Os países que compõem o bloco BRICS (Brasil, Rússia, Índia, China e África do Sul) realizam de 26 a 28 de março, em Durban, África do Sul, sua quinta reúnião de chefes de estado e devem aprovar a criação de seu próprio banco de desenvolvimento – espelhado, em alguma medida, no Banco Nacional de Desenvolvimento Econômico e Social (BNDES).
O Instituto Mais democracia, em aliança com a Fundação Heinrich Böell, está monitorando esse importante movimento financeiro e geopolítico e teve acesso a uma das versões do documento elaborado pelos economistas Nicholas Stern (da London School of Economics) e Joseph Stiglitz (da Universidade de Columbia), divulgado em setembro de 2011, que vem servindo como um dos subsídios aos estudos de viabilidade da futura instituição financeira.
Leia abaixo.

An International Development Bank for Fostering South-South Investment:
Promoting the New Industrial Revolution, Managing Risk and Rebalancing Global Saving
Nicholas Stern (LSE) and Joseph Stiglitz (Columbia University), September 2011

0. Introduction and summary
If the international economy functions well this decade could see substantial improvements in the quality of life across the world, with the possibility of lifting hundreds of millions of people out of poverty. This will require infrastructure investment on a great scale in the developing world to support growth and opportunity, particularly for poor people. That investment requires finance on a comparable scale and in ways that are tailored to the risks and challenges. But there are risks to these possibilities if the world’s macroeconomic prospects remain fragile, if financial markets perform inadequately in their job of bringing funds to good investments, and if the world continues on its current pattern of climate and environmental damage.
This paper provides a proposal – the establishment of an International Development Bank for fostering South-South investment – that can respond to the challenges of finance for development, help reduce these dangers and risks, and help emerging markets and developing countries show the leadership that their changing economic position justifies. In summary:
A new institution is required to ensure a better allocation of hard-earned savings of developing and emerging economies away from risky portfolios, much of which is in rich countries, and onto sound investments in the developing and emerging world.
Low-carbon infrastructure and technologies, in particular, are crucial to lay different and more resilient foundations for growth in the next decades. Investments are urgently required to both mitigate the risks and adapt to climate change, generate economic growth, reduce poverty and promote stability and security. These are the great challenges of the 21st century. Failure on one is likely to imply failure on the others.
Developing and emerging countries are in the position to both lead on the efforts to rebalance savings and investments and to make significant progress in creating the infrastructure for a different type of economic growth. Their hard work and strong economic growth is changing the world and they have created the right and ability to lead. This in no way absolves developed countries from their existing commitments both on development and climate change.
Existing institutions are inadequate for financing these crucial investments. There are major deficiencies in their ability to manage and transfer sovereign, commercial and climate change policy risk, they have unsuitable governance structures, and they are unable to deliver finance on the scale required and with appropriate instruments. Further, they face political obstacles to expansion and reform. And they are often unable to involve important stakeholders, such as the private sectors, sovereign wealth funds and philanthropic organizations on a sufficient scale and with an ability to share in shaping the agenda.
Decisions on ownership and governance structure for this new institution should be led by emerging and developing countries, with an appropriately skilled and equipped Board. It should be able to issue a wide range of instruments that suit the diverse range of infrastructure and technologies. Initial capital may be around US$30bn, with say, $8bn paid in. This could quickly lead to lending volumes of $3-6bn per year with overall investment size around $10-20bn per year. Success could lead it to double or triple its capital over the following 10 years or so, in which case it could be associated with investments of $50bn or more per year by the end of its first decade.

1. Investment for development
Key large, fast-growing countries around the world have agreed on the urgent need to direct some of the global savings to developing countries as part of the response to the current global macro-imbalances.1 Their huge exposure to developed country bonds now looks like an unbalanced portfolio. Simultaneously, the weak functioning of financial systems in developed countries was a central cause of a serious misallocation of resources towards risky financial propositions—including bets on inflated housing markets—and, consequently, of the current economic and financial crisis.
At the same time, there is broad consensus that development should take a different path; a systemic transformation of the economy based on reduced emissions and higher resource efficiency. There is an overwhelming case for action to radically reduce greenhouse gas emissions and to increase the productivity, sustainability and resource demand of developed, emerging and developing economies. And unless that action is strong in the next two decades, there is a major risk that climate damage will be so radical as to imperil living standards across the world and cause many to move. There is thus a danger that during this century development could be halted and reversed and the achievements of recent decades undermined. The dangers from climate change affect all countries, although poor people are hit earliest and hardest. The potential scale of risk is such that we are the first generation that could destroy, through our neglect, the relationship between humans and the planet. Laying the foundations for a new energy and industrial revolution is therefore the right thing to do from the perspectives of development, fighting poverty, promoting stability and security, and managing sustainability and climate change. Development and climate change are the same agenda: a growth pattern based on high-carbon and intensive resource use will destroy itself. Developing and emerging markets is where the bulk of infrastructure and other investment in coming years will be: they are in a special position to set the pace of this new energy and industrial revolution.
All this points to the opportunity to channel some of the flows of global savings to emerging markets and developing countries where many of the sound production investment opportunities exist. Investments on a major scale are also necessary to adapt to climate change and many of them can simultaneously advance development and mitigation as well as adaptation. All sectors are relevant to both mitigation and adaptation: agriculture, industry, buildings, transport, power. Energy efficiency, renewables and technological change will be crucial. Urban infrastructure will be centre stage. There is a great urgency and potential in fighting deforestation.
A South-to-South facility could facilitate the necessary flows: a modern bank with a strong sustainable infrastructure perspective, equipped with a full range of financing instruments and the ability to manage risk, able to be flexible enough to involve existing national, regional and multinational development banks as well as the private sector and others (such as sovereign wealth funds and philanthropic organizations). In this paper we argue that such a new facility could play a crucial and constructive role in fostering South-South investment. For specificity we speak of an International Development Bank (IDB) but many titles are possible. We outline the arguments for such an institution and the facilities it should provide and then, for illustrative purposes, give examples of possible structures. These are potential options for a number of features, such as the range of instruments, but the specifics of design would naturally be a matter for the founders.

2. The break between savings flows and investment needs
In the years before the crisis, there were complaints in some advanced industrial countries about a global “savings surplus”—so large that it was referred to in some quarters as a “savings glut”—and several fast-growing emerging economies are indeed characterised by high saving rates. Some of these countries are now looking for investment opportunities to diversify out of the ‘traditional’ investment in US or Euro bonds. Even before the crisis there was a feeling that something was amiss: there were better ways of deploying the world’s savings, given the enormous needs for investments to promote development and to respond to the challenge of climate change. But today, after the crisis, the world is operating well below its potential. Something is wrong if, simultaneously, there are excess funds looking for uses, unutilised labour and capital and vital needs that need to be satisfied.
The G20, meanwhile, has been calling for those countries with high savings to reduce their savings and to consume more. But the planet will not survive as a viable habitat if everyone aspires to the kind of resource-intensive lifestyles that have marked some of the advanced industrial countries. Developing countries and emerging markets are increasingly aware of this,2 and they are increasingly recognizing it in their development plans. One example is China’s 12th Five-Year Plan.
The focus should thus not be on discouraging savings, but on recognising that there was (and is) a massive failure in the deployment of savings. In other words, global financial intermediation has not functioned well, and there is a great misallocation in how savings have been “recycled”. Surely, investing them in American houses that were beyond buyers’ ability to pay was not the best global use of those funds.
The problem is that markets, for all their virtues, have not been good at handling certain kinds of risks. The deficiencies in global capital markets are exemplified in the phenomenon of massive flows of money going in the wrong directions—from developing and emerging markets to the advanced industrial countries—rather than taking advantage of opportunities for sound investment in economic growth and poverty reduction in the developing world, which is low-carbon and climate-resilient. Developing countries have been exporting their hard-earned savings and importing risky portfolios that do little to advance the well-being of their own people.
A South-to-South multilateral facility, where a number of key economies in the South would take the lead in ensuring that funds are used to promote development and respond to climate change, would enhance the well-being of the citizens of the South today and in the future. At the same time, such a facility could help the vexing and until now seeming irresolvable problem of global imbalances. But contrary to the G-20 proposal of promoting the kind of consumption that would put our planet at risk, it would do so in a way that actually lays the foundation for the next decades of sustainable growth and development. In doing so, it would make an important contribution to resolving a set of issues that has been a source of global tension for years. And at the same time, such a facility would provide a sound driver of growth in a world economy that is likely to be fragile for much of this decade.

3. Unblocking financial flows to invest in sustainable infrastructure and new technologies
Over the last few years we have seen a substantial trend in developing countries pioneering a new approach to growth, focused on sustainability: growth that more efficiently uses natural resources, and limits emissions. This contrasts markedly with past growth strategies in the more advanced industrial countries, which traditionally have focused on the more efficient use of labour, treating natural resources and the environment with abandon. This focus on the environment and sustainability is driven not only by the recognition of the planet’s limited resources and by an awareness of the adverse effects of environmental degradation on quality of life, but also by the desire to be less dependent on fossil fuels.
The advances within developing countries and emerging markets are starkly different from the stalling international negotiations for a global deal on climate: developing countries seem to be taking natural, bottom-up leadership in reducing their emissions. Still, it should be understood that the international negotiations, even if they are currently going slowly, are nevertheless a crucial complement to national-level action. Further, while the initiative described in this paper will strengthen the efforts of developing countries and emerging markets, it is not intended in any way to absolve the developed countries of their responsibilities and obligations, undertaken at Rio in 1992, Kyoto in 1997, Bali in 2009 and Cancun in 2010—obligations not only to reduce their own emissions, but to provide substantial financial assistance and technology to developing countries and emerging markets to help them continue with their efforts in responding to climate change. Indeed, it will set an example for the advanced industrial countries of what they can and should be doing. It can also create investment vehicles through which the advanced industrial countries can more easily make contributions in fulfilment of the commitments that they have already undertaken. To that end, it is our hope that through this effort on the part of the developing countries and emerging markets, the developed countries will be inspired and challenged not only to live up to previously made, albeit modest, commitments, but also to go further, making new commitments of the kind that will be necessary if the world, together, is to respond to the challenge of climate change and to do so with equitable contributions from all countries.
These are initiatives of immense value to the world as a whole. They are based on the recognition that the notion of low-carbon growth and the new energy-industrial revolution will write the growth story of the future. As we stand on the verge of a new growth model, it is apparent that there will be immense needs for investment in the coming years, not only in the fight against poverty but also in the battle against climate change. These are the two defining challenges of our century—failure on one means failure on the other.
The infrastructure needs of the developing world are, themselves, enormous. The energy sector alone, over the next 25 years, will require $33tr of investment, 64% of which is expected to be in developing and emerging countries.3 This infrastructure will, of course, have to be financed. The development and demonstration of new technologies is vital. We all gain from the emissions reductions they can bring and it is vital that the world develops mechanisms for their sharing. Some of this, too, will involve finance. The proposal described below focuses on infrastructure, but its potential role in the financing of technology should not be ignored.4
Much of the investment is likely to be in the private sector, much of it public, and much of it a combination. The proposed institution could finance only a small fraction of the whole. But it can be crucial in poorer economies. And it can provide strong examples for all: the power of the example is absolutely vital in a process of transition.
A central impediment to the financing of these crucial high-return investments is the absence of practical instruments for the effective mitigation of risks. The risks of investments in infrastructure can be especially large, given the high level of investment required upfront and the long-term nature of the underlying assets. And the deficiencies in institutions for managing and transferring risk are especially large in developing countries and emerging markets. Establishing risk-mitigation institutions or facilities—which in turn help create and manage appropriate risk-mitigation instruments—will thus be crucial for unblocking and fostering the necessary flow of funds. There are three important sets of risks:
a) Sovereign risk: There are, e.g. political risks associated with expropriation or adverse policies. These can be handled, at least in principle, by MIGA and by a number of relevant national institutions, although accessing such support is often complex and entails substantial costs of transaction.
b) Commercial risk: Every project involves technical and economic risks. Markets are supposed to choose the best projects, and manage them and their associated risks. Risk management may entail, for instance, the use of financial instruments (e.g., cover for exchange rate risk, insurance, and the issuance of equity, to spread risk). An example here might be an economy that could sell hydro-electric power to a neighbour, but needs to cover the risk of cross-border delivery and payment.5
c) Global climate-change policy risk: The global price of carbon emissions is for the most part close to zero across the world; almost surely, sometime in the coming half century, it will increase markedly either explicitly or implicitly via regulation. There is uncertainty about when the price adjustments will occur, and the level to which the price will rise. A firm investing in climate change mitigation might earn a high return if the price of emissions increases, but might lose money if the price remains low for the next twenty years.
This discussion makes clear that, while there exist mechanisms for addressing some of these investment risks, there remain important lacunae. The proposal below is meant to address these gaps as part of a process of facilitating the demand for and flow of the necessary funds.
A number of other obstacles may, of course, also hold back investment flows, including: i) limited management and technical capacity; (ii) a weak investment climate; and iii) the absence of sound climate policies both in the host country and more broadly. Improvements in the investment climate and managerial ability are key parts of the development and investment processes on which all countries will have to work, and are crucial complements to the more specific proposal that we have described. Still, we believe that, even under current circumstances, the proposal below could help unleash billions of dollars of additional investment which would simultaneously promote development and help preserve the planet.
Why we need to go beyond the existing financial architecture
The existing financial architecture is not adequate for the purpose of mobilising flows originating in emerging markets and directed to the objectives outlined earlier for a number of reasons:
1. The governance structure of the current international financial institutions does not correspond to the influence of emerging economies on global financial flows.
2. The current IFIs are not in a position to deliver the scale of financial commitments that are necessary given the reluctance of developed countries both to increase paid-in capital and to allow dilution of their shares if others take the lead in providing more capital.
3. The current IFIs cannot deliver the required blend of different types of finance required by developing countries to support their transition to a green economy (for public and private investments or a blend, different types of debt and equity, guarantees and other instruments, etc.)
4. History matters, and in some countries, the history of the IFIs raises political obstacles to their effective participation in many projects within emerging markets and developing countries.

4. A potential role for emerging countries in developing a relevant institution
The reasons for Southern leadership
Developing countries could take the lead in developing a South-to-South facility tailored to their needs and capable of generating the momentum necessary to manage the global rebalancing of savings and investments while, at the same time fostering sound development and poverty reduction and setting the pace of the new energy and industrial revolution. There are several reasons why this makes sense:
Developing countries have the clout to do it. Several developing countries have the strength and growth potential necessary to generate credibly a strong financial institution, backed by their sovereign guarantees, which could finance itself issuing high-quality debt. As a comparison, at its foundation in 1946, the World Bank had capital commitments from member countries of $7.67bn (approximately $50bn in today’s money, an amount that represents approximately 1% of the amount that emerging markets and developing countries hold in their reserves6) and the US paid-in capital contribution was $317mn (less than $2bn in today’s money). This allowed the World Bank to play a significant role in post WWII reconstruction. In PPP terms, the GDP of the US and Europe at the end of WWII is 1/3 of the current GDP of Brazil, India, China and South Africa taken together.7 It would be feasible for a core of fast-growing emerging countries to start an institution of similar scale.
Such cooperative institutions can obtain funds in the international market at very low rates—much lower than those paid even by member countries, illustrated most dramatically by CAF.8
There is strong demand for low-risk high-grade investment opportunities. In particular, there is real appetite for new, low-risk bonds in the market, particularly as saving-rich developing and emerging-market countries look for ways to diversify their reserve accounts from US dollars and Euros.
Such an institution in co-operation with other development institutions could help with promoting the appropriate policy environment, investment climate and capacity building.
There is great need and potential demand for investment in new, sustainable infrastructure in the developing world with the prospect of high returns, on the back of strong growth and the potential of additional returns through stronger climate policies.
Such an institution can be crucial in generating sufficient confidence for the private sector to invest: private investors need long-term commitment from developing countries and risk sharing to help with issues of sovereign and commercial risk. The presence of such an institution as an investor, as for example the EBRD has shown, can bring confidence and credit enhancement to project sponsors and co-investors.
This is a substantial opportunity for developing and emerging markets to build on the experience they have in investing in infrastructure and developing carbon-friendly technologies. For example, the BNDES – Brazilian Development Bank, has invested more than $400bn in the last 10 years.9 The China Development Bank can also point to relevant experience in developing infrastructure. Many emerging market economies, such as India, Brazil, Korea, South Africa, have developed strong industries and specialisations in certain low-carbon technologies, and would find great scope for expansion and further technological development.
An institution of this kind could facilitate the transfer of technology and know-how from industrialised countries and from those emerging markets that have been at the forefront of developing technologies appropriate for developing countries and emerging markets. Financial instruments to facilitate green infrastructure investment could substantially increase the investment of the current green technology market leaders into developing countries. Several corporations, whether from emerging market or developed countries, would likely increase their presence and investments in developing countries, hence sharing both technology and know-how. Financial tools could be tailored in order to prioritise investment flows that carry with them technologies and know-how that are more important for developing countries—for instance offering wider financial guarantees for companies that transfer specific technologies. Such mechanisms could be designed to be additional and complementary to other mechanisms for the transfer of intellectual property. There is evidence that such mechanisms can work: for example, strong private investment in the financial sector fostered by EBRD guarantees and co-investments was accompanied by the transfer of skills to that sector which brought benefits to the transition economies at large.10
There is also strong need for investment in safeguarding economies from the inevitable consequences of climate change and reducing the vulnerability of the poorest. A South-South facility would be in a position to work together with regional development banks, the World Bank, other IFIs and bilaterals in financing action on adaptation.
The institution could also enhance responsibility and climate and environmental sensitivity for existing and future South-South investments more generally.
The G20 has already indicated that it intends to strengthen the cooperation between its ministries of finance to ensure stronger action in rebalancing global savings and investments. The potential of such an institution to play a catalytic role among emerging markets in fostering such rebalancing and channelling excess savings to sensible investment across the developing world makes it a very attractive option.

5. Governance and relations with other institutions
Governance should be related to purposes, risks and ownership. Given the purposes, both governance and ownership should be focused on emerging and developing countries. Decisions on the ownership and governance structure should be led by emerging and developing countries. As we have noted, they may decide to allow some participation by advanced industrial countries, e.g. as minority “shareholders.”11
Decision on the location of e institution should also reflect the purpose and ownership. From this perspective the headquarters might be in a major emerging market economy and there could be branch offices in developing countries focused on implementation.
It is important that the Board of such an institution be equipped to form judgements on risk and on growth, on the climate and the environment more generally. Thus the board should seek to provide for competencies beyond those of the standard civil service which predominates as “country representatives” in a number of the boards of the international financial institutions.12
A modern governance structure and board competencies could help provide an example for the reform of the governance structures of the existing IFIs as they struggle to adapt themselves to the profoundly changing reality of a new international economy. Fifteen or so years ago the rich countries with a little under 20% of the world’s population had around 80% of the income. Now rich countries’ share of global income is around two-thirds and 15 years from now it will be around one-half. And it is not only aggregate output that is being transformed; the international division of labour and skills is changing rapidly too. The proposed new institution reflects this leadership from emerging markets and developing countries in a changing world and its example could help others. Mutual support amongst emerging and developing countries would also contribute to decreasing the dependence on firms and industries from rich countries.

6. Sketch of possible structures
Key aspects of the new institution
Instruments
It would be important for this institution to be able to offer a wide range of instruments and methods that suit the diverse range of needs of climate-related projects (examples include equity participation, insurance and credit enhancement, loan-guarantees, debt instruments, first-loss equity, challenge funds, grants and so on).
Cooperation with other institutions
The extensive experience of the regional development banks, the World Bank Group, the IMF and other international institutions and organisations will be valuable. Also, the experience of national development banks, particularly in emerging countries, will be important. These other institutions would have complementary and mutually supportive instruments and focus. The new institution with its flexibility for public and private, capabilities for risk-management, and environmental mandate would be a strong partner for more traditional development banks most which have a predominantly public sector focus. The new institution could draw on the long experience and skills of these various institutions in promoting development and overcoming poverty.13
Private sector participation
Such a new institution could and should allow the direct and close involvement of the private sector. The private sector will provide some, and in some countries and areas, most of the investment in the transition to an economy based on more sustainable infrastructure given the scale and nature of investments involved. This private sector involvement, in the scale and in the direction necessary to achieve success in the objectives laid out in the beginning of this paper, can be achieved only if the needs of the private sector, around sovereign, commercial and climate risk, are understood and supported by the new institution performing the functions described. Practically, this would mean that financial instruments would need to be created to share the risk of projects at tolerable transaction cost, and taking into account the nature and capabilities of both local and global private sector banks and multilateral institutions. The power of the example will be of immense importance—a new institution cannot possibly provide finance for all but it can give examples for all.
At the same time, in many countries there will be a need for private-public sector cooperation, including cooperation with international organisations and institutions.
Cooperation with developed countries
While we envisage the new institution as primarily a South initiative, developed countries could cooperate if they wished to do so, in a variety of ways. They could provide grants for technological sharing or capability development or adaptation. They could co-invest in projects carried out by the institution, and the new institution could create SIV in which developed countries could participate.
As we have already note, it must be very clear, however, that this institution would not be a substitute for developed countries’ commitments to support developing countries in their transition to more sustainable infrastructure via the GCF and in other ways. It would simply provide an additional and potentially more effective way by which developed countries could channel the funds that they have already committed—and will need to commit in the future—to fulfil their responsibilities in meeting the challenges of global climate change.
Cooperation with other institutions
It would be of great importance for this institution to retain flexibility in terms of its ability to cooperate with non-traditional funders and non-national institutions. It would be of particular importance for this institution to be able to engage directly with sovereign wealth funds and with large philanthropic organizations, as these are likely to continue playing and increasingly important role in low-carbon infrastructural investment in developing countries. Membership of the Bank could be open to national development banks, sovereign wealth funds and philanthropical organisations – that would be a choice for the founders.
Developed countries could even participate by making capital contributions to the new institution. Given its principal purpose of fostering South-South investment, the majority ownership should, however, be from emerging market and developing countries—for further discussion, see chapter on governance.
Building to a decision
The first issue to be decided is the need for and value of such an institution. As is set out in this paper, given the scale of the required investment over the next few decades, particularly in light of the risks of climate change, the nature of the new energy-industrial revolution, the great potential of South-South flows and the limitations on other development institutions, this initial step in the argument seems clear. It must be decided in the first place primarily by emerging market and developing economics.
Once this decision is taken then details of the new institution and its establishment could be created and achieved fairly rapidly. We have the example of the IBRD (World Bank), which was created in 1944, but then quickly played an important role in the reconstruction of Europe. The decision to establish the EBRD in 1990 came shortly after the fall of the Berlin Wall at the end of 1989, and it was operational in 1991. Quickly, in response to the “Arab Spring” of 2011, it expanded its coverage to large parts of North Africa.
The principal purpose of this paper is to describe the great potential for such a facility and some of the key issues of design. This is surely a real opportunity for developing countries to take the lead in shaping for themselves the growth story of the future. They are becoming the leaders in savings and investments and, increasingly, in developing new, sustainable infrastructure and even technology across the world. Such an institution would mark and enhance their leadership in a changed and changing world. But sketches of possible models are useful in thinking about how to move forward.
Paid-in and callable capital
It was Keynes’ genius in the establishment of the IBRD to create the idea of paid-in capital (around say 25% of the total) and callable capital which, in extremes, can be called. It is this multiplicative factor (from paid-in to callable) of around 4 that is so powerful. The IBRD and EBRD, like other development banks, cannot invest (loans, equities, guarantees, etc.) beyond the total capital. This very conservative 1:1 gearing ratio allows them to borrow to finance investments (as other international development banks) at AAA status. And this very solid capital structure provides a useful destination for bondholders seeking a reliable return and looking for some diversification. It is the soundness and commitment of the governments and institutions that stand behind the callable capital that provides this AAA status, but the soundness of the investment portfolio of the institution itself is also of great importance.14
We have already drawn on some lessons of the EBRD as the most recently-established modern and flexible of current IFIs. Some numbers on its establishment and growth may be instructive.
Scale
The EBRD began in 1991 with €10bn of capital. The paid-in component was spread over a period of five years or so. It has had two capital increases of a further €10bn each time to reach its €30bn now (the paid-in capital was lower in the recent increase – 2010 – to reflect its experience and performance). This EBRD experience should not be regarded as a model for the new institution but can provide some pointers.
A new institution might be established with, say, around $30bn initial capital with, say, $8bn paid-in. These illustrative numbers can be scaled multiplicatively. Suppose, for illustration, the eight emerging market/developing countries in the G20 but outside the G8 (China, India, Indonesia, South Korea, South Africa, Argentine, Brazil, Mexico15) took around 50% of the capital, so that the average share was 6-7%. Some would likely want to take a higher share and some a lower. This would be translated into paid-in capital for each of this group of, on average, around $500mn or $100mn for each of five years. This would surely be a manageable amount in relation to the investment it could unleash and to the resources available within these countries. It is likely that other emerging countries would also want to take a significant share. Smaller economies will want to take small shares. It would not be unreasonable if membership would be necessary in order to be a country of operation, and that priority for investment be given to poorer regions. Again, all of this would be for the founders to decide.
It would also be possible to allow membership of non-sovereign entities. Examples might be major domestic development institutions such as the BNDES, sovereign wealth funds from emerging market economies, or large charitable institutions of a sufficient scale. Whether or not to allow for that kind of membership, or the “voting rights” allotted to such “associated membership” should be an early decision for the key founders.
The total capital would allow total investments of the new institution of around $30bn and given that co-investment would be a crucial objective, with, say, a mobilisation ratio of 3, the total project size would be $90bn. Many investors would want to invest alongside, not simply because of the risk-mitigation instruments, but also because the presence of the institution itself in a transaction gives greater security against policy and commercial risk and enhances the credit worthiness of sponsors and co-investors for projects. This type of mobilisation is crucial to the power of the example and to demonstrating the possibilities in a context where innovation in technology, financing and policy are vital.
Such an institution could fairly quickly build to a lending volume of $3-6bn per year associated with overall investment size of $10-20bn per year. Success could lead it to double or triple its capital, after 10 years or so, when it has proven itself, in which case it could be associated with investments of $50bn or more per year. This type of scale could be valuable in its own right but, even more important, these investments could provide a whole range of powerful examples which could lead to other similar investments on a much greater scale.16

7. Concluding comments
The institution proposed here is an idea whose time has come. It reflects the urgency of embarking on the energy and industrial revolution to manage climate change with growth. It embraces the attractiveness of the new path in terms of creativity, innovation, energy-security, biodiversity and so on. It could provide for a sustainable response to the challenge of overcoming poverty. At the same time, it provides a way to rebalance savings and investment across the emerging and developing worlds, and an alternative to the promotion of profligate consumption in the emerging markets—a course that would endanger the planet. And it could help foster a powerful source of growth in a fragile world economy.
Such an institution also represents and builds on the new reality of the size, growth and increasing sophistication of emerging-market and developing countries. They have much to contribute to each other and much to gain both in the shorter term and the longer run from fostering the investment flows crucial to this low-carbon path to prosperity and poverty reduction. This is an opportunity to act, to take advantage of the new economic landscape, and to turn these potential benefits into a reality.