by Jonathan Everhart
Artificial Intelligence (AI) is at the core of the future of the global capital markets. The World Bank can capitalize on it by leaning in from a governance and operational standpoint to leverage AI to accelerate investments for emerging markets and developing economies (EMDEs). This is critical to driving needed development and climate investments into EMDEs since currently only 8.6% of global private capital investment goes to emerging markets, despite the fact that these markets account for almost two-thirds of global GDP growth.
At the recent 78th Session of the United Nations General Assembly, President Biden reiterated that he has asked the U.S. Congress for support that would release new concessional World Bank financing by more than $25 billion. Furthermore, the World Bank and International Monetary Fund (IMF) continue to highlight the increases in private finance needed to mitigate climate change and cope with its effects in EMDEs. The IMF’s most recent Global Financial Stability Report estimates investment in EMDEs must collectively reach at least $1 trillion in energy infrastructure by 2030 and $3 trillion to $6 trillion per year across all sectors by 2050. Employing innovative financing instruments and expanding the investor base are a few key solutions the report emphasizes. The newly released policy brief by the Bretton Woods Committee Climate and Energy Transition Finance Project Team reinforces these principal solutions. As capital is unlocked through the World Bank to support economic development and climate finance in EMDEs, AI is an innovative and strategic tool to optimize the scale of the financing instruments used and impact of private investor groups. However, to capitalize on AI’s benefits, the World Bank must continue to broaden the scope of its governance to support the operation of AI and foster an effective ecosystem of AI solutions and partners.
Senior management support for AI should continue to be strengthened for the World Bank to leverage the technology to achieve its development and climate goals. This governance shift begins with enhancing AI governance at the World Bank. AI should be regularly included on the agenda at governance meetings for key units, such as the World Bank IFC Asset Management Company which provides capital to private funds for investment in EMDEs. Leading international governance associations such as the Institute of Directors provide high-level governance guidance through an AI in the Boardroom checklist that can be used by the World Bank to assess ongoing AI preparedness. An evaluation of the World Bank’s technical debt—the cost of maintaining outdated technology systems as opposed to investing in more efficient solutions—associated with its legacy systems should also be undertaken. The checklist and technical debt activities can have far-reaching governance benefits in driving new private capital to support the World Bank’s development and climate investment goals.
Within the World Bank’s investment operations, AI presents opportunities to improve value chains in making investments. In doing so, AI requires existing operational process maps within the World Bank to be updated to account for the necessary changes to support AI’s advantages in facilitating investments. This value chain improvement can enable new private capital flows. The World Bank has demonstrated its openness to adopt AI in supporting investments through its MALENA Project—an AI powered platform that extracts investment insights from emerging markets Environmental, Social and Governance (ESG) data. MALENA is scheduled to be officially released in late 2023. Still, adoption of additional AI solutions is needed to scale up the World Bank’s efforts to meet the pressing development and climate finance goals. There are existing and proven commercial solutions available to the World Bank that offer AI-based deal-making and investor matching. For instance, the Kognetics® platform uses AI to identify companies in emerging and developing markets that are likely to hit the primary buy-out market and can be attractive targets for an IPO or buy-out. The platform additionally provides ongoing growth analysis to these companies using AI to identify growth opportunities and critical gaps based on market trends and competitor activity. The World Bank IFC’s Growth Equity and Sector Funds can incorporate a solution like Kognetics® to support the private funds they invest with in deploying capital to boosting fast-growing mid-sized emerging market companies and preparing them for an eventual IPO or buy-out. In 2021, I presented at the World Bank IFC External Speaker Series and the United Nations about the platform’s AI capabilities and benefits for emerging markets economic development and climate finance.
AI has the potential to accelerate capital across EMDEs. AI governance practices and commercial solutions are available for the World Bank to proactively continue implementing. As AI fundamentally shifts the core of the capital markets, the World Bank must further position itself to leverage AI’s capabilities to assist markets in meeting their investment demand for economic development and climate change.
Dr. Jonathan R. Everhart, CAIA, CPA, Esq. is the CEO & Chief Investment Officer of Global ReEnergy Holdings. The company is 1 of only 15 companies globally to be selected to the United Nations Green Technology Startup Initiative Global Community. He serves on a United Nations Advisory Board for this initiative. He is an appointed member to the United States Investment Advisory Council for the U.S. Department of Commerce, Industry Trade Advisory Committee on Digital Economy for the U.S. International Trade Administration, and Expert Advisory Group on Tech, Science & Innovation for the Institute of Directors. He is a member of the Bretton Woods Committee.
*Thank you to Helen Turner, Esq. of Locke Lord LLP for the valuable comments.