Foreign Affairs Committee on June 8th, 2017

[The Chair (Hon. Robert Nault (Kenora, Lib.)), Liberal, Bob Nault]

Colleagues, we'll bring this meeting to order.

Pursuant to Standing Order 108(2) and our study of Canada's development finance initiative, today we have in front of us Daniel Runde, who is the William Schreyer chair and the director of the project on prosperity and development at the Center for Strategic and International Studies. Lucky him, he's in Rome.

Welcome, Mr. Runde.

As well, we have with us Aniket Bhushan, who is an adjunct research professor and principal investigator at the Norman Patterson School of International Affairs at Carleton, one of my favourite universities, with the Canadian International Development Platform.

Our two witnesses are going to make some opening comments.

Mr. Runde.

[Daniel Runde, William A. Schreyer Chair and Director, Project on Prosperity and Development, Center for Strategic and International Studies, As an Individual]

I'm sorry I'm not in Ottawa. I love going to Ottawa. I go about twice a year. I go for the sugar pie and the maple syrup, so I'm sorry I'm not there with you in person, but I'm in Rome instead.

It really is an honour to be with the distinguished members of this committee. Thank you for inviting me to testify before you today.

I hold an endowed chair at the Center for Strategic and International Studies, CSIS. It's not that CSIS, not the intelligence agency. Although my mother still thinks I'm a spy, I'm not a spy.

In past experiences I was in the Bush administration at USAID, which is the foreign aid arm of the U.S. government. I worked at the International Finance Corporation, which is the development finance arm of the World Bank Group. I had previous lives at Citibank in Argentina, working in commercial banking, and I started my career in investment banking in corporate finance at what is now Deutsche Bank. I bring a lot of experience in international development and development finance to this presentation, to what we're going to be talking about.

I want to first congratulate Canada on deciding to create a development finance institution. I spoke before to this committee, I believe in 2011, when I suggested in my prepared remarks that Canada ought to develop certain forms of development finance authorities or instruments. I didn't go so far as to say to stand up its own institution, though that was certainly at the back of my mind, and I think it's great that Canada is doing that.

I also wrote an article in Forbes.com in 2015, talking about the fact that the previous Canadian government had included in its budget contemplating creating and standing up a DFI, so this is not something that's new for Canada. I know there has been a lot of thought that's gone into this by many of your professionals in Global Affairs Canada and EDC. I know many of the folks who have been thinking about this and working on this. You have some really very fine civil servants who have been thinking about this for a long time, but also one of the things that's great about this is that I think it enjoys broad support across the political spectrum in Canada.

The other thing I'd want to note is that Canada is, if not the last, the second to last G7 member to stand up a DFI. All the other countries, including France, the United Kingdom, the United States, and Japan, have a stand-alone development finance institution, so Canada will be in very good company standing up this institution.

I want to also remark on the following. This is not your grandparents' developing world. It's richer, freer, more capable, and with more options, and as a result of that the role of the private sector in development is critically important. Countries develop by having good governance, like Canada has, like the United States has, and by having a robust, formal private sector like Canada has and countries like the United States have. So it's very important that we find ways to work and empower a formal private sector.

I'm going to submit for the record a report we did with the European development finance institutions called “Development Finance Institutions Come of Age”, which was published in October. I commend it to all of you, and I hope the clerk will share that with the committee.

If you look at all the foreign assistance that's being spent right now by all the countries like Canada and France and the United States and others, as well as multilateral institutions, you'll see it's about $130 billion or $140 billion U.S.

We looked at the amount of all the development finance investments catalyzing private sector activity by development finance institutions, and we saw that last year it was about $70 billion. There has been a doubling of traditional foreign assistance in the last 15 years, and there has been an increase of seven times the amount of private capital catalyzed in the last 15 years by development finance institutions.

I would submit to this committee that sometime in the next five years those lines are going to cross and there will be more private sector activity catalyzed by development finance institutions than traditional foreign aid. That's not because we still don't need foreign aid. We do need traditional official development assistance as provided by Global Affairs Canada and institutions like USAID for things like good governance, certain instances of humanitarian assistance, fighting corruption, promoting good democracy and human rights, and certain kinds of technical assistance to governments, and in some cases providing basic human needs or supporting fragile and weak states, in particular.

But what you're going to see, because the developing world is evolving and you have 60 or so states that are proving to be middle-income countries that are going toward following the path of South Korea and Taiwan, is that their needs are very different.

What they need much more, instead, are things like infrastructure or enabling private investment or encouraging more trade, not so much financing basic human needs. I think the development ecosystem, things like Global Affairs Canada or the new development finance institution.... It's important that we have these different instruments to meet the changing world that we're in.

Let me make some points about Canada's new DFI.

I think that Canada's new DFI should reflect strategic and geographic interests of Canada, as well as global business opportunities for Canada. I would just name some. The Francophonie is certainly very important to Canada, so I would think francophone Africa should be very important for this new DFI. I think Haiti and Ukraine should be very important to this new DFI.

I also think that the new DFI should be willing to take on heavier investment risks if it's going to be asked to operate in francophone Africa and countries like Mali or Haiti or Ukraine. There's an implicit expectation that it's going to be taking on a higher level of risk than if it were investing in telecom projects in Brazil or Turkey or China, which, let's agree, are perhaps a bit of a more benign risk profile than the kinds of places that are important to Canada.

I'd encourage the DFI, if it's going to operate in countries of priority to Canada, to take on a higher risk profile as a result of that. I think the political leadership that stands behind the DFI needs to be prepared to support that higher level risk. That's my second point.

The third point I want to make is that while it's excellent that Canada has stood this up, I want to encourage the committee to begin to plan ahead and think out three to five years from now on a number of fronts. There's going to be a period of time, three to five years, to stand this institution up, to create an investment track record, to create various processes for making decisions about what transactions should be in. I expect that it will piggyback on other DFI deals, and I'll come back to that in a minute.

I think it's going to require that the DFI is given some time to demonstrate its worth, so I want to encourage this committee to provide a bit of patience and give it several years to get its sea legs.

Those are my three points: focus on strategic and geographic interests of Canada, as a result of focusing on country interests and priority interests of Canada; accept a higher level of risk; and then, third, I ask that this committee give the DFI several years to stand up and get its sea legs.

Also, as an additional point, consider perhaps a different kind of structure in the future. It may need to make different kinds of structural arrangements, and I'll get to that as well.

Let me address those three points.

I want to re-emphasize that the success of a country's private sector is critically important to development. The best social program in the world is a good job. The World Bank has data that says that in the developing world nine out of 10 jobs are in the private sector; so if nine out of 10 jobs are in the private sector, standing up this DFI makes a lot of sense.

Let me come to my first point, that Canada's DFI should reflect regional and topical interests, strengths, and relationships of Canada. As I said, francophone Africa, Haiti, and Ukraine would be a first area of focus, a first bucket of focus.

A second would be Afghanistan and Pakistan, given that Canada has put a significant amount of resources into and focus on Afghanistan and Pakistan over the last 15 years. Those are two countries where it would make a lot of sense for this DFI to be operating.

Third, I would posit the northern triangle of Central America as a region of importance to Canada. I've met with Global Affairs Canada representatives in Honduras, Guatemala, and El Salvador in the last couple of years when I've been down there. I'd also posit Colombia as a country of focus, given Canada's significant investment of time and effort in enabling the peace process that's going on there.

Regionally, those are the three buckets I would consider geographically.

Thematically, I want to suggest a couple that also reflect the priorities of the Canadian government.

I think women's economic empowerment, of course, is a central focus of the Trudeau government. I think Canada's DFI should also prioritize this.

I would specifically look to the International Finance Corporation, which has spent at least 10 years looking at how to enable women's business both in terms of analysis and technical assistance and in providing lines of capital to a number of different banks to provide lending to women-owned small and medium-sized enterprises around the world. The new Canadian DFI could piggyback on what IFC is doing in that specific area.

I want to also encourage post-conflict recovery and fragile states as an area of focus for post-conflict situations. It will be very important.

A third area is global health. I want to make reference to Canada's incredible legacy of leadership on mother-child health. What is not known about health is that there was a study done about 10 years ago by the International Finance Corporation, which I will also submit for the record, showing that about one half of all health care expenditure in sub-Saharan Africa in 2005—this is a little bit dated, but it's important for you to understand—was through for-profit private sector health care providers. If that's the case, and I believe it's still the case in sub-Saharan Africa, then it would make sense for this DFI to make investments in the health care sector. We need to make a bit of a mental mind shift to think about how health care is actually delivered. It's not always done through non-profit NGOs or government; it's often done through the for-profit private sector.

A fourth theme for Canada's DFI should include what I'm going to describe as an “all of the above” energy strategy. I absolutely think this DFI should be financing oil and gas projects. I frankly think that on an appropriate basis, it should considering financing coal projects. I know that's not necessarily where the Trudeau government is going to be, but I want to emphasize that a number of other DFIs are going to be doing so.

I met with the leadership of the Asian Infrastructure Investment Bank and the New Development Bank in the last month, and they are clearly going to be doing that. In certain contexts, say in the case of Haiti or francophone Africa, if it's the best option, then coal ought to be considered.

I'm not saying we should invest in coal willy-nilly, but I think we should consider it. I certainly think oil and gas are going to be a part of it. I believe that 53 of the 54 sub-Saharan African countries have oil, gas, and mining activities going on right now, and so I think this is only appropriate, especially in francophone Africa as well. Of course hydroelectric, wind, geothermal, and solar are a given, but I want to emphasize an “all of the above” energy as a fourth sector.

Finally, given Canada's excellent companies that work on global infrastructure, the 30 or so fragile states need certain kinds of assistance, but the 50 or 60 countries that are on their way to middle-income country status are extremely hungry for infrastructure. Look at the Asian Infrastructure Investment Bank's success. Canada is a member of the Asian Infrastructure Investment Bank, and the fact that it has 80 or so members now speaks to the fact that there is a major infrastructure deficit. I hope that the new DFI will consider this as a fifth area of focus.

Let me talk about planning for risk. I think that—

[The Chair, Liberal, Bob Nault]

Mr. Runde, I'm going to have to ask you to wrap it up. We want to get to some questions. Can you shorten this? Then we'll go to Mr. Bhushan.

[Daniel Runde]

Yes, I'll wrap it up. I have a couple of further points. Give me two more minutes.

Within the $300 million that's being budgeted for the new DFI, I think there ought to be some consideration for so-called first loss. I also think that this committee is going to need to think about the fact that not every investment the new DFI makes is going to be successful. This committee needs to be prepared for the situation that not every one of the things they're going to come to you with is going to be a home run. That's something else the committee is going to need to think about.

Finally, I want to just reference the fact that the current ownership structure, whereby in essence it's a subsidiary of the EDC, is perhaps not going to be the best structural arrangement for the new DFI. I would posit that perhaps a new crown corporation, with a stakeholder board including Global Affairs Canada, the finance ministry, business representatives from Canada, as well of course as EDC, might be a more appropriate arrangement. I want to consider that as well.

I have one final point. There ought to be some sort of stand-alone office, most likely housed at Global Affairs Canada, to support the new DFI with small amounts of technical assistance. Having a single one-stop shop for technical assistance for the new DFI would be very important, and I think the appropriate place would be in a separate institution such as Global Affairs Canada.

Let me just stop there. Thank you.

[The Chair, Liberal, Bob Nault]

Thank you, Mr. Runde.

We apologize for shortening it a little bit.

[Daniel Runde]

No problem.

[The Chair, Liberal, Bob Nault]

We'll go to Mr. Bhushan, please.

[Aniket Bhushan, Adjunct Research Professor, Norman Patterson School of International Affairs, Carleton University, and Principal Investigator, Canadian International Development Platform]

It's a pleasure to be here. Thank you for the invitation.

I'll jump right into it. A number of my remarks will complement what the former speaker just mentioned, and clearly the first part about this not being your grandparents' developing world.

With my time I'd like to make three areas of introductory points. I'll push for one group of points that I've made that will be submitted to the committee and that I think the committee could push the government on, to clarify further the thinking on the DFI as it stands. Then I'd really like to focus on the parts about recommendations.

I'm at the Norman Patterson School of International Affairs. I lead the Canadian International Development Platform, which is a data analysis platform focused on Canada's engagement with the developing world. A lot of my presentation will reflect that perspective.

Really, to echo the first point, the landscape of development and development finance is changing quite dramatically. We know that global poverty reduction is a good-news story, and I won't belabour the statistics too much, but even out to the 2030 date of the sustainable development goals target, I believe the hardest mile in development will still be remaining and pending.

I think that for two key reasons. One, global poverty will be increasingly concentrated in the most stubborn pockets, which are the hardest, costliest, and riskiest to reach. Second, we're living in a new normal of low growth and, in the context of poverty reduction, lower responsiveness to the growth of poverty. We can discuss further the factors behind that.

Traditional donors are facing resource constraints from the combined effect of constrained budgets and growing needs. Think of costly or more frequent emergencies, humanitarian crises, the refugee crisis, and broadening agendas. I see a risk here—as I have put it in the brief that will reach you soon—of asking the leopard to grow stripes.

Essentially, this really echoes what's in Daniel's report. I know a number of the co-authors of that report. As they put it, DFIs are becoming increasingly, in this context, the instrument of choice for any and every development-related challenge. What's happening is there's a risk that they are pushed more and more outside of their comfort zone and pushed to cover a wider and wider mandate, including from NGOs and civil society organizations, CSOs, I would argue, which will push DFIs increasingly to act more like aid agencies than like institutional investors. This is a risk I think we need to keep in mind.

The other introductory point I'd like to make is that DFIs are in the space I call where the puck is going. I'll make some quick points on this. Since the Financing for Development conference in Addis in 2015, there is now a consensus on the need to go from billions to trillions in development finance. Going beyond ODA and core aid is no longer a matter of debate.

Most donors, Canada included, clearly realize this. The real question is how. Now DFI flows already exceed ODA by multiples. We know that. Conservative projections for capital flows to developing countries by 2030 are of the order of $6 trillion. The gaps in development finance, which are in the trillions, seem daunting when we look at them in isolation, but when we put them in the perspective of what I call some of the broken plumbing of the global financial system, it helps us reorient our thinking.

Think about the fact that, as of February and March 2016, about $7 trillion was lying in bond markets globally earning negative yields. You have negative yields and assets lying there. I'm not suggesting that all of this can be intermediated for development, but certainly we could do a better job.

As the previous speaker has already mentioned, DFIs are growing at a rapid pace, 10 times as fast as ODA over the 2002 to 2014 period, whichever way you slice it. But we need to remember where we find investments. They are mostly in lower and upper-middle income countries, and not in what we call the poorest LICs and LDCs, or small-share LICs and LDCs. They are primarily in five sectors: banking and financial services, industrial infrastructure, energy generation and supply.... I won't go on with the list. We can go into a Q and A on this.

I think therein lies the space and the relatively limited purpose of DFIs as additional, catalytic, self-sustaining financing in the space between public foreign aid and private investment. DFIs are financial institutions with a development mandate that provides additional and complementary financing distinct from ODA.

There are three areas that I think the committee should push the government to clarify. I don't have time to go into all of this because I want to focus on my recommendations instead, but I'll submit one. In the context of the discussion around the Canadian DFI specifically, there are semantic issues. The way this has been discussed, even the acronym DFI, has been extremely inconsistent. It was DFI, the I being an “initiative”; DFI, the I being an “institution”; and most recently, in the Prime Minister's announcement in Montreal, the I being “institute”. Which is it, and does it portend anything about scale, ambition, remit, or limit? I think that's useful to clarify.

The second point is this notion of $300 million over five years as a capitalization. Are we to understand the capitalization in the normal financial sense, as something the institution can go and lever further, or are we to understand it more as a limitation in terms of what it can do and what it will have over five years? Capitalization, and then that time period of five years, together makes no sense in the standard financial sense. This is another thing that the committee can clarify.

The next point on pushing the government to clarify is around the source and reportable use. The source, the $300 million that is coming into the DFI, is it entirely off-budget? Is it coming from the international assistance envelope, IAE? Is a proportion of it coming from the IAE? This is unclear, and I think this should be made clearer.

Secondly, on the reportable use, is the entire capitalization going to be booked as ODA or not? This is another point that I think is important to clarify because it has an implication for what Canada's ODA numbers will look like, especially going into the G7 next year.

My recommendations are, first, I think Canada and this committee should push for formally placing development additionality and sustainability in the mandate of the DFI. Unless they have a tight mandate and governance, it's been shown that DFIs are prone to drift away from their developmental purpose and more to financial and commercial purposes. This is obvious, and it makes sense for good reasons. Incentives, therefore, need to be formally aligned around development additionality.

Additionality is a concept that many DFIs use, but it's not straightforward. I'd like to offer a very simple way to think about this. That is, the investment thesis at various levels, whether at the portfolio level overall or at an individual investment level, should be able to clearly articulate how and why the involvement of the DFI's investment is expected to drive development outcomes and what those development outcomes are. That's a very simplistic, characterized way. I think we could make a contribution in this space by pushing for development additionality to be the core of the mandate.

The second principle is sustainability, by which I mean sustainability in terms of what the DFI invests in but also financial sustainability. Over the medium term a DFI should be self-financing, and it should be able to, from the evidence we have at hand of other DFIs, finance itself through retained earnings, and profits and so forth.

I'd like to quickly move to the next point, that Canada's DFI should be given the space to take risks. The key point here is risk. This fits with the earlier point I made about where global development is, the hardest mile remaining to go. If you believe that, then focusing on the poorest and most vulnerable, in large part, means increasing one's risk tolerance. One of the key criticisms of DFIs is that they don't take enough risks. EDC is good at many things. They have very strong financial capacity and capability, but they are not known as a high-risk-taking institution. This should be kept in mind.

It should be remembered, as the previous speaker said, that while there's a lot of talk about making money while doing good.... It's noted often that OPIC, the U.S. DFI, has returned $5.7 billion to the U.S. Treasury since 1971, has not required additional capital, and yet is under threat of closure. DFIs can and do lose money. I provide an example of Sweden's Swedfund. It has a specific target in terms of its benchmark, which for the past couple of years it has missed and has lost money. Development is a risky business. This is a risk-taking institution, and this should be kept in mind if development additionality is to be the core of the Canadian DFI.

I do think that DFIs with a wider slate of instruments and offerings have a better chance of driving development outcomes, so while most DFIs focus on the debt and loan end of the capital structure, only some go and offer equity. Those are the ones driving development outcomes, in my opinion, more seriously. Examples and data are provided in my brief on the CDC Group of the U.K., FMO in the Netherlands, and Norway's Norfund.

The third recommendation is that Canada's DFI will be small, and therefore by definition needs to find a niche.

According to our analysis, it will be about the second- or third-smallest of the bilateral DFIs. I think the Canadian DFI will need to strike a key balance, which is between supply and capital to existing opportunities and investing in longer-term capacity to increase the pipeline of what we call “bankable projects”.

What does it do? With the small corporates, what does it do? One way to think about this is to go where larger pieces of Canada's development financing and development investment are. One example would be the transition to low-carbon growth in developing countries, which is the focus of a lot of the investment of the Trudeau government. It is also an area where Canadian innovation could be brought to market, to globalize in developing countries.

A second area, I would argue, which stems from what I see as a key problem in terms of why investment doesn't go to poor countries, is a lack of local capacity to promote investment and package bankable deals. This points to a powerful sector that Canada's DFI can focus on: building financial sector capacity in developing countries. By focusing on the local financial sector, Canada's DFI could balance both providing capital to existing opportunities and building that longer-term capacity of bankable projects.

Finally, my last recommendation around Canada's DFI is that it has the opportunity to set the standard when it comes to development outcomes measurement and transparency. DFIs, by and large, don't do very well on reporting development outcomes and impacts. This is, in a sense, a function of the renewed interest in DFIs. It's new that they've been called on to talk more about their outcomes and impacts.

Canada's DFI, I believe, should not only track and report progress and indicators at the project level, but should combine project mezzo- and macro-level impacts. Generally, DFIs report outcomes in the form of first-order effects, primarily on employment generation, contribution to government revenues, investment outcomes and financial rates of return, environmental and social outcomes, and catalytic effect in terms of co-investment and crowding-in other players. The Canadian DFI could go further to develop a methodology on development impact measurement that also looks at its contribution to second-order growth in activity and investment and their impact, however indirect, on poverty reduction.

I will leave my remarks there. I've gone a little bit over the time, but I appreciate your patience.

[The Chair, Liberal, Bob Nault]

Thank you, Mr. Bhushan.

We're going to go right to questions.

We'll start with Mr. Kent, please.

[Peter Kent, Conservative, Thornhill, ON]

Thank you, Chair.

Thanks to both of you.

For the past almost 50 years, Canada has been a major partner in the Inter-American Development Bank. We contribute about 4% every year. During the economic crisis, I think we temporarily increased callable capital to something north of $4 billion. It has been fairly successful. I think it has a good track record in terms of Canadian private sector engagement, as well as some pure development work in places such as Haiti, after the earthquake.

I'm wondering, both of you, what your advice would be for the relationship between, as you described, Mr. Bhushan, a relatively small, new Canadian DFI, with something as well developed and working effectively in Canada's neighbourhood and the Americas as the Inter-American Development Bank.

Mr. Bhushan, would you like to go first?

[Aniket Bhushan]

Sure. I think the Canadian DFI, just as you've said, by virtue of its size—once it's clarified what it actually means in terms of size, scale, and scope—will need to partner not only with the IADB, but with other regional development banks.

I think there are two different things. I think the callable capital thing is a very specific thing, and it's around the financial crisis and responsiveness. I think it's worth looking at what the impact of callable capital is if it's there but never called.

I think we shouldn't take these at face value. I think there's a lot of support there, but if you look at the deal structures of most DFIs, you'll see that they partner with the regional development banks, the IFC, and others, so I entirely foresee that will happen in the case of the Canadian DFI as well.

I think the real question to ask is what the additional delta is, if you will, in terms of the development delta that the Canadian DFI's investment will bring to a project. What is the additional impact? Also, why would you need that as opposed to, say, just putting in more resources through the IADB, the IFC, or elsewhere?

[Peter Kent, Conservative, Thornhill, ON]

Yes, exactly.

Mr. Runde.

[The Chair, Liberal, Bob Nault]

Mr. Runde, we can't hear you. There is a lot of static. They're trying to fix it.

[Peter Kent, Conservative, Thornhill, ON]

As we wait to reconnect, perhaps I'll just do a follow-up question. You talked about balancing, though not in so many words, the individuality of the decisions made by a DFI, as opposed to the political interest of the sponsoring country. How is that? How should that be balanced? What are the dangers in trying to achieve a balance?

[Aniket Bhushan]

If you think about what the instruments are, or the potential go-tos to help with that.... If you have a clear and tight mandate, that provides one element of amelioration. If, on top of that, you have a governance structure that enforces that mandate, such that the development component of it is central and not the promotion of, say, the host country's narrow commercial objective, that's another way.

I should note that we did a brief last year—I think some of you have it—on making it happen and getting the details right. One of the key elements of getting the details right is having an independent governance board looking at the deal flow off the DFI in a very tight manner. In the Canadian context, because we are talking about a relatively small number, it's going to be a relatively small number of approvals as well.

The centrality of the board.... Who composes that board? Is it just government, or does it include stakeholders from civil society and so forth? Does it include stakeholders from countries where the DFI may be focusing, for instance? That's one way. The other element is to question, on a deal-by-deal basis, whether this adds an additional component to the development, and to think through the counterfactual. Is this necessary? I don't think many DFIs do this.

[Peter Kent, Conservative, Thornhill, ON]

I'll leave it there for now, Mr. Chair, but if we do reconnect it would be interesting to get a response from Mr. Runde on that first question.

[The Chair, Liberal, Bob Nault]

We'll work our way through that.

Mr. Fragiskatos, go ahead, please.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much, Mr. Chair.

Thank you for being here today, Mr. Bhushan. I think this is the second time we've had you at the committee. You made a point that DFIs tend to invest in infrastructure and banking and financial services, and there were three other areas. Could you touch on that?

[Aniket Bhushan]

In terms of a quick rank ordering, the five main sectors of a DFI portfolio are banking and financial services, industrial infrastructure, energy generation and supply, transportation and storage, and communications, which should be telecom.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Although at first glance those areas might not contribute to poverty alleviation, they do contribute to economic development and growth, and hence poverty can be tackled significantly. Would you agree?

[Aniket Bhushan]

Completely.

[Peter Fragiskatos, Liberal, London North Centre, ON]

You spoke about climate change innovation as a potential area for the DFI to focus on. Could you expand on that by touching on the focus of other DFIs? Are other DFIs making that a priority?

[Aniket Bhushan]

Yes. For example, regionally in Africa, in many cases DFIs have been what we call first movers into spaces. An example people often refer to is the CDC Group, the U.K.'s DFI. It is one of the largest DFIs in the world and one of the first movers in renewables in Africa.

That has a couple of different effects. The first is in terms of opening and moving into a space, and the second—equally important, I think—is a signalling effect to other investors. Once a DFI is there, it changes the risk profile of what would otherwise be deemed too risky for other investors to be involved in.

Certainly, in terms of renewables and investment consistent with the transition to low-carbon growth, there is plenty of evidence of DFIs being big players in that space.

[Peter Fragiskatos, Liberal, London North Centre, ON]

It would make sense that investing in those areas generates economic growth. Is that correct?

[Aniket Bhushan]

Yes. Obviously, it's hard to pinpoint the impact in the short term and at a micro level, but over the long term, yes.