low has shown her across 13 countries in Latin America and commitment to furthering gender equality in the Caribbean, found that female workers the workplace, particularly in frontline roles where women's representation has historically were 44 percent more likely than male been lacking. Low's efforts set an example for women in the finance sector, who have been workers to lose their jobs at the onset of significantly underrepresented in executive the COVID-19 crisis4. positions—representing less than 2 percent of bank CEOs and holding less than 20 percent of board seats of banks worldwide. This fiscal year, MIGA formally adopted a Gender Strategy accordance with MIGA’s Policy on Environmental and Social Implementation Plan FY21–23 (GSIP). MIGA's GSIP estab- Sustainability. Gender issues are reviewed during project lishes processes that enable MIGA and its staff to contribute consultations and, when necessary, clients are asked to meaningfully to gender equality at the minimize gender-related risks from business corporate, client, and partnership level. activities and unintended gender-differen- The GSIP leverages MIGA's unique role in As MIGA shifts tiated impacts and/or to develop mitigation development finance as a provider of PRI its focus to measures. This year, MIGA continued to and credit enhancement. It aims to build strengthen its gender-related due dili- an approach to client engagement that is supporting a gence through enhanced training and due aligned with MIGA's role as an insurance globally inclusive diligence on gender-based violence (GBV), provider rather than as a direct financier. and resilient sexual harassment, and sexual exploitation MIGA's gender strategy is aligned with and abuse. the World Bank Group's Gender Strategy recovery, putting (2016-23), which emphasizes that achieving women at the At a corporate level, MIGA works on increas- greater gender equality is key to reducing forefront of the ing gender parity and equality as part of poverty and increasing prosperity. its diversity and inclusion efforts. Staff are recovery remains invited to participate in various trainings, Gender-informed decision making is a critical. workshops, and lectures that are offered cross-cutting practice at MIGA. The agency throughout the year to elevate current dis- screens each proposed project for gender- cussions on gender within MIGA and the related impacts (positive or negative) in World Bank Group. 37 2. Goldstein, M., P. Gonzalez Martinez, S. Papineni, and J. Wimpey. 4. LACGIL (Gender Innovation Lab for Latin America and the 2020. “The Global State of Small Business during COVID-19: Gender Caribbean). 2021. “The Gendered Impacts of COVID-19 on Labor Inequalities.” Let’s Talk Development (World Bank blog), September 8. Markets in Latin America and the Caribbean.” Policy brief, LACGIL, 3. Facebook, OECD (Organisation for Economic Co-operation and World Bank, Washington, DC. Development), and World Bank. 2020. “Global State of Small Business Report: Reflections on Six Waves of Data Collection.” Wave VI Update on The Future of Business Survey. 38 Annual Report 2021 Governance MIGA’s Board A Council of Governors and a Board of Directors, representing 182 member countries, guide MIGA’s programs and activities. Each country appoints one governor and one alternate. MIGA’s corporate powers are vested in the Council of Governors, which delegates most of its powers to a Board of 25 Directors. Voting power is weighted according to the share of capital that each Director represents. MIGA's Board resides in the World Bank Group headquarters in Washington, DC, and meets regularly to review and decide on investment guarantee projects and oversee gen- eral management policies. Visit the Board’s website for more information: http://www.worldbank.org/en/about/leadership/governors Oversight and Accountability Compliance Advisor Ombudsman Integrity Vice Presidency (INT) The Office of the Compliance Advisor Ombudsman (CAO) is The Integrity Vice Presidency (INT) is an independent unit within the independent accountability mechanism for MIGA and the the World Bank Group that investigates and pursues sanctions IFC. The CAO responds to complaints from people affected by related to allegations of fraud, corruption, collusion, coercion, MIGA and IFC-supported business activities, with the goals of and obstruction in WBG-financed projects, as well as fraud and enhancing environmental and social outcomes on the ground corruption by WBG staff and vendors. In addition, through its and fostering greater public accountability of both institutions. Integrity Compliance Office, INT engages with parties toward Visit the CAO website for more information: meeting their conditions for release from sanction. INT shares http://www.cao-ombudsman.org/ its investigative insights across the institution to help mitigate fraud and corruption risk in projects, playing a fundamental role in supporting the WBG’s fiduciary responsibility for the develop- Group Internal Audit ment resources it manages. Visit the INT website for more information: Group Internal Audit (GIA) provides independent, objective, www.worldbank.org/integrity insightful risk-based assurance and advice to protect and enhance the value of the World Bank Group. GIA gives man- To report suspected fraud, corruption, or other sanctionable agement and the Board reasonable assurance that processes practices in WBG-financed projects, visit www.worldbank.org/ for managing and controlling risks—as well as their overall gov- fraudandcorruption ernance—are adequately designed and functioning effectively. GIA reports to the President and is under the oversight of the Audit Committee. Visit the GIA website for more information: http://www.worldbank.org/internalaudit Independent Evaluation Group The Independent Evaluation Group (IEG) assesses MIGA’s strategies, policies, and projects to improve the agency’s devel- opment results. The IEG is independent of MIGA management and reports its findings to MIGA’s Board of Directors and the Board's Committee on Development Effectiveness. Visit the IEG website for more information: http://ieg.worldbankgroup.org/ 39 MIGA Financial Highlights Financial Results By fiscal year, millions of dollars 2017 2018 2019 2020 2021 Gross premium income 179.7 210.1 237.9 232.3 239.3 Net premium incomea 93.2 104.1 115.1 117.1 121.3 Administrative expensesb 51.3 51.6 57.8 61.1 58.7 Operating incomec 41.9 52.5 57.3 56.0 62.6 Net income 200.2 40.9 82.4 57.2 81.5 Administrative expenses to net premium income ratio 55% 50% 50% 52% 48% a. Net premium income equals gross premium income and ceding commissions less premium ceded to reinsurers and brokerage costs. b. Administrative expenses include expenses from pension and other post-retirement benefit plans. c. Operating income equals net premium income minus administrative expenses, including pension costs. Capital Measures By fiscal year, millions of dollars 2017 2018 2019 2020 2021 Total economic capitala 592 685 717 756 768 Shareholders' equity 1,213 1,261 1,320 1,335 1,474 Operating capitalb 1,398 1,471 1,542 1,591 1,724 Total economic capital/operating capital (%) 42% 47% 47% 48% 45% a. Amount of capital utilized in support of the guarantee portfolio as well as the investment portfolio and operational risk. b. Comprised of paid-in capital, retained earnings/accumulated other comprehensive loss and Insurance portfolio reserve, net. 40 Annual Report 2021 Noteworthy in FY21 December 2020 Working Together to Unlock FDI – Global Virtual Event On December 8, MIGA hosted a virtual event, “Working Together to Unlock FDI,” to launch a handbook for strengthening collab- oration among MDBs and unlocking FDI in emerging markets. Speakers and panelists included Mari Pangestu, Managing March 2021 Director, Development Policy and Partnerships, World Bank; Tharman Shanmugaratnam, Senior Minister, Singapore, and Chair of the G20 Eminent Persons Group on Global Financial Governance (2017-18); Hiroshi Matano, Executive Vice President, 6th Annual MIGA Gender MIGA; Ethiopis Tafara, Vice President and Chief Risk, Legal and Leadership Award: Women Administrative Officer, MIGA; Solomon Quaynor, Vice President for Private Sector, Infrastructure and Industrialization, African Financing a Resilient Asia Development Bank; Nandita Parshad, Managing Director, Sus- MIGA hosted its 6th Annual Gender Leadership Award, titled tainable Infrastructure Group, European Bank for Reconstruction “Women Financing a Resilient Asia,” on March 7 to coincide with and Development; Fabio Fagundes, Chief of Financial Products International Women's Day. The award was presented to Audra and Services Division, IDB Invest; and S. Vijay Iyer, Vice President Low, Chief Executive Officer and Executive Director of Clifford and Chief Operating Officer, MIGA (Master of Ceremonies). Capital. Speakers included David R. Malpass, President, World Bank Group; Sri Mulyani Indrawati, Minister of Finance, Indone- https://live.worldbank.org/unlock-FDI sia; Hiroshi Matano, Executive Vice President, MIGA; Audra Low, Chief Executive Officer and Executive Director, Clifford Capital; Ekhosuehi Iyahen, Secretary General, Insurance Development Forum; and Caren Grown, Global Director, Gender, World Bank Group. May 2021 https://live.worldbank.org/6th-annual-miga-gender-leader- ship-award-women-financing-resilient-asia MIGA Trade Finance Guarantees In May, the Board of Directors approved a new product, the Trade Finance Guarantee (TFG), in support of trade finance transac- tions. TFGs will provide trade finance guarantee capacity to the IFC for coverage against the risk of nonpayment by SOE banks under the IFC's Global Trade Finance Program. The guarantees June 2021 target selected IDA-eligible countries, FCS, and low-income EMDEs where SOE banks play a significant, and prospectively increasing, financing role throughout the COVID-19 pandemic. Compliance Advisor Ombudsman Policy The MIGA Board of Directors approved the Independent Accountability Mechanism Policy for the Compliance Advi- sor Ombudsman (CAO). The new policy works to improve the complaints process for IFC and MIGA projects, responding to recommendations from an independent external review. The aim is to increase the focus on outcomes for communities and IFC/MIGA clients. https://www.worldbank.org/en/news/press-release/2021/07/01/ new-cao-policy-enhances-ifc-and-miga-environmen- tal-and-social-accountability 41 Who We Are 1 2 3 4 5 6 7 8 1. Hiroshi Matano | Executive Vice President 5. Muhamet Fall | Director Infrastructure, Manufacturing, 2. S. Vijay Iyer | Vice President and Chief Operating Officer Agriculture, Services (MAS) and Trade Operations 3. Ethiopis Tafara | Vice President and Chief Risk, 6. Aradhana Kumar-Capoor | Director and General Counsel Legal and Administrative Officer 7. Merli Margaret Baroudi | Director, Economics 4. Sarvesh Suri | Director - Climate, Energy, Extractives, and Sustainability Capital and Financial Markets Operations 8. Santiago Assalini | Director, Finance and Risk 42 Annual Report 2021 Contact Information Senior Management Chris Millward Accounting and Reporting Hiroshi Matano Global Head and Sector Manager, Thomas Obuya Executive Vice President Finance and Capital Markets Controller hmatano@worldbank.org cmillward@worldbank.org tobuya@worldbank.org S. Vijay Iyer Marcus Williams Reinsurance Vice President and Chief Global Head and Sector Manager, Frank Linden Operating Officer Energy and Extractive Industries Head, Reinsurance sviyer@worldbank.org mwilliams5@worldbank.org flinden@worldbank.org Ethiopis Tafara Regional Economics and Sustainability Vice President and Chief Risk, Nkemjika Onwuamaegbu Moritz Nebe Legal and Administrative Officer Regional Head, Africa (Acting) Sector Manager, Economics etafara@worldbank.org nonwuamaegbu@worldbank.org mnebe@worldbank.org Sarvesh Suri Olga Sclovscaia Yasser Ibrahim Director - Climate, Energy, Regional Head, Europe Sector Manager, Sustainability Extractives, Capital and Financial and Central Asia (Environment & Social) and Climate Markets Operations osclovscaia@worldbank.org yibrahim@worldbank.org ssuri1@worldbank.org Jae Hyung Kwon Judith Pearce Muhamet Fall Head of South and North Asia Global Head, Integrity Director Infrastructure, (excl. Japan) jpearce@worldbank.org Manufacturing, Agriculture, jkwon@worldbank.org Hiroyuki Hatashima Services (MAS) and Trade Operations Tim Histed Chief Evaluation Officer mfall3@worldbank.org Head – South East Asia hhatashima@worldbank.org Aradhana Kumar-Capoor and Australasia Portfolio Management Director and General Counsel thisted@worldbank.org Hoda Moustafa akumarcapoor@worldbank.org Olga Calabozo Garrido Global Head of Portfolio Santiago Assalini Head, Latin America hmoustafa@worldbank.org Director, Finance and Risk and the Caribbean Business Inquiries sassalini@worldbank.org ocalabozogarrido@worldbank.org migainquiry@worldbank.org Merli Margaret Baroudi Shuichi Hayashida Director, Economics and Sustainability Head of Japan and Vice Head mbaroudi@worldbank.org of Southeast Asia shayashida@worldbank.org Sectors Nabil Fawaz Rouzbeh Ashayeri Global Head and Sector Manager, Senior Underwriter, North America Manufacturing, Agribusiness, Business Origination and Services rashayeri@worldbank.org nfawaz@worldbank.org Layali Abdeen Elena Palei Senior Underwriter, Middle East Global Head and Sector Manager, and North Africa Infrastructure – Transport, Water labdeen@worldbank.org and Sanitation, and Telecom Lin Cheng epalei@worldbank.org Underwriter, China lcheng1@worldbank.org 43 Annex 44 44 Annual Report 2021 Report Under the Task Force on Climate-Related Financial Disclosures This report is MIGA’s first disclosure under As part of MIGA’s efforts under the Action Plan, MIGA is adopt- ing the disclosure recommendations of the TCFD to more the guidelines recommended by the Task effectively communicate its climate strategy, internal pro- Force on Climate-related Financial Dis- cedures for climate change management, and potential climate-related risks and opportunities. This report should closures (TCFD). It comes at the end of the be viewed as an initial disclosure, noting that MIGA’s climate landmark World Bank Group (WBG) Cli- change management structures, policies, and procedures are currently evolving and undergoing enhancements to mate Change Action Plan 2016–2020 and meet the ambition of the new Climate Change Action Plan. follows the adoption in June 2021 of the The report reflects MIGA’s continued commitment to main- tain and strengthen our climate-related disclosures across WBG Climate Change Action Plan 2021– all aspects of our mission and to continue this journey in 2025, which is shaping the WBG’s climate future TCFD-related disclosures. action agenda for the next five years. The TCFD’s recommendations on climate-related financial disclosure are structured around four core elements (see figure 1), and this report takes these core elements as its organizing principles. Figure 1. Core Elements of TCFD Disclosure Recommendations Governance Metrics and Strategy Targets Risk Management 45 A. Governance environmental and social risks and the impacts of climate change to foster sustainable practices in all MIGA operations. The unit includes a team of climate change specialists who All aspects of MIGA’s climate business and internal climate are responsible for evaluating all new business for climate change management procedures are overseen by MIGA’s mitigation and adaptation finance opportunities; conducting Executive Vice President (EVP), who reports to the President climate risk analysis and greenhouse gas (GHG) accounting; of the World Bank Group (WBG). The WBG President sets and providing inputs for carbon pricing analysis, environ- the overall ambition on climate action for the WBG and is mental and social project due diligence, development selected by the IBRD, IDA, IFC, and MIGA Boards of Directors. impact assessments, and climate-related commitments in MIGA’s Board of Directors, comprising 25 representatives legal contracts. The team of climate change specialists also from MIGA’s member countries, are responsible for approving actively monitors the existing portfolio of projects against cli- all of MIGA’s climate business operations, policies, and overall mate requirements and commitments made at the approval governance structures. Notably, over the past year, the MIGA stage. In addition, MIGA participates in several joint working Board of Directors endorsed a new climate finance target groups with other multilateral development banks (MDBs) and a Paris Agreement alignment target, which will drive on opportunities for harmonizing approaches related to MDB MIGA’s climate business and climate change management climate activities. procedures over the next five years. MIGA reports its prog- ress on climate activities to the MIGA Board of Directors as The Vice President & Chief Operating Officer oversees all part of the triannual EVP Board Reports. Separately, the WBG guarantee operations at MIGA. Two operations departments reports progress on the Action Plan annually to the Board of are under his leadership: (a) Infrastructure, Manufacturing, Executive Directors. The WBG corporate scorecard will also Agribusiness, Services (MAS) and Trade Finance; and (b) report annually on key high-level climate indicators such Climate, Energy, and Finance. The latter formulates MIGA’s as climate finance. (For further details, see the “Metrics and strategy and implementation plans at the agency, sectoral, Targets” section below.) and regional levels to grow MIGA’s climate finance origination and business and to foster MIGA’s climate objectives. Both operations departments work to drive and innovate MIGA’s Vice Presidential and products and product applications, achieve business tar- gets (including climate finance targets), and grow MIGA’s Departmental Leadership guarantee business in climate activities. Under the responsibility of MIGA’s EVP are two Vice Presi- dents: The Vice President & Chief Operating Officer oversees the Operations departments, which are mandated to seek opportunities to grow MIGA’s climate business. The Vice Pres- ident & Chief Risk, Legal and Administration Officer oversees three MIGA departments: (a) Finance and Risk Management, (b) Economics and Sustainability, and (c) Legal Affairs and Claims. The Economics and Sustainability department is mandated to provide climate analytics and technical exper- tise to MIGA’s climate business; contribute to WBG climate analytics and strategy; support the development of MIGA’s climate business; and evaluate, monitor, and report on MIGA’s climate activities. MIGA’s Vice Presidents also participate in various WBG formal and informal groups that review major WBG initiatives, strategies, policies, and targets—including those pertaining to climate—before submission to the Board of Directors. The Director of Economics and Sustainability (under the supervision of the Vice President & Chief Risk, Legal and Administration Officer) oversees the Sustainability and Climate Unit, which works with MIGA’s operations manage- ment and staff, as well as clients and businesses, to address 46 Annual Report 2021 Strategy, Policy, and Project B. Strategy Review Process Increasing MIGA Support to Cross-Border MIGA’s strategies, policies, and projects are reviewed by the MIGA Management Team (MMT), which includes MIGA’s Climate Finance Investments Directors, Vice Presidents, and Executive Vice President. The MMT reviews all guarantee projects to be supported by MIGA MIGA’s political risk insurance and credit enhancement in two stages: products have helped cross-border investors to protect their long-term investments in climate mitigation and cli- 1. Before the Early Screening Committee, chaired by MIGA’s EVP, mate adaptation activities across diverse markets and the MIGA project team presents the project rationale and regions. As one of the few multilateral institutions that pro- determination of the potential for alignment with MIGA’s vides long-maturity guarantees, MIGA is instrumental in mandate and policies and provides guidance to the project fostering the lock-in of transformational climate action. team for due diligence. Climate finance opportunities are In FY21, MIGA issued about US$1.35 billion of guarantees flagged at this stage, as are whether the project advances, supporting climate change mitigation or adaptation in hinders, or is neutral to the attainment of the principles 22 countries across four regions, representing 26 per- and goals of the Paris Agreement (“Paris Aligned”) as cent of its guarantee issuance, up from only 7 percent five well as any climate resilience concerns or opportunities. years ago. 2. Before the Project Review Committee, in a decision meet- ing chaired by MIGA’s EVP, the project team presents the full evaluation of the project, including climate finance vol- Implementing the Climate umes; climate risks to project performance; any avoided Change Action Plan GHG emissions or climate mitigation benefits of the proj- ect; whether the project is Paris Aligned and the project’s consistency with MIGA’s Sustainability Policy and MIGA’s The WBG Climate Change Action Plan (CCAP) 2021–2025 aims Environmental and Social Performance Standards, and its to advance the climate change aspects of the WBG’s Green, development impact, among many other aspects of the Resilient, and Inclusive Development (GRID) approach, which project. If a project is approved at this stage, the project views poverty eradication and shared prosperity through will then proceed for approval to MIGA’s Board of Directors, a sustainability lens. The Action Plan reflects WBG support further to the delegated authority from the WBG President to public and private sector clients to maximize the impact to MIGA’s EVP. of climate finance, aiming for measurable improvements in adaptation and resilience and measurable reductions MIGA’s report to the Board includes climate information in GHG emissions. It also considers the vital importance of pertaining to the project, such as whether it has a climate natural capital, biodiversity, and ecosystems services. The finance component. All individual projects supported by CCAP 2021–2025 represents a shift toward accelerating the MIGA are either approved by the Board of Directors directly ramping up of climate finance while pursuing broader devel- or under specific authority delegated by the Board to MIGA’s opment objectives through the GRID approach. management. MIGA’s Board of Directors can seek clarifica- tion from MIGA, including potential climate risks to projects, Climate change is a priority area in MIGA’s strategy along opportunities to maximize climate finance by enhancing the with support for low-income (IDA-eligible) countries and climate mitigation or climate adaptation benefits yielded, countries facing fragility, conflict, and violence (FCV). MIGA’s and the project’s alignment with the Paris Agreement. climate strategy reflects the ambition of the commitments made in both the WBG CCAP 2021–2025 and MIGA’s Strategy and Business Outlook (2021–2023) to deepen its impact as countries recover from the COVID-19 pandemic. MIGA’s commitments under the new WBG CCAP 2021–2025 include: I ncreasing the share of MIGA guarantees toward cli- •  mate mitigation and adaptation to an average of 35 percent of MIGA’s overall business over 2021–25 47 • Working with the World Bank and IFC to produce the WBG’s To those ends, MIGA will continue to search for new market own dedicated country climate and development diagnos- opportunities in the following areas: tic, the Country Climate and Development Report (CCDR), which will help countries align their climate action and Cities: MIGA will aim to scale up its green building busi- •  development agendas while analyzing key mechanisms ness, both through de-risking of asset owners directly and by which climate change is affecting the country and key through financial intermediaries by increasing the use of features of the economy that are affecting climate green mortgages and green construction finance. MIGA will support our clients to adopt circular economy approaches •  Mobilizing more private capital toward climate action to advance climate, development, and broader sustain- through innovative applications of MIGA’s political risk ability goals. insurance and credit enhancement products in high-cli- mate-impact sectors Transportation: MIGA will support investments in energy- •  efficient equipment and infrastructure, particularly in rail, •  Aligning MIGA’s financial flows with the low-carbon and ports, and airports. climate-resilient objectives of the Paris Agreement by (a) ensuring that 85 percent of Board-approved real sector •  Manufacturing: MIGA will help the manufacturing sector operations are aligned with the goals of the Paris Agreement to accelerate a path toward decarbonization via resource starting in July 2023 and 100 percent starting in July 2025 efficiency and low-carbon solutions. By providing de-risk- (which will require beginning to align 100 percent of MIGA’s ing products, MIGA will support clients to implement proven projects at the concept stage well ahead of July 1, 2023); and abatement measures and innovative technologies. MIGA (b) applying a methodology for financial institutions and will apply three principles to investments across heavy funds, once finalized, to this business line in a similar manner. manufacturing industries: (a) not supporting new coal-fired power projects or wet process in cement; (b) differenti- Helping to drive private sector investments into resilience •  ating the sustainability and climate “bar” for supported and climate adaptation by integrating climate into its investments based on the development stage of client country risk assessment work and screening all proposed countries while also promoting progressive transitional MIGA guarantees for physical climate risks by the end of sustainability improvements where absolute sustainability FY23. is not yet achievable; and (c) assessing the sustainability and climate-related drivers in projects, such as energy MIGA continues to focus on five key strategic areas for its sources and alternatives, materials used and alternatives, climate business: clean energy, climate-smart agribusiness, products produced and alternatives, and process tech- green buildings, public transportation, and green finance. nology, striving for best-in-class production processes. This focus will entail assessing opportunities to enhance low-carbon and climate-resilient development pathways • Nature-based solutions: MIGA will scale up private sector by evaluating both physical and transition climate-related investments that integrate climate risk management mea- risks in these sectors to limit climate change impacts at the sures and support resilience and adaptation. Therefore, country level, which will be critical to achieving the WBG’s twin nature-based solutions are key to developing sustain- goals of reducing poverty and boosting shared prosperity. able business models that consider biologically diverse ecosystems and protect biodiversity. In support of these efforts, MIGA is integrating ecosystem services valuation into its climate risk screening framework. The approach will allow MIGA to demonstrate to its clients the costs and benefits (avoided losses) yielded from the protection of natural capital. • Climate-smart agriculture: MIGA will increase its support for sustainable agribusiness transactions by supporting investors in de-risking private financial flows and climate finance to agribusiness operations and interconnected value chains. Moreover, MIGA will emphasize the adoption of climate-smart techniques that increase resilience to climate-related shocks, raise awareness about identifying and managing climate risks, and propose GHG emis- sions accounting methodologies tailored to our clients. 48 Annual Report 2021 • Energy : MIGA will seek to scale up its renewables portfolio Project Highlight: by maximizing private sector participation in utility-scale Climate and Rural solar, wind, hydropower, and geothermal opportunities. MIGA will continue to strive to develop innovative ways for Roads in Kenya its guarantees to support micro- and off-grid solutions that can accelerate electrification to underserved communities, Kenya’s transportation sector is relatively underde- specifically in IDA-eligible countries and in those affected veloped in some regions, thereby limiting economic by FCV. development and contributing to regional dis- parities. In FY21, MIGA provided US$211.6 million in A just transition away from coal is crucial to achieving the guarantees to cover equity and loans for the design, goals of the Paris Agreement. MIGA, in collaboration with the construction, rehabilitation, and maintenance of World Bank and IFC, will work with our clients to support the over 80 kilometers of rural and peri-urban roads in phaseout of coal, including through innovative financing or 10 counties in central and western Kenya. de-risking instruments and incentives. The transition away from coal must be done justly, with due attention to people Because flooding is a prevalent concern in these and the distributional effects. regions, a climate risk analysis was performed for the roads. An ensemble of climate change pro- MIGA is also prioritizing the use of its guarantee products to jections was reviewed, and it was evident that a support the greening of financial intermediaries (FIs), with significant increase in the frequency and intensity a focus on promoting climate-friendly sustainable financing of extreme rainfall events is likely for the region over practices. MIGA’s engagement with FI clients is serving to the near-to-mid term. Since built infrastructure, like direct the use of proceeds of MIGA-supported finance—or roads, often alters a region’s hydrological regime the capital relief facilitated by MIGA’s capital optimization and can exacerbate flood risks, leading to detrimen- product—toward climate adaptation and mitigation invest- tal impacts on neighboring communities, climate ments while also helping to strengthen clients’ climate risk resilience measures were required to ensure the strategies whenever possible. In addition, MIGA will no longer performance of the roads and to limit any adverse support FI clients that do not have a plan to phase out their impacts to communities. investments in coal and coal-related projects over an agreed period of time, but no later than 2030, and will support its FI Working with the construction engineers, MIGA’s clients in developing disclosure frameworks. client approved construction of road drainage com- ponents to a 20-year design level rather than a 5- to MIGA will also help FI clients to green their portfolios, grow 10-year design level, which is typical for roads of this their climate finance business, and mainstream climate class in Kenya. Specifically, this means, for exam- risk assessments, including by (a) evaluating the clients’ ple, that 1,200 millimeter (mm) pipe culverts, 600 existing capacity and providing guidance on organizational mm access culverts, and 600 x 600 mm U-shaped constraints and knowledge gaps related to climate change drains will be constructed instead of the typical 900 management; (b) evaluating the clients’ existing portfolio mm pipe culverts, 300 or 450 mm access culverts, of investments and helping them identify climate finance and 450 x 450 mm U-shaped drains. Adopting the opportunities; (c) supporting clients in developing relevant incremental cost approach of the joint MDB climate climate-related policies and low-carbon and climate-re- finance methodology, up to 12 percent of the MIGA silient development trajectories; (d) conducting capacity guarantees were tagged as climate adaptation building centered on tools and methodologies to facilitate finance. better carbon and climate risk management; and (e) pro- viding guidance on enhanced climate-related financial disclosures, including supporting and adopting the TCFD recommendations. 49 C. Risk Management emissions profiles than the closest viable alternative to the project. Under the requirements of PS3, all projects that are expected to or currently produce more than 25,000 tons of MIGA’s approach to identifying, assessing, and managing carbon dioxide equivalent (tCO2e) annually must quantify climate risks is conducted in accordance with MIGA’s Policy and report to MIGA (a) the direct emissions from the facilities on Environmental and Social Sustainability. Under this policy, owned or controlled within the physical project boundary; all projects are screened against the requirements of the and (b) the indirect emissions associated with the off-site MIGA Performance Standards on Environmental and Social production of power used by the project. (E&S) Sustainability. For each project supported by MIGA, before Board approval, an Environmental and Social Review MIGA’s Contract of Guarantee typically includes an Environ- Summary that captures E&S risks (including climate-related mental and Social Action Plan (ESAP) for projects for which PS physical and transition risks and mitigation options) is pub- gaps were identified during the project due diligence. Mon- licly disclosed according to MIGA’s Access to Information itoring requirements are also included, and MIGA’s clients Policy. The disclosure period varies by the nature of the risks must submit Annual Monitoring Reports (AMRs) and status and expected impacts for a project, but is typically either reports on the ESAP. In addition, MIGA staff may conduct peri- 30 or 60 days. odic site monitoring visits to ensure compliance2. Among the MIGA Performance Standards (PS), the cli- MIGA also started piloting carbon pricing to address tran- mate-related risks are identified and addressed within PS1: sition risks in the economic analysis for carbon- intensive Assessment and Management of Environmental and Social projects. A carbon price is included in the economic analysis Risks and Impacts; and PS3: Resource Efficiency and Pollution of MIGA projects that have a defined use of proceeds and Prevention. where estimated annual project emissions exceed 25,000 tCO2e. The carbon price levels applied are in line with the Within PS1, climate-related physical risks that can affect the 2016 report of the High-Level Commission on Carbon Prices E&S performance of a project are identified, evaluated, and and consistent with those used by the World Bank. Both low addressed. The assessment includes a description of climate and high carbon values are used in project analysis. Carbon change hazards from a review of climate model projec- price levels depend on the host country income grouping tions and observational datasets, climate-specific project as classified by the WBG, with low values starting at US$40 vulnerabilities, and coping capacities or climate resilience per tCO2e in 2020 and increasing to US$78 in 2050, and high measures being taken to limit any adverse climate-related values starting at US$80 in 2020 and reaching US$156 by impacts to and by the project. All real-sector projects in all 2050. regions are screened for climate risks. MIGA has developed an internal climate risk screening tool that extracts climate In addition, as part of MIGA’s efforts to address carbon risks change projections from over 25 climate models and cre- and minimize its indirect exposure to coal-related projects, ates hazard projections for drought, flood, wildfire, tropical MIGA follows the WBG practice of not investing in greenfield cyclones, extreme temperature, and wind. Hazard projec- coal power generation. In 2019, MIGA extended this practice tions are provided for multiple climate scenarios and over to upstream oil and gas investments. In addition, MIGA does multiple time horizons. The MIGA climate risk screening tool not support new loans to financial institutions for coal-re- also includes a module to assess the potential impacts of lated activities. climate hazards to the performance of a project. Within PS3, climate-related transition risks are evaluated. Currently, this is limited to GHG accounting for Scope 1 and Scope 2 emissions generated by the project1. Both gross and net GHG emissions are calculated, where net GHG emis- sions reflect the total avoided GHG emissions that result from the project through either energy efficiency gains or lower 1. Scope 1 emissions are direct emissions from owned or controlled 2. Since the COVID-19 pandemic began, staff E&S monitoring of sources. Scope 2 emissions are indirect emissions from the generation projects is frequently being conducted virtually. of purchased energy. 50 Annual Report 2021 D. Metrics and Targets MIGA reports the following indicators, at least annually: Climate Change Targets To build low-carbon and resilient business across sectors, • Climate finance as a proportion of total gross MIGA continues to diversify its climate business and identify issuance of guarantees (%) new areas of growth. Under the WBG’s second CCAP, 35 per- cent of MIGA’s gross issuance will consist of direct climate • Private mobilization toward climate finance finance over the five-year period of 2021–25, on average. In addition, MIGA has made commitments for projects to be • GHG emissions avoided (tCO2e/year) aligned with the low-carbon and climate-resilient devel- opment goals of the Paris Agreement following the Paris • GHG gross emissions (scope 1 and 2). Alignment methodology developed jointly by the MDBs. MIGA will align 85 percent of Board-approved real sector opera- tions starting July 1, 2023, and 100 percent of these operations by 2025. To be ready to meet these targets, MIGA, well ahead of the July 2023 target date, will need to begin aligning virtu- ally 100 percent of our projects at the Early Screening Meeting stage. For MIGA’s support of financial institutions, MIGA is working with the IFC on the methodology and will join the IFC in announcing the timeline for alignment of these oper- ations to the Paris Agreement in October 2021. This phased approach to Paris Alignment will help ensure that, working closely with our clients, we are well prepared to deliver proj- ects that meet both the mitigation and adaption goals of the Paris Agreement while remaining true to our development mandate. In FY21, direct climate finance accounted for 26 percent of MIGA’s total issuance through FIs (US$654 million), renewable energy (US$615 million), and infrastructure and agribusiness (US$78 million). This represents a significant increase in cli- mate finance issuance, both in dollar terms and as a share of MIGA’s total issuance since FY16 (figure 2). MIGA’s climate finance supports projects that yield either climate change mitigation and/or climate change adaptation benefits. MIGA has backed climate finance projects across all of the regions covered by MIGA (figure 3). From FY16 to FY21, almost one- third of MIGA’s climate finance supported projects were in Sub-Saharan Africa (figure 4). 51 Figure 2. MIGA Climate Finance Issuance, FY16–FY21 26% 1400 25% Share of total MIGA issuance (%) 21% 1200 17% 18% 20% 1000 13% US$, millions 800 15% 600 7% 10% 400 5% 200 0 0% FY16 FY17 FY18 FY19 FY20 FY21 Climate finance issuance % of total issuance Figure 3. MIGA Climate Finance Issuance, by Region, FY16–FY21 1400 1200 1000 US$, millions 800 600 400 200 0 FY16 FY17 FY18 FY19 FY20 FY21 East Asia & Pacific Europe & Central Asia Latin America & the Carribean South Asia Sub-Saharan Africa Middle East & North Africa 52 Annual Report 2021 Figure 4. Regional Shares of Total Climate Finance MIGA developed its internal Impact Performance Assessment Issuance across MIGA's Client Countries, FY16–FY21 and Comparison Tool (IMPACT), which assesses and rates expected (ex ante) project-specific outcomes (including those related to environmental and climate outcomes) as well as beyond-the-project outcomes to provide positive demonstration effects to foreign investors (including those pertaining to environment and climate). Before approval, 31% all projects are assessed and rated for expected develop- 15% ment impact. Projects that support expected positive climate and environmental outcomes are expected to deliver better development outcomes and receive higher ratings than projects without these benefits. Climate Issuance over FY16-FY21: 5% US$5,058 million 22% Greenhouse Gas (GHG) Emissions and Footprint 17% MIGA continues to calculate and report GHG emissions 10% avoided (tCO2e/year) and GHG gross emissions (scope 1 and 2). MIGA calculates gross GHG emissions for all real sector projects with emissions over 25,000 tCO2e. MIGA continues to disclose ex ante estimated annual gross GHG emissions through the publicly available Environmental and Social East Asia & Pacific South Asia Review Summary available for all MIGA projects. Europe & Central Asia Sub-Saharan Africa From FY19 to FY20, MIGA reduced its carbon footprint from 2,543 tCO2e to 1,878 tCO2e. This target is in line with the WBG’s Latin America Middle East commitment to reduce facility-related emissions by 28 per- & the Carribean & North Africa cent over the same period. Owing to the COVID-19 pandemic and its implications for MIGA’s staff working arrangements, the comparable figure for FY21 is not available at this time. Development Impact Reporting Highlights of MIGA supported projects’ anticipated results include: MIGA publicly reports its progress against climate finance • Projects for renewable energy and energy efficiency, commitments in this annual report and in the public Joint which are expected to result in over 10 million metric tons Report on Multilateral Development Banks’ Climate Finance. of avoided GHG emissions per year As indicated earlier, MIGA also reports internally to MIGA • Projects that provide over 22 million people with access and WBG senior management on progress toward the to power generated from renewable sources CCAP 2021–2016. A scorecard is submitted annually to the Board of Directors that provides a snapshot of results and • Projects that enable over US$545 million in finance for performance in institutional priority areas, including MIGA’s small and medium enterprises to engage in climate annual climate finance business. In addition, MIGA’s prog- action. ress against its climate change commitments and targets is provided in the EVP’s triannual reports to the MIGA Board and in the individual project documentation provided to the Board when it approves a MIGA guarantee. MIGA also reports annually to the Board of Directors in several briefings. 53 Since its creation, MIGA has issued nearly $65 billion in guarantees across 119 developing countries.