In an effort to increase private investments in renewable energy in poor nations, the World Bank Group announced on Wednesday that it would be consolidating its loan and investment guarantee structure. The goal is to triple the organization’s annual guarantees to $20 billion by 2030.

The World Bank would consolidate all of its guarantee expertise from various business units into a single platform with the announcement of the reforms made during a G20 financial leaders summit in Sao Paulo, Brazil.

According to the bank, the adjustments will expedite approvals and offer “a seamless experience for clients and easier access to the full suite of guarantees” as of July 1.

The $20 billion annual guarantee objective for the next five to six years, according to World Bank President Ajay Banga, is a somewhat arbitrary figure intended to reflect desire to extend these products.

“Our ambition is to go in quantum number from where we are today,” Banga told a news briefing, adding that capital adequacy would need to be reviewed.

“So don’t think of this as a cap that is imposed by the bank,” Banga said. “If you want to get to three times where we are today, the quicker we get there, the better we do it, the happier we’ll be, and the more ambitious we’ll be about the next step.”

Currently, the World Bank Group guarantees loans and investment contracts totaling approximately $6.8 billion annually across its business units, which include the International Finance Corp., the Multilateral Investment Guarantee Agency (MIGA), and its primary lending arm, the International Bank for Reconstruction and Development.

The guarantees cover things like currency restrictions, insurance against political risk, insurance against commercial risks like contract violations, and other things that prevent private investment in developing nations. In order to combat climate change and other global challenges, the bank is working to extend its balance sheet and increase lending by over $150 billion over the course of ten years. One important part of this endeavour is to increase these guarantees.

The announcements made on Wednesday represent the first concrete outcomes of a private-sector investment executives group that World Bank President Ajay Banga put together last year under the name Private Sector Investment Lab. The group’s goal was to develop concepts to attract more private capital to clean energy and other investments in developing nations.

According to the World Bank, the strategy aimed for condensing guarantee products into a single, all-inclusive menu so that customers could quickly find and choose the instrument that best suited their requirements. In place of the current hodgepodge of various procedures, guidelines, and standards that “holds back their potential and impedes client access,” the bank proposed a new, uniform approach to guarantee reviews.

The head of the Private Sector Investment Lab and U.N. climate envoy, Mark Carney, also works in asset management and predicted that clean energy projects would receive the “lion’s share” of World Bank guarantees. However, he added that heavy industry decarbonisation projects might also find favour with emerging markets and developing nations.

“Political risk is often a deal breaker for energy infrastructure investments, Carney said. “And the private sector just can’t manage that on its own.”

(Adapted from BusinessToday.in)

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