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Speeches & Transcripts July 29, 2020

Remarks by Managing Director and World Bank Group Chief Financial Officer Anshula Kant at the OMFIF Global Public Investor 2020 Forum

I am delighted to join you today at the launch of the seventh Global Public Investor Report produced by OMFIF.

I would like to talk to you about some of the challenges that central banks and public investors face and are likely to face in the aftermath of the pandemic, and the essential role they will play in a sustainable recovery. I will also touch upon how the World Bank is making a difference in sustainable recovery and the ways we can partner to champion and promote sustainable capital markets. But first, a few words on the new economic context. 

The COVID-19 pandemic has triggered what is likely to be the deepest global recession since World War II. In a best-case scenario, the global economy could shrink by 5.2 percent in 2020. The recession in advanced economies is hitting developing countries hard. Globally, we will see the first increase in poverty since 1998. And as it disrupts billions of lives and livelihoods, the pandemic threatens decades of hard-won development gains. Recovery is also likely to be slow in 2021. Growth forecasts for the global economy are around 4 percent next year. But there is some hope.

Central banks have been playing an essential role in responding swiftly to the challenges of the pandemic. With the purpose of stimulating the economy and preserving the normal functioning of financial markets central banks have gone beyond their traditional role of lenders of last resort.

Policy rates were cut by approximately 80 basis points in developed economies, and almost 100 basis points in emerging economies. Balance sheets have experienced an expansion at an unprecedented speed and size. For example, G4 central bank balance sheets have expanded by 20 percent of GDP over the first three months of the pandemic.

Moreover, asset purchase programs have been adjusted to impact also non-financial private firms, by allowing the purchase of corporate bonds. This was particularly important, given the effects a sudden stop in economic activity could have on labor and corporate income.

With national governments working fast to strengthen health care systems and protect the most vulnerable, central banks have also played a critical role in supporting the fiscal policy response. Under different institutional arrangements, central banks have developed lending facilities to implement the credit backstops provided by governments.

Notably, the Federal Reserve offered USD FX swap facilities to several central banks and inaugurated a repo facility designed to provide collateralized lending of dollars to foreign central banks. These measures were timely and effective, reducing dollar funding pressures and preventing large scale currency depreciation in many emerging countries. 

While all these nimble actions have helped stabilize financial markets, their medium- and long-term impact remains to be seen.

Central banks will have to rethink their policy toolbox to navigate further these uncharted waters. Monetary policy should continue supporting economic recovery as long as required. But once the world economy is back on track, policy will need to be normalized. This phase will require a careful unwinding of the extraordinary policy measures to avoid disrupting financial markets and allow for efficient risk pricing. In the meantime, financial systems will have to cope with recession and the impact on credit quality.

While managing their countries’ foreign exchange reserves, Central Banks are public investors, often rather conservative ones, keeping a close eye on capital preservation, liquidity and safety of their portfolios. The GPI report as well as our own survey on central banks reserves management activities published by RAMP, (RAMP is our Reserve Advisory and Management Partnership arm in World Bank Treasury), earlier this year, make us think of another role the central banks can play in economic recovery.

In addition to the “traditional” risks, many of them exacerbated by the pandemic, public investors need to keep in mind another risk affecting the entire world, and that is climate change. This risk has significant implications for the long-term risk-return profile of assets. Here investors can make a difference by financing projects that help advance a low-carbon economy. They can also contribute by incorporating environmental, social, and governance principles into their investment policies.  

In fact, Global Public Investors are starting to recognize that climate change risk has the potential to destroy significant global economic wealth in the coming decades and regulators too have warned of the potential investment risk from assets that become unsellable because of climate change.

The first step for institutions seeking to adopt sustainable and responsible investment principles is to get a clear mandate on this from their stakeholders. Once the investment objectives are updated to include ESG principles, implementation becomes the next challenge, especially for central banks, as many of them operate in the high-quality fixed income space.  In this space, the availability of instruments where ESG considerations play a straightforward role in the risk-return analysis may be discouraging. But this is an area where the World Bank makes a difference, because of the bonds we issue. 

At the World Bank Group, we understand that financial markets play a vital role for the “real economy,” as they provide financial solutions to tackle the world’s most pressing problems, such as income inequality and poverty. We work with the countries to design programs that meet their development priorities and advance our mission to end extreme poverty and build shared prosperity. We look for ways to achieve positive environmental and social impacts as we design our projects.

Because we work closely with our client countries to design programs, when the times call for it, we can be nimble, and we can adjust quickly to reprioritize projects to help governments address new and urgent needs.  This has proved critical as our clients combat COVID-19. But besides addressing the immediate health threat from COVID, and its social and economic repercussions, we have been maintaining a line of sight to our client countries’ long-term development vision, not just to get development back on track but to identify opportunities to “build back in a more resilient and sustainable manner.”

In the context of a sustainable recovery, I would like to point out the steady shift we’ve seen in investor behavior over the past years, with investors seeking to do good while doing well. The World Bank has also helped drive this shift, as both a leader and key partner in efforts to build sustainable capital markets. We played a founding role in the development of the Green Bond, Social Bond, and Sustainability-Linked Bond Principles.  We have partnered with asset owners like the Government Pension Investment Fund of Japan and Network for Greening the Financial System and we have convened investors and sovereigns to engage on ESG concerns and opportunities.

We are also communicating the environmental and social impacts of everything the World Bank does across all the sectors in which we lend to our client countries. We want investors in our Sustainable Development Bonds to understand what the entire balance sheet finances, not just our green bond portfolio.


The green, and now, social and sustainability bond market is essentially about purpose and transparency. We must continue working toward broader transparency and increasing information and data so that investors have better information for decision-making for all their investments.

We have used our issuance program to engage investors on the SDGs. For the World Bank this has been an opportunity to raise awareness for key development challenges while financing a broad range of development sectors in line with our mandate. For investors it has been an opportunity to align their investments to the SDGs and/or to implement ESG strategies. 

To conclude, I see genuine cause for optimism that the financial markets have been doing so much to embrace ESG considerations and bond issues that are specifically designed to support sustainability objectives. This puts us in a stronger position to support the kind of sustainable recovery that countries will need. It makes me hopeful that we can not only get developing countries back on their feet, but also help them advance on their development goals, build more resilience, and improve people’s lives.

It has been my pleasure to join you today. Thank you.