CIF - Annual Report 2021 Meeting the Moment

2021 ANNUAL REPORT

MEETING THE MOMENTCONTENTS 2 Letter from the IFC Board 5 Le tter from David Malpass, Wo rld Bank Group President 7 Wo rld Bank Group Response to t he COVID-19 Pandemic 8 Le tter from Makhtar Diop, IF C Managing Director 13 Ou r Management Team

RESULTS

14 World Bank Group 2021 Sum mary Results 16 IF C 2021 Year in Review

STRATEGY

IN ACTION 20 Meeting the Moment

CRITICAL

FU

NCTIONS

43 Measuring Up 46 S ustainability 48 A ccountability and Oversight

Add itional information is available on IFC’s Annual Report 2021 website: www.ifc.org/AnnualReport. ABOUT IFC International Finance Corporation (IFC), a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets and developing economies. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities for better lives. In fiscal year 2021, we invested $31.5 billion in total commitments, including $23.3 billion in long-term finance and $8.2 billion in short-term finance, to private companies and financial institutions in emerging and developing economies, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org.

Cover: Meeting the Moment tells the story of IFC stepping forward to take bold, transformative action at a time of unprecedented global need.OUR PURPOSE We apply our financial resources, technical expertise, global experience, and innovative thinking to create markets and opportunities that help countries mobilize private sector solutions to address the most pressing development challenges.

WHERE WE WORK

to take bold, transformative action at a time of unprecedented global need.OUR PURPOSE We apply our financial resources, technical expertise, global experience, and innovative thinking to create markets and opportunities that help countries mobilize private sector solutions to address the most pressing development challenges. WHERE WE WORK As the largest global development institution focused on the private sector, IFC operates in more than 100 developing countries. We bring over 60 years of institutional knowledge to the countries in which we work, applying lessons learned in one region to solve problems in another. WHAT WE DO The World Bank Group has set two goals for the world to achieve by 2030: end extreme poverty and boost shared prosperity in every country. IFC contributes to these goals by supporting the private sector in developing countries to create markets and open up opportunities for all. IFC focuses on investing, providing advice, and mobilizing finance for private financial institutions and companies. Our products and services are tailored to meet the specific needs of clients while our ability to attract other investors brings added benefits: we introduce our clients to better ways of doing business and new sources of capital. IMPACT Measuring the results of our work lies at the heart of everything we do. We set corporate targets for development impact. This ensures that IFC and our clients are reaching the people and markets that most need our help. The Anticipated Impact Measurement and Monitoring (AIMM) system, launched in 2017, is now fully integrated into IFC’s operations. Highlighting our impact in FY21, IFC’s investment clients: • Supported nearly 2.6 million jobs • Re ached nearly 13.7 million customers in power, water and gas distributions • Re ached nearly 45 million patients, over 7.9 million students and nearly 3.6 million farmers Additional results are available on our website: www.ifc.org/AnnualReport

ACCOUNTABILITY

ached nearly 13.7 million customers in power, water and gas distributions • Re ached nearly 45 million patients, over 7.9 million students and nearly 3.6 million farmers Additional results are available on our website: www.ifc.org/AnnualReport ACCOUNTABILITY We are accountable to our partners, clients, and communities we serve as we aim to achieve our development objectives in an environmentally and socially responsible manner. IFC has been working hard to deliver on a series of accountability and transparency reforms we committed to in the last few years, including in response to an independent external review of IFC’s environmental and social (E&S) accountability. We have also taken important steps to improve transparency around our use of blended finance and our investments in financial intermediaries (FIs). We believe that continuous evolution toward more transparency is one of the most important things we can do as a development institution to maintain the trust of our stakeholders and gain crucial feedback as we develop new solutions to the biggest development challenges. PARTNERSHIPS Today’s development challenges are too vast for any one institution to solve on its own. They require collaboration and coordination. IFC brings together a variety of players to address these challenges collectively, partnering with more than 30 government development agencies, as well as with several foundations, corporations, and other multilateral organizations. These partnerships complement the funding for IFC’s work, helping incubate new ideas, and allow proven solutions to be scaled up. They facilitate knowledge transfer and build business and institutional capacity, strengthening IFC’s own impact. They are integral to our strategy and a growing, evolving pillar of our work. IFC ANNUAL REPORT 2021  1IFCBOARD LETTER FROM THE IFC BOARD The past year has been immensely challenging around the world  — es pecially for developing countries  — as

evolving pillar of our work. IFC ANNUAL REPORT 2021  1IFCBOARD LETTER FROM THE IFC BOARD The past year has been immensely challenging around the world  — es pecially for developing countries  — as

the COVID-19 pandemic reversed decades of progress in ending extreme poverty, achieving shared prosperity, and reducing inequality. The World Bank Group responded swiftly and extensively to the health, economic, and social impacts of the crisis to help spur recovery. But more needs to be done to address the needs of the marginalized and those who live in the poorest areas. The Board discussed and approved several important initiatives and programs in support both of countries’ immediate needs and of long-term development goals. Vaccines. 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 transparent, affordable, and fair access to vaccines for developing countries and to continue strengthening global preparedness for future pandemics. Assisting the poor. To help start the process of recovery, the Bank Group registered a historic increase in the delivery of lending for projects and initiatives to assist lowand middle-income countries, including small states, in tackling multifaceted challenges, safeguarding human capital, and providing social safety nets to target their most vulnerable people. Given the immense financing needs, we agreed to bring forward the IDA20 replenishment process, which we 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 of food insecurity and to support countries in achieving SDG 2, and nutrition for all, along with other partners. Green, resilient, and inclusive development. The Bank Group continues to support countries in achieving the twin goals of ending

also asked the Bank to scale up its work to address rising levels of food insecurity and to support countries in achieving SDG 2, and nutrition for all, along with other partners. Green, resilient, and inclusive development. The Bank Group continues to support countries in achieving the twin goals of ending extreme poverty and boosting shared prosperity. In responding to the COVID-19 crisis, the Bank Group has an opportunity to help lowand middle-income countries build the foundations for a strong and durable recovery based on a framework that we discussed, which supports green, resilient, and inclusive development. We believe that this, in turn, can help address the longer-term challenge of climate change. Climate. We hope that the ambitious new targets for climate financing outlined in the Climate Change Action Plan 2021–25 and the alignment of the Bank Group’s financing with the Paris agreement  — co mplemented by the approach to green, resilient, and inclusive development and efforts to build long-term resilience for food security  — wi ll help deliver on the twin goals and the Sustainable Development Goals. Knowledge framework. We welcomed the discussion of the new Strategic Framework for Knowledge, which strives to better integrate knowledge into solutions for clients and the global community. We look forward to implementation of this framework, which will strengthen the Bank Group’s role as a source of solutions. 2  IFC ANNUAL REPORT 2021Evangelia 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 Hayrettin Demircan Turkey Merza Hussain Hasan Kuwait (Dean) Rajesh Khullar India Alphonse Ibi Kouagou

Canada Monica E. Medina Peru Nigel Ray Australia Hayrettin Demircan Turkey 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 IFC BOARD IFC ANNUAL REPORT 2021  3The World Bank Group remains ready to help our clients on the path to recovery. LETTER FROM THE IFC BOARD Debt. As countries face increasing debt burdens, our Governors, together with the IMF, have given the Bank Group a mandate to address fiscal and debt distress in IDA countries in a way that supports green, resilient, and inclusive development and poverty reduction. We are hopeful that the G20 Common Framework, along with extension of the Debt Service Suspension Initiative to the end of 2021, will allow beneficiary countries to dedicate more resources to tackling the crisis, investing in healthcare and education, promoting growth, and improving their long-term approaches on debt. Private sector. Recognizing growing credit constraints, the private sector is a critical player in helping client countries attain their development goals, create and develop markets, mobilize resources, and respond to COVID-19, including through IFC’s Global Health Platform and MIGA’s response programs. We expect the Bank Group to keep building partnerconstraints, the private sector is a critical player in helping client countries attain their development goals, create and develop markets, mobilize resources, and respond to COVID-19, including through IFC’s Global Health Platform and MIGA’s response programs. We expect the Bank Group to keep building partnerships across a common strategic framework to help generate private sector solutions that address development challenges. Racial justice. There were important efforts this year to address racial injustice within the Bank Group and with our clients, including a set of recommendations put forth by the End Racism Task Force to fight racism and racial discrimination. We look forward to implementation of these recommendations through an action plan that will reaffirm this institutional value, which is embedded in the Bank Group’s Code of Ethics. Accountability mechanisms. We also reaffirmed the importance of accountability mechanisms for people and communities who believe that they have been, or are likely to be, adversely affected by Bank Group projects and investments. We have approved enhancements to the Bank Group’s social and environmental accountability framework, including changes to the World Bank Inspection Panel’s toolkit and to the reporting line of the Compliance Advisor Ombudsman for IFC and MIGA. Leadership, staff, and return to office. November 2020 marked the transition to a new Board of Executive Directors, and in February we welcomed Makhtar Diop as IFC Managing Director and Executive Vice President. We look forward to the widespread availability of COVID-19 vaccines across the globe, the safe return of the Bank Group’s staff to the office, and the overall return to a new normal. Our utmost appreciation goes to the staff for their ongoing dedication to the Bank Group’s mission and their perseverance and hard work over the past year, despite the immense and 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.

Group’s mission and their perseverance and hard work over the past year, despite the immense and 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. 4 IFC ANNUAL REPORT 2021Message from the President Since the start of the COVID-19 pandemic, the World Bank Group has worked hard to help countries fight the pandemic’s health, economic, and social impacts. From April 2020 through the end of fiscal 2021, the Bank Group committed over $157 billion  — th e largest crisis response in any such period of our history. We have helped countries address the health emergency, procure billions of dollars of medical supplies, deploy COVID-19 vaccines, strengthen health systems and pandemic preparedness, protect the poor and vulnerable, support businesses, create jobs, promote growth, and expand social protection. Despite this unprecedented global effort, the pandemic has reversed gains in global poverty reduction for the first time in a generation, pushing nearly 100 million people into extreme poverty in 2020. I remain deeply concerned about fragile states, which have been particularly hard-hit by unsustainable debt burdens, climate change, conflict, and weak governance. And though I am hopeful for the global economy to rebound, many of the world’s poorest countries are being left behind, with inequality widening both within and between countries. We are committed to working with our partners to find solutions to these urgent challenges  — in cluding by promoting transparency, human 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 inclusive recovery. Ensuring safe, fair, and widespread immunization will be key to curb the pandemic and advance recovery: we are supporting countries’ access to COVID-19

able, support business growth and job creation, and rebuild in better ways toward a green, resilient, and inclusive recovery. Ensuring safe, fair, and widespread immunization will be key to curb the pandemic and advance recovery: we are supporting countries’ access to COVID-19 vaccines, including through COVAX and directly from manufacturers. The World Bank has expanded its financing available for COVID-19 vaccines to $20 billion over two years  — in f iscal 2021 alone, we committed $4.4 billion for 53 countries. Working with WHO, Gavi, and UNICEF, we developed mechanisms for safe distribution in 140 lowand middle-income countries. We are partnering with the African Union and the Africa Centers for Disease Control to support the Africa Vaccine Acquisition Trust (AVAT) in order to help countries purchase and deploy COVID-19 vaccines for up to 400 million people across Africa. And we are working with the IMF, WHO, WTO, and other partners to track, coordinate, and advance delivery of vaccines to developing countries. IFC is doing vital work to build resilient health systems and expand the manufacturing and supply chains for COVID-19 vaccines. Through its Global Health Platform, IFC committed $1.2 billion to support vaccine manufacturing capacity, including in Africa, and the production of essential services and medical equipment, including test kits and personal protective equipment. IFC-led investments include the mobilization of a €600 million financing package to boost COVID-19 vaccine production in South Africa, support to vaccine manufacturers in Asia, and investments in medical equipment manufacturers and suppliers. To address many countries’ risk of debt distress, we’ve played a key role in the G20’s Debt Service Suspension Initiative, alongside the IMF. The effort has helped more than 40 countries to suspend debt service payments in excess of $5 billion, freeing up fiscal space as countries combat the crisis. While I am pleased the

played a key role in the G20’s Debt Service Suspension Initiative, alongside the IMF. The effort has helped more than 40 countries to suspend debt service payments in excess of $5 billion, freeing up fiscal space as countries combat the crisis. While I am pleased the LETTER FROM DAVID MALPASS President of the World Bank Group IFC ANNUAL REPORT 2021  5initiative has been extended to the end of 2021, more needs to be done, particularly to reduce the stock of debt in the poorest countries. With the IMF, we are helping implement the G20 Common Framework for Debt Treatments, which aims to reduce countries’ debt burdens for the long term. As the world emerges from the pandemic, climate change will remain a central challenge. The World Bank Group is the largest multilateral provider of climate finance for developing countries. Over the past five years, we have delivered over $83 billion  — in fiscal 2021 alone, our climate finance totaled over $26 billion. Our new Climate Change Action Plan, launched in June, seeks to integrate climate throughout development efforts, with a focus on greenhouse gas reduction and successful adaptation. The plan commits us to 35 percent of Bank Group financing having climate co-benefits over the next five years; 50 percent of IBRD and IDA climate financing will support adaptation and resilience. We will align all World Bank financing with the goals of the Paris Agreement starting on July 1, 2023. For IFC and MIGA, 85 percent of Board-approved real sector operations will be aligned starting July 1, 2023, and 100 percent starting July 1, 2025. We will support countries’ preparation and implementation of Nationally Determined Contributions and long-term strategies; these, in turn, will inform our Country Partnership Frameworks. And we will support countries’ transition away from coal to affordable, reliable, and cleaner alternatives for electricity. Our efforts will help countries grow

ration and implementation of Nationally Determined Contributions and long-term strategies; these, in turn, will inform our Country Partnership Frameworks. And we will support countries’ transition away from coal to affordable, reliable, and cleaner alternatives for electricity. Our efforts will help countries grow their economies while reducing emissions, adapting to climate change, building resilience, and protecting natural resources, including biodiversity. In fiscal 2021, IBRD committed $30.5 billion to middleincome countries, and IDA committed $36.0 billion on grant and highly concessional terms to the poorest countries. I welcomed the G20’s endorsement of advancing IDA’s 20th replenishment cycle to 2021, which will provide the poorest countries with more resources to overcome the crisis and work toward recovery. I am also pleased that, after nearly three decades, Sudan cleared its arrears to IDA in March, enabling full reengagement with the Bank Group and paving the way for the country to access nearly $2 billion in IDA financing. IFC delivered a strong fiscal performance, reaching a record high of $31.5 billion in financing, including $23.3 billion in long-term finance and $8.2 billion in short-term finance. IFC also scaled up its shortterm financing offerings and kept trade flowing. With COVID-19 severely impacting private enterprises across emerging markets, IFC provided critical support through liquidity and trade financing, allowing companies to remain in operation, preserving jobs, and enabling long-term private sector intervention once pandemic impacts subside. We are accelerating the execution of the IFC 3.0 strategy to create more investible projects in places where they are needed most, particularly in IDA and FCS markets, and build a pipeline of investments in a post-pandemic world. In February, I was pleased to announce the appointment of Makhtar Diop as IFC’s Managing Director and Executive Vice President. His leadership and experience will enable the World Bank Group to build on the

pipeline of investments in a post-pandemic world. In February, I was pleased to announce the appointment of Makhtar Diop as IFC’s Managing Director and Executive Vice President. His leadership and experience will enable the World Bank Group to build on the unprecedented speed and scale of our response to the global crisis and support vital recovery efforts through the private sector. MIGA issued $5.2 billion in guarantees to help countries achieve their development goals. These efforts are expected to provide 784,000 people with new or better electricity service, support about 14,600 jobs, generate over $362 million in taxes for countries, and enable about $1.3 billion in loans, including to local businesses. MIGA continued to make progress across its strategic priority areas, with 85 percent of its projects in fiscal 2021 dedicated to climate mitigation and adaptation, projects in fragile and conflict-affected settings, and IDA countries. As part of our ongoing commitment to fight racism and racial discrimination in our workplaces and our work, our senior management and I welcomed 80 recommendations submitted in fiscal 2021 by the Bank Group’s Task Force on Racism. The first set of 10 foundational recommendations are already being implemented, and more are under review. I am grateful to all those who have come forward to engage on this important topic as we continue to work for tangible, meaningful, and long-lasting change. 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

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. LETTER FROM DAVID MALPASS President of the World Bank Group David Malpass President of the World Bank Group and Chairman of the Board of Executive Directors 6 IFC ANNUAL REPORT 2021World Bank Group Response to the COVID-19 Pandemic The World Bank Group has mounted a broad and decisive response to the pandemic  — the largest in our history. From April 2020 through the end of fiscal 2021 (June 30, 2021), Bank Group financing totaled over $157 billion. The scale of this response reflects the Bank Group’s strong financial position, underpinned by the 2018 IBRD and IFC General Capital Increases and the IDA19 Replenishment. It includes: $45.6B in financing from IBRD for middle-income countries.

$42.7B from IFC to private companies and financial institutions.

$7.9B from recipient-executed trust funds. $53 .3B of IDA resources on grant and highly concessional terms for the poorest countries, with built-in debt relief for countries at risk of debt distress. $7.6B in guarantees from MIGA to support private sector investors and lenders.

Includes long-term commitments from IFC’s own account, short-term finance commitments, and core mobilization. IFC ANNUAL REPORT 2021  7HOW WE DELIVERED MEETING THE MOMENT Collaborating for greater impact with clients, partners, co-investors

Includes long-term commitments from IFC’s own account, short-term finance commitments, and core mobilization. IFC ANNUAL REPORT 2021  7HOW WE DELIVERED MEETING THE MOMENT Collaborating for greater impact with clients, partners, co-investors Resilient staff committed to flexibility and innovation Using de-risking tools and creating mobilization platforms HISTORIC GLOBAL CHALLENGES • COVID-19 and its economic impact • Climate change • Fragility and conflict “At a time when so many others had to step back, IFC stepped forward: helping developing countries weather the worst of the health crisis, preserve jobs, and scale up climate solutions.” Makhtar Diop, IFC Managing Director

OUR RESPONSE WITH

THE PRIVATE SECTOR • Largest-ever investment volume • Expanded climate financing • Developing investment pipeline for fragile countries 8 IFC ANNUAL REPORT 2021We launched a $4 billion financing initiative to help developing countries access healthcare supplies needed to fight the pandemic. We mobilized $8 billion in liquidity financing to keep businesses in affected industries open, including $400 million to reach small and women-owned businesses. We delivered a record $4 billion in climate financing for our own account. These numbers represent lives saved. Businesses lifted. Communities protected. Opportunities created. Our accomplishments this year are a testament to the strength and resilience of IFC’s teams around the globe. They stayed laser-focused on our mission even as they dealt with their own personal hardships related to the pandemic. Their dedication inspires me every day and gives me confidence that we are prepared for what the future demands of us. The future demands that we be bold enough to venture into the world’s most difficult places. That we be persuasive enough to convince our private sector partners to work with us to redefine impact investing. In short, the future demands our fearlessness. And we intend to deliver by setting our most audacious goal yet: doubling IFC’s impact and

venture into the world’s most difficult places. That we be persuasive enough to convince our private sector partners to work with us to redefine impact investing. In short, the future demands our fearlessness. And we intend to deliver by setting our most audacious goal yet: doubling IFC’s impact and mobilizing two dollars for every dollar we invest. Much can be learned in times of crisis. They hold up a mirror, forcing us to reckon with what we see. What did COVID-19 reveal? A world more interconnected than ever before, where health and economic outcomes are intertwined, conflict is on the rise, and progress against inequality is fragile. But perhaps the most important revelation is this: when a moment arrives that requires urgency and action, extraordinary things are possible. I joined IFC in the midst of a global pandemic and in a world defined by uncertainty. It was a humbling experience that gave me a front row seat for this organization’s extraordinary capabilities in the most challenging of circumstances. At a time when so many others had to step back, IFC stepped forward: helping developing countries weather the worst of the health crisis, preserve jobs, and scale up climate solutions while ensuring countries facing fragility, conflict, and violence are not left behind. The pages that follow tell a more complete story, but a few facts are worth highlighting. In Fiscal Year 2021, IFC made $31.5 billion in total commitments around the world, including $11.9 billion in fragile, conflict-affected, and poverty-stricken countries. Makhtar Diop IFC Managing Director IFC ANNUAL REPORT 2021  9Tackling challenges, maximizing opportunities We will begin by tackling the twin challenges that threaten our planet and our people. First, we must act on one of our generation’s most urgent tasks: addressing climate change. Time is running out to head off the worst-case scenarios predicted by scientists, and it is the world’s most vulnerable — those who have contributed the least

threaten our planet and our people. First, we must act on one of our generation’s most urgent tasks: addressing climate change. Time is running out to head off the worst-case scenarios predicted by scientists, and it is the world’s most vulnerable — those who have contributed the least to climate change — who will suffer for it. IFC recognizes that if we don’t do our part to limit global warming, we will never accomplish our mission. In the face of such stakes, there is only one option: to meet this moment head on and fundamentally change how we operate. We have committed to aligning 100 percent of our direct investments with the objectives of the Paris Agreement by Fiscal Year 2026. These same investments in climate solutions will also help us address the second major challenge facing the world: ensuring the current health pandemic does not allow a pandemic of inequality to take root. COVID-19 dealt a devastating blow to emerging markets, rever