Foreign Affairs Committee on June 13th, 2017

[The Chair, Liberal, Bob Nault]

I have a last question that relates to the idea that the country that has a DFI accepts the high-risk structure and mandate it has been given, which means that governments and politicians and the public should be aware that there will be infusions of capital from time to time because of the risk being taken.

It's a good investment to put in some of our development assistance money that we've earmarked, in your case your 0.7%, I think it is, every so many years. It's a good strategy because you also leverage the private sector. Let's assume the $300 million that Canada's putting in is just the start, and that within the next few years we'll have to do it again. We accept that as a legitimate strategy, because we leverage the private sector much better than we would if we put it straight into NGOs.

Is that a realistic argument to make right off the bat, without pretending that somehow this is going to be self-financing once we get an infusion? Of course, some politicians 10 years from now will have to come back and restructure it because it may not be working the way it was intended. I'd be very interested in your comments about that.

[Simon Maxwell]

It's certainly true that you can aspire to leverage large amounts of private sector capital. A figure that's often used is 20:1, for example in the climate field, where one pound of government money can leverage 20 pounds' worth of private sector money. In principle, you'll get money back, so whether you need to recapitalize.... If you're getting the kinds of returns that Diana is mentioning, you shouldn't need to recapitalize unless you want to expand, but if you want to expand, and have even higher returns, then you will need to put in further tranches of capital.

[Paddy Carter]

I'm hesitating because, like many people around the world, I feel my ability to second-guess what plays well with the voting public has fallen to zero. I know there are people who are skeptical about these leverage arguments. There are a lot of DFIs out there, and there is a suspicion the same dollar gets attributed to DFI multiple times. That's maybe skepticism within a small specialist and engaged NGO community. I'm not sure whether that skepticism extends to the wider public. I'm ending up with no answer here. I don't know whether this leverage argument would help you sell to the public what DFIs do.

[The Chair, Liberal, Bob Nault]

Ms. Noble, you get to wrap it up.

[Diana Noble]

I think it's really helpful to start with lowish expectations. That just gives the team you hire a good platform to exceed expectations. Remember also that if you're making a choice between making an investment or making a grant, with a grant, that money is 100% gone, but if you make an investment through a DFI, the intention of course is that you get a positive return, and then it becomes a renewable balance sheet. Even if you make some losses, you're still making better returns than losing everything. I think accepting that you're taking risk, giving it time, and having your return expectations reasonably low gives yourself the best chance of being in a great place to build on that in 10 years' time.

[The Chair, Liberal, Bob Nault]

As we wrap up, do you have a larger plan in your mandate that relates to this new mandate that the government gave you in 2010 vis-à-vis the poorest countries? Do you have statistics now that we can look at that show the progress you're making? It's now seven years in, and it would be useful to see where that would be taking you vis-à-vis the higher risk mandate that you were given in 2010.

[Diana Noble]

Yes, of course. We can show you what our portfolio looked like in 2011, when I joined, in terms of where the capital has gone, and how it looks today. It is a dramatic change.

[The Chair, Liberal, Bob Nault]

That's very good. Thank you.

Colleagues, that will wrap it up for us today.

I want to thank Mr. Carter, Mr. Maxwell, and Ms. Noble for giving us an insight. Of course, this is our first try, so we get to experience the frustrations and the challenges that you've had over the last number of years. As has been suggested by Mr. Mitchell, hopefully we can pioneer going in a direction that maybe makes a little difference around the world.

I want to thank all three of you for spending some time with our committee this morning, or this afternoon or this evening for you. We very much appreciate it.

Thank you, colleagues.

Colleagues, that will wrap it up today. We will see you on Thursday. Have a good day.

The meeting is adjourned.