Civil society organisations (CSOs) and academics have vocally questioned the World Bank Group (WBG) Evolution Roadmap’s continued promotion of the Cascade approach, a policy paradigm that heavily prioritises incentivising private finance to provide co-financing for development efforts through de-risking – and which has thus far failed in its goal to mobilise ‘trillions’ in supposedly idle capital.
The draft Roadmap, which was initially prepared for discussion by World Bank governors in April, is currently undergoing public consultation until 31 July, ahead of further negotiations on reform of the Bank at its Annual Meetings in Marrakech, Morocco, in October.
A briefing published on 5 July, endorsed by 74 CSOs and academics, including Belgium-based CSO network Eurodad and South Africa-based CSO Institute for Economic Justice, noted, “the Roadmap’s push to reinvigorate the Cascade approach represents part of the larger political project which Professor Daniela Gabor (University of the West of England Bristol) has referred to as the “Wall Street (Climate) Consensus”, which reshapes the role of the developing states as de-risking agents for private capital, with international financial institutions helping to facilitate this process.” It added, “This paradigm risks greatly deepening existing inequalities within and between states, and its promotion within mooted World Bank reforms reflects in part the failure of the World Bank’s wealthy shareholders to help ensure a more equitable multilateral system that is truly fit for purpose to meet the challenges of the 21st century.”
The derisking approach...ignores the developmental dilemma posed by prioritising private risk over that of distributive social equity and state sovereignty in legal and normative affairs. It is yet to be seen if the WBG will incorporate sufficient provisions within its plans to escort private capital that ensure the recipient state’s right to regulate in the public interest, for a rights-based economy that upholds economic, climate, feminist justice.Bhumika Muchhala, Third World Network
Missing trillions? Despite unfulfilled promises and misalignment with development aims, Bank’s dedication to Cascade remains undimmed
The Cascade, first launched by the World Bank in 2017, focuses on privileging private finance solutions over public ones to supposedly maximise the impact of ‘scarce public resources’. The World Bank’s 2016 Forward Look document, where the Bank’s vision of the Cascade was first set out, noted, “Only where market solutions are not possible through sector reform and risk mitigation would official and public resources be applied” (see Observer Summer 2017).
The World Bank’s Evolution Roadmap proposes a deepening of the Cascade approach, stating: “To further increase the scale of impact…the WBG will invest more in upstream analytical work and support to the business enabling environment; make the Cascade concept central to the country engagement cycle to inform diagnostics, country dialogue and programming; further develop joint programs to maximize the One-WBG approach; institutionalize joint WBG program pipeline reviews within countries; and revise instruments and approaches across institutions to scale up PCF [private capital formation].”
The Summit for the New Global Financing Pact in Paris on 22-23 June doubled down on this approach, as well, with host French President Emmanuel Macron calling for $100 billion a year in private finance to be mobilised by multilateral development banks in his closing speech at the Summit.
This followed the World Bank launching a new Private Sector Finance Lab at the Summit, and newly appointed World Bank President Ajay Banga somewhat quixotically claiming that he is targeting $5 of private sector co-investment for every $1 spent by the Bank in a panel on reform of the Bretton Woods Institutions at the Summit.
A 2021 estimate by UK-based think tank Overseas Development Institute suggested actually existing rates of private finance mobilisation by public finance institutions are closer to a $0.7-to-$1 ratio, pouring cold water over the idea that ‘trillions’ can be mobilised via blended finance initiatives.
This is before taking into account whether such approaches are appropriate for development finance aims, more generally. “The derisking approach assumes that there will never be trade-offs between commercial goals and the public interest,” said Bhumika Muchhala of global CSO Third World Network. “It also ignores the developmental dilemma posed by prioritising private risk over that of distributive social equity and state sovereignty in legal and normative affairs. It is yet to be seen if the WBG will incorporate sufficient provisions within its plans to escort private capital that ensure the recipient state’s right to regulate in the public interest, for a rights-based economy that upholds economic, climate, feminist justice” (see Observer Summer 2023).
Civil society warns re-affirmation of Cascade approach could exacerbate deeply unequal global economic system at root of the current crisis
The World Bank’s Evolution Roadmap includes a proposed expansion of the World Bank’s mission, with an enhanced emphasis on sustainability, which “reflects the need to ensure that WBG impact is positive including in fiscal, economic, social, and environmental terms.”
However, the joint civil society briefing questions the extent to which this is compatible with the continued promotion of the Cascade, noting, “Rather than ‘evolution’, the promotion of the Cascade represents the reaffirmation by World Bank management and shareholders of a flawed development paradigm that assumes incentivising private finance is inherently benign and productive, while failing to acknowledge that the type of projects designed to attract profit-seeking private investors and generate quick returns might not match the public interest and national or local priorities, or support sustainable economic transformation.”
It calls for ‘rerouting the Roadmap’, via a number of recommendations, including: (1) commissioning an external and independent review of the World Bank’s development effectiveness; (2) inverting the Cascade, putting public interest at the core of the Bank’s efforts to support global public goods; (3) developing and funding a WBG human rights policy; (4) mainstreaming climate justice into the Bank’s operations; (5) mainstreaming a gender lens into the Bank’s operations, extending beyond the mandate of the upcoming Gender Strategy; and (6) developing better metrics for measuring – and policies to tackle – inequality.
The briefing notes that, “As a starting point, we would strongly emphasise that privatisation and blended finance approaches inherent in the World Bank’s current version of the Cascade should not be used for projects that involve essential public services, including health and education.”
It adds, “On the 75th anniversary of the Universal Declaration of Human Rights, the World Bank Group must work consultatively – with grassroots communities who are affected by Bank activities, and their civil society allies – to develop and adopt a Human Rights policy. The Bank must also dedicate adequate funds to effectively implement the policy.”
Finally, the briefing argues that, “the Bank must ensure that climate justice and a focus on green economic transformation are integrated into its approach. This includes supporting publicly-owned clean energy transitions that ensure dividends for developing country governments and citizens, rather than a continued reliance on energy systems privatisation and price liberalisation.”