DFIs and Impact
As European DFI portfolios have swelled, their contribution has boosted development outcomes.
Impact drives DFI investment
DFI commitments – loans, equity stakes, grants –– support commercially sustainable private sector projects that would otherwise not have obtained the same financing. Concentrated in regions and sectors with high relevance for international development policy, DFI investment in projects on an on-going basis typically extend long term, from five to 10 years, or even longer. DFIs track and report on high-impact development outcomes stemming from private sector projects, such as job creation and skills development, environmental and social outcomes, investment results, valuable goods and services provision, and tax revenues in developing countries.
In addition to the direct development outcomes reported at a project level, emerging evidence shows that DFI investments generate an impact which goes beyond direct productive activity and lifetime of projects. DFIs measure indirect impacts to evaluate the contribution of their investments towards reaching the SGDs. Indirect effects include indirect employment effects, labour productivity, economic growth, investment, poverty and environmental impacts.
One example is how DFI investment outcomes contribute to climate change goals. That impact depends on DFI ability to catalyse investment in energy efficiency and green technologies, not just on whether an individual project has an acceptable financial return or saves on energy use*.
Source: Development Finance Institutions Come of Age
European DFI’s most important direct contributions are contribution to development outcomes
European DFIs: Impact accelerators in 2022
Some 8.6 million people are employed in EDFI-financed companies, financial institutions and funds. That’s equivalent to the workforce of Mali.
Indirect employment effects comprise jobs at enterprises receiving EDFI financing through financial institutions and investment funds (14 million), as well as employment in the relevant supply chains (17 million) or enabled through better access to power (3 million) and finance (50 million).
96 TWh of clean energy produced annually. That’s equal to Bangladesh’s annual electricity consumption. Companies and projects currently financed by EDFI generated over 173 terawatt-hours (TWh) of electricity in 2022 (176 TWh in 2021)
€33 billion in taxes and other payments to government That’s equivilent to 50 per cent of Egypt’s annual tax revenues.
Respective governments received in 2022 more than €20.8 billion in taxes by enterprises that were EDFI-financed (direct investments, financial institutions, and fund investees). Some €14.2 billion in taxes and fees were collected in 2021. The year-on-year increase was mainly due to an improved coverage ratio.
15 million tonnes of CO2 equivalent GHG emissions avoided
The amount equals 75 per cent of the annual CO2 emissions of Bolivia
€4.8 billion of total private co-finance mobilisation.
European DFIs for 2022 reported €4.8 billion of total private co-finance mobilisation in new investments, comprising €2.2bn of private DIRECT mobilisation and €2.6 billion of private INDIRECT mobilisation. Total private co-finance mobilisation in new investments in 2021 was €4.4 billion.
The data for the comparisons are derived from the data bases of the International Energy Agency, the OECD and the World Bank.
