Update on Upstream January 2020 ILLUSTRATIVE & DIRECTIONALLY The Initial scenario forecasts between 45 and 130 Upstream investments per year over the next 10 years Historical commitments Projected commitments - BAU Projected commitments - Upstream Own-Account Commitments, historical & projected1, $ billions FY20-30 CAGR 25.0 25 23.6 22.2 17.2% 6.6% p.a. 21.0 7.8 19.8 7.0 (31%) 20 6.3 18.7 (30%) 17.6 5.7 (28%) 5.1 (27%) 16.4 4.5 (26%) 15.2 4.0 (24%) 15 14.2 3.3 (23%) 4.0% 2.6 (20%) 13.2 2.1 (17%) 11.9 1.6 (15%) 11.6 11.1 (12%) 10.5 For comparison, 10 8.9 17.2 FY09-18 CAGR 1.1 15.9 16.5 (13%) 14.7 15.3 (70%) (69%) 13.6 14.1 (72%) 12.6 13.1 (74%) (73%) 11.6 12.1 (77%) (76%) (83%) (80%) (88%) (85%) 5 4.0% 7.8 (87%) 0 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 Average Upstream investment size ($M)2 $43 $46 $49 $52 $55 $58 $60 $63 $66 $69 $72 Estimated count of Upstream investments 45 56 66 78 89 95 102 108 115 122 130 1 Historical Upstream commitment data is not available prior to FY19 2 Reflects weighted average between Infra, MAS, and FIG SOURCE: Team analysis, to be refined and problem solved. Historical data provided by IFC 3 The Definition of an Upstream Activity Has Been Established Working Upstream means proactively helping to stimulate and to create conditions that result in IFC’s Upstream activities must: the movement of capital -- private, domestic, Have a clear line of sight to a sized potential IFC and foreign -- into productive investment in 1 investment (or series of investments) within 5 years; and member countries. The work can be accomplished as quickly as in a few months or take several years. Identify relevant market/investment gaps to be addressed by developing specific investment projects and/or 2 conducting regulatory/sectoral reforms, including by working with the World Bank; IFC’s Upstream activities aim to: • Support the creation and realization of specific Be consistent with the priorities of relevant WBG/IFC projects, for which IFC is a likely financing partner 3 country strategies; (“Transaction Upstream”); and/or • Have a wider market or sectoral impact, to facilitate private sector investment, for which IFC 4 Have a defined, measurable development impact. could be a potential financing partner (“Creating Markets Upstream”). More information can be found at Upstream website (type “ifcupstream/” as URL in Google Chrome) 3 ILLUSTRATIVE Proposed mandates for enabling functions Proposed mandate Focus: credit risk, ▪ Help structure the early Upstream idea, operational risk, Concept Note, and Implementation Plan to ▪ Help structure the early financial risk maximize potential development impact Upstream idea to Risk & ▪ Assist with result measurement framework and increase the likelihood Economics Credit estimate of the project’s development impact of an IFC investment by addressing potential risk threshold that may prevent IFC from investing Focus: legal & ▪ Help structure the early Upstream idea, ▪ Provide input to compliance risk Concept Note, and Implementation Plan to prioritize which maximize potential mobilization amount Upstream projects will Legal & receive funding by ▪ Assist project team during implementation in Treasury identifying potential mobilization partners for Compliance highlighting “go”/”no- the resulting investment go” risk factors earlier in the process ▪ Support the mobilization process during the investment phase ▪ Help Project Leader identify the correct Risk Tier for their project Focus: potential ▪ Help Upstream Units identify strategic areas that would benefit from donor funding ▪ Assist project teams adverse E&S impact; ▪ Coordinate the donor funding process and help with identifying and implementation support in addressing manage relationship and communication with ESG managing risks that Partnership ESG bottlenecks donors supporting Upstream work arise during implementation & and/or maximizing ▪ Help formulate the message on the Upstream investment booking positive sustainability idea and project to maximize potential for donor impact funding ▪ Enabling functions should be engaged early on in the project cycle to solicit inputs (i.e. not sign-off) that will help structure the idea ▪ Throughout the life cycle of the project, the Project Leader is responsible for driving the interaction with enabling function experts, with support from a dedicated business partner from each enabling function 26 We are hardwiring key elements of the Upstream operating model ▪ Definition has been established based on input from throughout the ▪ Staffing and funding model assumptions are tied to the FY2030 targets organization ▪ The current staffing plan calls for an acceleration in staffing to 515 FTEs in ▪ Eligibility criteria require that projects be consistent with country FY21, including 300 full time staff strategies, address market gaps and have a clear line of sight to a sized ▪ Large scale recruiting initiative has been launched to address staffing IFC investment within 5 years and demonstrate development impact Staffing and Definition requirement ▪ Eligibility criteria is being tested against the existing pipeline The “case funding ▪ US$280 million of annual spend required in FY23 to support Upstream, 80% law” for qualified upstream projects is in development with upstream of which is regional - this represents ~37% of FY20 total Operations budget leaders and Upstream Director to be responsible for codification of and a 3x increase over the US$84 million FY20 Upstream budget decisions and models ▪ Proposed structures and mandates embed Upstream teams in both ▪ Upstream target has been added to the Corporate Scorecard global and regional industry departments, with integrated support from ▪ Reporting on Upstream activities is being put in place across the matrix to enabling functions, including permanent Global and Regional Upstream allow for full visibility across industries and sectors units; Global Upstream Director; agile Upstream project teams; and Structure and ▪ Upstream flag has been added in iDesk to track projects partially and fully dedicated enabling function staff. Targets and mandates ▪ Global Upstream Managers are in place metrics ▪ Regional Upstream leads are being recruited ▪ Mandates for other positions, including for Global Upstream Director, are being converted into TORs and recruitment is to be launched shortly ▪ Upstream ADM framework has been put in place ▪ Overall size of financial award pool tied to Corporate Scorecard performance ▪ Seed funding has been simplified to support pipeline at scale ▪ Departmental level awards: a ring-fenced Upstream award pool (US$3-6 ▪ Training program for funding and governance is being launched million) will be allocated to departments on the basis of departmental Upstream performance Governance Incentives ▪ Individual awards: Upstream staff with performance rating 3.5 and above will be eligible to receive an additional payout from the Upstream pool ▪ Upstream success will support career progression via defined competencies and a future requirement for senior roles, as a well as a program of corporate recognition (e.g. ‘Top 30 Individuals’) 2 There are different pathways from Ideation to Investment Different pathways towards downstream investments may occur depending on the maturity of the idea, nature of the upstream engagement Upstream Idea Generation Resources are Upstream Seed needed to define i.e. scoping, diagnostics, market/company surveys & Staff member comes the opportunity exploring ideas; funds are not to be used for providing advice Downstream up with an idea for an or financing to clients Investment upstream engagement to unlock investments Concrete and create markets opportunity Staff member speaks identified; ready to with relevant regional Potential move forward with Upstream lead who identified but Upstream Project Investment confirms fit with need follow on Transaction Country Strategy and Upstream work i.e. sufficiently advanced efforts where there is line of sight directs staff member before to a client engagement within 5 years, or where IFC is to submit the idea to Investment can providing advice to a client the Upstream unit based on idea’s be pursued maturity 4 Global and Regional Upstream structures are being set up, with 200 fully dedicated staff by July 2020 Global Teams Regional teams COO Summary of structural design ▪ There are permanent Upstream Global Upstream Global Industry RVPs structures both from the Global Director Directors – and Regional side, staffed by Infra, MAS, FIG fully dedicated Upstream staff Africa & MENA RID ▪ Upstream project teams will be staffed by both fully and Permanent Regional Upstream Units, which can vary by sector. Scaling of these units will depend on LAC & ECA RIH Asia RID partially dedicated Upstream Asia Infra UU staff, most of whom come from MENA Infra UU Global Upstream Unit ECA Infra UU regional teams Upstream idea incubation / Permanent Global Upstream Units with fully dedicated staff (“GUU”) - Infra project teams Africa Infra Upstream Unit (“UU”) LAC Infra UU ▪ There is a need for an Upstream Director to support Upstream implementation and focus on Upstream project teams staffed by both fully and cross-sectoral engagements opportunity in the sector and region partially dedicated staff, most of whom come from MENA MAS UU Asia MAS UU ▪ All units can engage in Global Upstream Unit - regional teams Africa MAS UU ECA MAS UU Upstream idea incubation MAS LAC MAS UU ▪ Enabling functions will support Upstream projects by providing a point of contact for permanent Upstream structure MENA FIG UU Asia FIG UU as well as a pool of available Global Upstream Unit - Africa FIG UU ECA FIG UU subject matter experts to FIG support Upstream projects LAC FIG UU Global Upstream Unit - CDF Infra MAS FIG CDF Fully dedicated staff Partially dedicated staff 4