Partially lifting the lid on a “treasure trove” of international economic data has not dampened interest in getting a closer look inside, but the crystal ball for the future is hazy.

The valued data in question is known by the acronym GEMs. There’s information from 26 development finance institutions covering 20,000 contracts over 30 years. GEMs is run by a consortium of the 26 contributing development finance institutions and has the full name of the Global Emerging Markets Risk Database.

GEMs officials were in a celebratory mood at a forum Oct. 23, talking about the significance of a recent report, based on the data, showing that investments in developing countries are less risky than sometimes perceived. (See reports and also a related Research Note.)

The headline disclosure is that the average default rate on private loans in the GEMs database was 3.6 percent, “roughly comparable to average default rates observed in noninvestment grade companies that receive a B credit rating from S&P (3.3 percent) and a B3 from Moody’s (4 percent).” The GEMs statistics also reveal that recovery rates, which measure the amount of investment recovered after a default occurs, “were higher than expected,” on average, 72 percent.

“It’s a really good day for the consortium,” said one official, whose name can’t be connected to his message. No speakers can be quoted under the rules for the session, held during the fall meetings of the World Bank and the International Monetary Fund and attended by more than 100 people.

They heard not only from GEMs officials, but also from three speakers from the private sector, from Moody’s Ratings, J.P. Morgan and a Dutch investment company.

The private sector representatives, while appreciating the new reporting, jumped at the moderator’s invitation to offer suggestions for what else should be disclosed.

They recommended revealing more about investment returns, investment impacts and state-owned enterprises. Also, they suggested more regular reports, and with more detail, such as on the size and types of companies, the currencies involved, interest rates,  the subjects of the investment and more.

One speaker said, “We want to sit down and understand the why and the how behind this data,” adding, “They are only as useful as far as we can understand them.”

A GEMS official said the some of the suggestions are being looked into.

The GEMs consortium governing body has not indicated what its future plans are. It meets privately several times a year but does disclose any minutes.

Eye on Global Transparency requested the minutes and is appealing the denial of the request through the EIB appeals process. EYE also was denied access by the International Finance Corporation to a market assessment report about GEMs. The study was funded by the Multilateral Development Banks Challenge Fund, backed by the Bill and Melinda Gates Foundation, the Rockefeller Foundation and Open Society Foundations, who normally require disclosure of studies they support.

Disagreement Over Whether G-20 Goal Met

Calls for more transparency of GEMs data have been circulating for several years and came most significantly from a special committee created by the G-20 in a 2022 report called the Capital Adequacy Framework (CAF) review.

“We have answered the expectations of the G20,” said one speaker at the forum held in the World Bank headquarters. Participants for GEMs included Román Escolano, Chief Risk Officer at the European Investment Bank (which manages GEMs) and Paolo Mauro, Director of Economic and Market Research at the International Finance Corporation.

However, Nancy Lee, a member of the G-20 Independent Expert Group, disagreed, saying much more needs to be disclosed to meet the G-20 goals.

Lee was presiding a few blocks away a session held by the Center for Global Development (CDG), where she is Director for Sustainable Development Finance.

At the CDG forum, Gary Forster, CEO of Publish What You Fund, a nongovernment organization based on London, summarized a new report on how to encourage more mobilization of private capital for development.

The PWYF report says that mobilizing private capital “requires a combination of the right incentives to improve measurement and the disclosure of relevant data to create the environment that leads to significantly more investments by the private sector.”

The report is sharply critical of nondisclosure agreements included in most contracts with development finance institutions.  It states: “Claims of commercial confidentiality are not only overused but are also contradicted by many in the private sector who support our disclosure proposal, including the identification of the mobilised party by typology. Further, the lack of disaggregated data discourages private sector investment, as critical missing information increases market inefficiencies and the cost of doing business with DFIs.”

The Global Emerging Markets Risk Database (GEMs) Consortium Oct. 15 reported on country-by-country loan default and recovery rates for the first time, but the Consortium has still not met the key transparency demand: making the database accessible.

The new data was called insufficient by critics in the private and nonprofit sector who say that issuance of more detailed information is necessary to boost lending to Emerging Market and Developing Economies (EMDEs).

GEMs said it is issuing “increasingly granular statistical publications,” but its future plans remain unclear.

The latest information came in two reports, released by the European Investment Bank, which administers the GEMs database. (See press release.) The GEMs data comes from 26 multilateral development banks (MDBs) and development finance institutions (DFIs) that pool their data using a harmonized template. The GEMs database is used by the 26 institutions, whose representatives jointly make decisions about its transparency.

Transparency Levels Debated

The lingering issue is how much data should be made available.

There is widespread agreement that more information would benefit EMDEs by providing investors “greater insights into credit risks in emerging markets, thereby allowing them to better guide their asset allocations,” as the GEMs press release puts it.

But the “piecemeal approach” was sharply criticized by Hubert Danso, Chief Executive Officer and Chairman of African Investor, an institutional investment holding platform based in South Africa.

“While today’s reports, conveniently timed to deflect criticism during the World Bank Annual Meetings, provide fragmented insights using GEMs data, they unfortunately miss the mark,” Danso told Eye on Global Transparency. The Bank and the IMF meetings will be held Oct. 21-26 in Washington.

Similarly, Karen Mathiasen, project director with the Center for Global Development, a Washington-based think tank, said that “for GEMS data to be of real use to the private it needs to include breakdowns by country and sector.”

The push from more detailed transparency has arisen from many quarters, but perhaps most significantly from the Group of 20 developed countries. Transforming GEMs into a free-standing entity “by 2024” was proposed. A 2022 report to the G20, called the Capital Adequacy Framework (CAF) review, said GEMs should “publish more granular statistics and analysis of the data showing credit performance for sovereign and private sectors by sector, countries or country groups, and regions.” The report further prescribed that GEMs should “share anonymized statistics with private investors and ratings agencies.” In addition, it said, GEMs should “provide risk analytics, charging fees as needed.” A new G20 action plan for the MDBs is being developed and could include more specific goals.

The Development Committee of the World Bank Group, in a wide-ranging statement issued April 19, 2024, stressed that. private capital mobilization “will be instrumental in meeting development financing needs.” Among other steps to this end, the Development Committee “applauded the publication of additional data from the Global Emerging Markets Risk (GEMs) database and statistics on the WBG’s default and recovery rates and look forward to further disaggregation, including by country and sector.”

The GEMs consortium, while providing reports with gradually increasing levels of granularity last year and this, has been circumspect about its long-term goals. In the Oct. 15 press release, Román Escolano, Group Chief Risk Officer, European Investment Bank, said, “The updated publications, with greater disaggregation and analysis, address feedback from our key stakeholders, and GEMs plans to continue publishing such statistics in a timely manner.”

Learning about future plans is complicated because the Consortium holds closed meetings and does not release any documents about them, including minutes.

The EIB denied EYE’s request for access to the minutes of the GEMs key decision-making body, the General Assembly. The EIB said disclosure of the minutes would “seriously undermine” its work and subject officials to “external pressure.” (See EYE article.) EYE appealed the denial but the EIB has yet to issue a decision. EYE also appealed the EIB’s decision to keep secret key parts of 2019 GEMs data-sharing agreement between the EIB and ILX Management, a Dutch investment company. This appeal is also pending. (See EYE update.)

Oct. 15 Report Provides More Data

The GEMs Consortium said that both of the new reports would benefit investors and that they show that “emerging market investments should be within the risk appetite of a broad range of investors,” in the words of Federico Galizia, Vice President, Risk and Finance, International Finance Corporation.

As summarized by the EIB:

The first publication covers the credit performance of lending to private and public counterparts. The average annual default rate of lending to private entities at 3.56% is broadly aligned with many non-investment grade firms in advanced economies, and the average recovery rate of 72.2% is higher than many global benchmarks. Although the GEMs statistics reflect the unique experience of MDBs and DFIs, these results provide valuable information on the investment risk in EMDEs, an area characterized by a lack of available credit risk data.

The second publication provides default rates and – for the first time – recovery rates for sovereign and sovereign-guaranteed lending based on an expanded range of 40 years of data. Results shows an average annual default rate of 1.06% and an average recovery rate of 94.9% and complement the GEMs statistics on private and public counterparts to provide a comprehensive view on EMDEs credit risks.

Danso Sees “Fiduciary Negligence’

Danso said, “This piecemeal approach distracts from the core issue: the urgent need for the full implementation of the GEMs2.0 directive, as mandated by the G20 for rollout in 2024.”

“Anything less,” he continued, “postpones the structural transparency required to properly price risks in emerging markets and developing countries (EMDCs), further hindering scaled efforts to crowd in private capital.”

According to Danso, “The absence of a fully operational GEMs2.0 database (which is a no cost reform for MDBs and the GEMs Secretariat), costs developing countries over $15.6 billion annually in avoidable cost of capital premiums and lost opportunities.”

Without this database, he said, “the current data landscape offers limited practical value for pricing risks and making informed investment decisions” and “EMDCs are likely to endure another year of inflated capital costs, just as official development assistance (ODA) declines and fiscal constraints deepen.”

Danso said, “The reluctance within MDBs to fully embrace their mandated responsibility to crowd-in private capital reflects not just a breach of mandate, but also erodes trust with their sovereign members and clients. Such fiduciary negligence by both the MDBs and the GEMs Secretariat compromises global financial stability and sustainable development—precisely when their most vulnerable and fiscally constrained clients need it most.”

Green Climate Fund (GCF), the world’s largest climate fund to accelerate transformative climate action in developing countries, has approved $28 million (approximately Rwf38 billion) grant funding to support the Green City Kigali initiative.

The funding announced in South Korea during the 40th Board Meeting of the GCF follows the completion of Green City Master Plan waiting for implementation on some 600 hectares in the Kinyinya suburb of Gasabo District, in Kigali.

This project will serve as a model for sustainable urbanization, showcasing climate-resilient, and low-emission infrastructure development. In Rwanda’s rapidly urbanizing capital, Kigali, nearly 77.3% of the population resides in unplanned settlements, making the city highly vulnerable to climate-related risks such as floods and landslides.

The Green City Kigali Project, implemented by Rwanda Green Fund, addresses the challenges by focusing on the upgrading of informal settlements with innovative, sustainable and climate resilient solutions.

“This agreement underscores the strength of our partnership at a critical time when the effects of climate change are increasingly evident. These impacts not only threaten the country’s economy but also pose serious risks to the lives of our people. The Green City Kigali Project represents a proactive step towards creating a sustainable and resilient urban environment, aiming to mitigate these challenges and promote a better quality of life for all Rwandans” said Valentine Uwamariya, Rwanda’s Minister of Environment.

The funding from GCF will support green infrastructure investments including resilient infrastructure for stormwater management, water security, renewable energy, and improved waste management in Ngaruyinka Village.

It will also support capacity building and skill development through the establishment of a Technical and Vocational Education and Training (TVET) center to develop green construction skills and green livelihoods.

Replicating best practices across Rwanda through training programmes for professionals in green construction and city development is also part of the project.

“This project not only represents a new model for urban development in Rwanda but has the potential to provide a template for other cities in Africa and around the world to plan resilient and sustainable urban development for a changing climate. GCF will look to replicate this approach in other countries drawing on the lessons from Kigali,” said Henry Gonzalez, the Chief Investment Officer of the Green Climate Fund.

The project will be implemented over the next five years, positioning Kigali as a model of sustainable, climate-resilient urban development for the region.

Teddy Mugabo, the CEO Rwanda Green Fund, said GCF board’s decision to support this project is a significant boost to Rwanda’s vision for sustainable urban development.

“By integrating green technologies and improving settlements in a challenging environment, this initiative complements the broader Green City Kigali program, addressing climate challenges and promoting long-term resilience,” she said.

Rwanda Green Fund is the country’s financing vehicle designed to attract climate finance.

30,000 housing units expected

The Kigali Green City project will feature climate-resilient housing units built with locally sourced materials and provide at least 40 per cent affordable housing through innovative typologies. The development of Kigali Green City will begin with a pilot phase covering 16 hectares, expected to be launched in 2025 and completed by 2030. This phase will have at least 2,000 housing units and other amenities.

Over 30,000 housing units are expected once the project is fully implemented. Residential typologies include incremental housing and high-end villas. For these houses and other amenities to be built under the project, the aim is to use local materials to promote local production as well as create jobs.

The project will involve constructing buildings that maximize passive design – with optimized window areas, that are well shaded, naturally ventilated and do not require air conditioning, complying with the EDGE green building standards, which reduce energy demands by 40 per cent.

The construction will also minimize embodied carbon in construction by constructing lean buildings with locally sourced, natural, minimally processed materials.

The Green City Project’s 600 hectares are divided into 18 neighbourhoods, each with a school and recreational areas. Community spaces, or open spaces, and recreational spaces for health and wellbeing were also considered. As part of implementing the proposed Green City Master Plan, the City of Kigali has announced plans to create Kinyinya ‘Forest Eco-park’ on the former Deutsche Welle Radio site.