OPEC Fund Quarterly - 2023 Q3

The OPEC Fund for International Development



ARTIFICIAL INTELLIGENCE UAE: “We need to be a leader”

GETTING RESULTS Why measuring development impact matters

SUMMIT Meeting the new World Bank President

COP 28 Aiming high

The OPEC Fund Quarterly is published four times a year by the OPEC Fund for International Development. The OPEC Fund works in cooperation with developing country partners and the international development community to stimulate economic growth and social progress in low- and middle-income countries around the world. The organization was established by the member countries of OPEC in 1976 with a distinct purpose: to drive development, strengthen communities and empower people. The OPEC Fund Quarterly is available free. If you wish to be included on the distribution list, please contact us via opecfund.org . Back issues of the magazine can be found on our website. The contents of this publication do not necessarily reflect the o ffi cial views of the OPEC Fund or its Member Countries. Any maps are for illustration purposes only and are not to be taken as accurate representations of borders. Editorial material may be freely reproduced, providing the OPEC Fund Quarterly is credited.

EXECUTIVE EDITOR Nadia Benamara EDITOR Axel Reiserer EDITORIAL TEAM Howard Hudson, Carlos Opitz, Basak Pamir, Nicholas K. Smith, Julia Zacharenkova PHOTOGRAPHS Abdullah Alipour Jeddi, Carlos Opitz (unless otherwise credited) PRODUCTION Iris Vittini Encarnacion

PUBLISHERS The OPEC Fund for International Development Parkring 8, A-1010 Vienna, Austria Tel: (+43-1) 51564-0 Fax: (+43-1) 51392-38 www.opecfund.org

DESIGN Robin Turton, More Tea Design Ltd PRINTED IN AUSTRIA Druckerei Odysseus This publication is printed on paper produced from responsibly managed forests.

FRONT COVER PHOTOS: iStock (main image); Lucan Coutts – abobe.stock.com



DEVELOPMENT IMPACT Special Feature: Knowing what works to use resources most e ffi ciently

18-21 OPEC Fund Director-General: Why development e ff ectiveness matters 22-25 Interview IsDB: "Independence is crucial for credibility"

6-17 An exploration of the themes and principles of development e ff ectiveness that all MDBs agree on – and the various approaches and viewpoints

ILLUSTRATION: StonePictures/Shutterstock.com


From around the World 26-45 26-29 COP28: Where the sky is no limit 30-31 Interview Omar

In the Field 46-47 Chennai: Funding and developing a ring road in southeastern India Development News 48-49 New OPEC Fund projects in Botswana, Egypt, Morocco, Tanzania and Thailand Spotlight 50-53 Harnessing the wind: OPEC Fund missions to Rwanda, Uganda and Zimbabwe

Events 54-57 54

How to future-proof our cities

55 Development Day at the OPEC Fund 56-57 Standing strong for the SDGs Meetings 58

Sultan Al Olama, UAE: "We need to be leaders" 32-33 Climate finance

workshop: Ramping up by getting in sync 34-39 Youth involvement in climate action: Interview with two youth engagement experts 40-45 Are Sustainable Development Goals becoming own goals?

A meeting of minds: OPEC Fund Director-

General Alkhalifa meets new World Bank President Banga



Dear Reader,

Speaking on the sidelines of the 2023 World Bank/International Monetary Fund (IMF) Annual Meetings in October in Marrakech, the Nobel prize-winning economist Joseph Stiglitz said poor countries should be provided with US$300 billion a year to finance their

funds for sustainable development is going to be more challenging than ever. The British government may not remain the only one to “adjust” its targets, citing a ff ordability concerns. One way to address the scarcity of funds is to make better use of existing ones. Assessment, monitoring and evaluation have been high on the agenda of development finance institutions for a long time, but never have they been more important. Here we are talking about a comprehensive approach influencing the whole lifespan of a project, starting with the design and ending with its impact, delivering better outcomes for the beneficiaries and better results for the states, taxpayers and investors who are funding the development finance institutions. In this issue of the OPEC Fund Quarterly we look into the theory and practice of development e ff ectiveness. Our team explores the discussion in the international community and the OPEC Fund’s approach. As part of the transformation of the institution the OPEC Fund introduced a Development E ff ectiveness Report this year for the first time and has created a unit in its Strategy Department to mainstream impact measurement throughout its operations.

The approach is anchored in the OPEC Fund Results Framework, which tracks key corporate performance, strategic alignment and results indicators across four levels (global/regional development progress, operations’ results, operational e ff ectiveness, and organizational e ffi ciency). An accompanying project- level toolkit ensures that operations are prepared in a way that ensures the consistent assessment, monitoring and evaluation of their development e ff ectiveness. OPEC Fund Director-General Abdulhamid Alkhalifa tells us: “We want to expand our activities and step up our delivery of development support. It is of paramount importance to deploy our funds in the most cost-e ff ective and e ffi cient way. This approach also commits us to lifelong learning and to constantly aiming to improve everything we do: By seeing first-hand what works today, we can refine our focus for the best results tomorrow.” That e ff ectiveness is a serious concern for all development finance institutions was echoed by our partners from the Islamic Development Bank (IsDB) who devoted considerable time and e ff ort to setting out their approach (see page 22). As a pioneer in the field the IsDB started with a first framework for the

fight against the climate crisis. As huge as this amount – to be

provided by the IMF as special drawing rights created by rich countries – sounds, it pales in comparison to United Nations’ estimates that developing countries need US$6 trillion in climate financing by 2030 in order to have any hope of achieving Sustainable Development Goal (SDG) 13 – Climate Action. Even if the US$300 billion Stiglitz proposes were to become available it would take 20 years to add up to the required US$6 trillion. Yet delivery of the SDGs is due in 2030 – approximately a third of this time span – and this is only 1 out of 17 goals. In any case, as Stiglitz acknowledged, the funds he, the UN, other development organizations and climate activists are asking for are not going to become available overnight. In a world where full-scale war is back on the agenda, the cost of living crisis is corroding even the wealthiest societies and widespread anger fuels populist movements, finding


monitoring, reporting and evaluation of projects already in 2004. Twenty years of experience has created a huge body of knowledge and our partners stress: “Independence is crucial for the objectivity and credibility of the bank’s development results measurement. It is envisioned to enhance performance, boost quality and foster transparency, accountability and learning.” Areas where e ff ectiveness will become even more important in the coming years are highlighted in the remaining sections of this issue. Following our cover story on the delivery of the Sustainable Development Goals at halftime since their proclamation, we have followed the latest UN assessments closely. To say it is not looking good would be the understatement of the decade. And similarly the international community will significantly have to

raise its game when it comes to the latest UN Climate Change Conference COP28, starting on November 30 in the United Arab Emirates (UAE). The OPEC Fund will be present and deepen its engagement to deliver climate action in line with the 2030 Agenda, its partners’ needs and our own strategy. In an interview, Omar Sultan Al Olama, the UAE’s Minister for Artificial Intelligence, Digital Economy and Remote Work Applications, tells us how he plans to turn his country into a global leader in the “Fourth Industrial Revolution” for people and planet. Expect more on the economic and societal shift spearheaded by AI and automation in one of our next issues. For now, we wish you an interesting read with our new magazine.

We want to expand our activities and step up our delivery of development support. It is of paramount importance to deploy our funds in the most cost-e ff ective and e ffi cient way.

Abdulhamid Alkhalifa, OPEC Fund Director-General

Axel Reiserer, Editor





E ach MDB has its own approach on how to assess and monitor development e ff ectiveness. There are, however, some common questions, themes and principles of development e ff ectiveness that they all agree on. This Special Feature will explore the di ff erent aspects of development e ff ectiveness and present di ff erent approaches and viewpoints MDBs take.



Providers and recipients are paying increased attention to whether development finance is e ff ectively tackling development challenges where support is most needed around the world. Now the OPEC Fund is following suit – with significant results By Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness BECAUSE EVERY DOLLAR COUNTS DEVELOPMENT EFFECTIVENESS:

I n a world where resources are limited, development finance is no di ff erent. Despite the growing amount of multilateral development resources committed to developing countries every year, the latest available data showed that these commitments 1 represented a mere 0.7 percent of the developing world’s GDP, 2 which is considered insu ffi cient to meet the needs of developing countries. 3

Given the scarcity of resources, ensuring that these are well spent is all the more important. Particularly since the early 2000s, development finance providers and recipients have paid increasing attention to whether development finance is e ff ectively tackling development challenges where support is most needed around the world. The need to better understand whether, where and how

development impacts are in fact materializing, and why or why not, led to the formulation of the Paris Declaration on Aid E ff ectiveness in 2005 4 . This agreement reflects an unprecedented consensus among donor and aid recipient countries about what needs to be done to substantially improve the impact of development cooperation.

1 The multilateral development system committed a record US$230 billion in financing to developing countries in 2020. OECD, 2022. Multilateral Development Finance 2022 report. 2 Calculation based on multilateral development finance from the OECD report, and GDP data for developing countries taken from the World Bank data portal. 3 https://www.oecd.org/development/multilateral-development-finance- 2022-9fea4cf2-en.htm

4 In March 2005, senior o ffi cials from over 100 aid-receiving countries and donor agencies met in Paris to take concrete steps to increase the e ff ectiveness of aid. The concrete steps they agreed on are set out in the Paris Declaration on Aid E ff ectiveness, which o ff ers a blueprint for e ff ective aid that maximizes impact from investments, synchronizes donor e ff orts and integrates the full spectrum of development challenges. 5 OECD Glossary of Key Terms in Evaluation and Results Based Management



Accountability and transparency around development e ff ectiveness have become increasingly important.

Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness

OECD-DAC EVALUATION CRITERIA Relevance: The extent to which the intervention objectives and design respond to beneficiary, global, country, and partner/institution needs, policies,and priorities,

What is development e ff ectiveness and why is it needed?

tackle the many remaining challenges. Accountability and transparency around development e ff ectiveness have therefore become increasingly important.

The Development Assistance Committee of the Organisation for Economic Co- operation and Development (OECD- DAC) defines development e ff ectiveness as “the extent to which a given development intervention’s objectives were achieved, or are expected to be achieved, taking into account their relative importance” 5 . Measuring the extent to which the development objectives were achieved requires the measurement of whether the expected development outcomes (and impacts, when possible) of a transaction or project that focuses on addressing a certain development challenge have in fact materialized. In turn, assessing the achievement of the results and therefore objective is only possible if the expectations had been clearly defined before undertaking a development intervention. Measuring development e ff ectiveness is meant to provide clear and objective data that allows finance providers and recipients to take informed decisions on where to best direct the limited resources, and how – in an e ff ort to target the most e ff ective interventions, and to design all interventions in a way that they can reach the largest impact possible. Clear data and information about the development e ff ectiveness of their activities also allows development finance providers to be accountable to their funders and other stakeholders. Knowing, and being able to show, the e ff ectiveness in the use of their funds can motivate funders – such as national governments who are accountable to their taxpayers – to continue supporting development causes and therefore to

Guiding principles for development e ff ectiveness

and continue to do so if circumstances change. Coherence: The compatibility of the intervention with other interventions in a country, The extent to which the intervention achieved, or is expected to achieve, its objectives and its results, including any di ff erential results across groups. E ffi ciency: sector or institution. E ff ectiveness:

The assessment of whether or not a development intervention has been e ff ective is usually performed after project implementation, as development benefits usually take some time to materialize. This evaluation typically considers a number of highly interrelated aspects. Most development finance institutions (DFIs) apply several, or all, of the evaluation criteria as defined by the OECD-DAC Network on Development Evaluation (see box, right) when measuring whether or not a development project has been successful. Whereas these criteria can be applied to all development interventions, the use of donor money for private sector interventions also requires an assessment of whether and why this assistance is needed in the first place – as opposed to private funds – to avoid distorting potentially functioning markets to the detriment of final beneficiaries. Providers of development finance to the private sector therefore typically also assess to what extent their financing o ff ers financial or non-financial value – also called additionality

The extent to which the intervention delivers, or is likely to deliver, results in an economic and timely way. Impact: The extent to which the intervention has generated or is expected to generate significant positive or negative, intended or unintended,

higher-level e ff ects. Sustainability:

– which is needed for development results to materialize, but which, at the same time, is not available from purely commercial financiers.

The extent to which the net benefits of the intervention continue, or are likely to continue.

ILLUSTRATIONS: MicroOne/Shutterstock.com


Relevance and coherence

Development needs and country ownership

over setting their priorities and strategies for tackling the needs that they, themselves, view as most pressing. Country ownership also increases the likelihood that development interventions are coherent, i.e. e ff ectively complement (and don’t overlap with, or counteract) other interventions and actions by the government or other development partners. In short,

Development projects that are considered highly relevant by both the developing country and their development partner are more likely to be successful, and their benefits sustained over time, because the importance of their success is clear to, and accepted by, all parties involved in project planning and implementation. Relevance ensures that all parties pull indeed in the same direction and hard enough for there to be movement. Assessing the extent to which development projects respond to actual development needs at the country and global level, as well as align to country and financier priorities, is therefore important. A lack of relevance can imply a higher risk of project failure or unsustainability. The same is true for coherence – if an intervention is inconsistent with, or overlaps with other interventions by the government or other development partners, scarce development finance resources may be wasted on duplicated, ine ff ective or unsustainable e ff orts.

Ensuring the success of development intervention usually requires hard work from all involved. The chances that development interventions are relevant to, and therefore fully supported by, developing countries are higher when the recipient countries take ownership

Developing countries’ priorities should drive the need for development aid and not the other way around.

Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness


In 2015 all UN member states adopted the 17 SDGs, a set of broad goals aimed at ending poverty and other deprivations such as inequality, low growth and lack of access to education and healthcare, all “while tackling climate change and working to preserve our oceans

and forests” 9 . Although the achievement of these goals is tracked at the country level, development organizations, companies and other stakeholders have increasingly worked to show how their activities aim to contribute to the achievement of the SDGs.



OPEC Fund Development Forum 2023

developing countries’ priorities should drive the need for development aid and not the other way around. Ownership also provides incentives for countries’ institutions and private players to build the necessary capacity to be able to receive and use development aid e ff ectively and e ffi ciently. Recognizing the importance of country ownership for development e ff ectiveness, in 2011 the Busan Partnership for E ff ective Development Co-operation, 6 convened by the OECD- DAC, established four principles: (i) countries should define their own development model; (ii) sustainable impact should be in the center of any policy-making e ff ort; (iii) development cooperation must be transparent and accountable to all citizens, and (iv) development depends on the e ff ective involvement of all actors. 7 All forms of development aid, which includes both public and private development finance and technical

The OPEC Fund Development Forum 2023 featured thought-leaders from all over the world. Speaking on stage and in one-on-one interviews, they shared their latest views

on various aspects of development and climate action – from tapping new resources to reform of the financial system.

cooperation, should be bound by these four principles and, together, they should address the most pressing development challenges. 8 Many development challenges are common among developing countries. The Sustainable Development Goals (SDGs), defined by the United Nations

“Everybody has a role to play” OFQ : What are the most pressing development challenges? How can South- South and Triangular cooperation address those challenges? Dima Al-Khatib: In the aftermath of the COVID-19 pandemic the countries of the Global South are su ff ering from many development challenges, ranging from low health resilience to financial debt to socioeconomic issues. It is extremely important that the OPEC Fund for International Development is convening these forums to gather the various development actors and the di ff erent actors in development finance — because everybody has a role to play. South-South cooperation is an innovative mechanism of solidarity among countries, but it needs to be financed. OFQ : Why is targeting net zero without a Just Transition not an option for the climate? DAK: In recent years around 90 percent of natural disasters have been attributed to climate change. That means we need to talk about building resilience and strengthening institutions. Everybody has a role to play, so we also need to talk about inclusion and the ability of the countries of the South to negotiate on an equal footing with their counterparts in the North. Ultimately, we need to equip developing countries not only to pursue the Just Transition but actually achieve it. Dima Al-Khatib Director of the United Nations O ffi ce for South-South Cooperation (UNOSSC)

in 2015 (see box, below left) provide a high-level list of some of the most pressing development needs that a ff ect developing countries and vulnerable populations around the globe (see pages 40-45).

PHOTO: Tong_stocker /Shutterstock.com

PHOTO: Hamza Makhchoune/Shutterstock.com; ILLUSTRATION: MicroOne/Shutterstock.com

6 https://www.oecd.org/dac/e ff ectiveness/busanpartnership.htm 7 https://e ff ectivecooperation.org/landing-page/e ff ectiveness-principles

8 This includes not only o ffi cial development assistance (ODA), but non-ODA climate finance, other o ffi cial flows, South-South and triangular cooperation, funds and blended public/private finance, civil society actions and some non-financial co-operation including policy measures and private sector engagement (European Comission). 9 https://sdgs.un.org/goals


The true test for the good use of scarce development resources is the question of whether the development benefits can be

OPEC Fund Development Forum 2023

Alignment to donor/ financier priorities

The scarcity of development finance resources implies that development finance providers cannot provide support to any and all development projects. They therefore have to prioritize, with such priorities usually spelled out in their strategies and business plans. Factors influencing these decisions are: 1. E ff ectiveness This is achieved when an intervention’s development objectives are achieved. Since the development is fundamentally about improving people’s lives, development objectives should express what specific improvements the project is expected to bring about for the targeted beneficiaries. To understand whether a project is e ff ective, it is therefore not enough to know whether a financed activity or asset has been delivered. One must also understand whether the provision of these activities or assets has resulted in measurable improvements for the a ff ected populations. Quantitative indicators are therefore established not just for the products, or outputs, of each project, but also for the improvements from the perspective of the beneficiaries. A project financing the paving of formerly dirt roads, for example, would need to not only provide evidence on the kilometers of road paved by the project (the project output), but also measure improvements from the viewpoints of the road’s beneficiaries and other stakeholders, such as the travel time savings of road users, the increased number of days the road is passable, the reduced number of accidents if the road is made safer, reduced road maintenance costs, or other benefits depending on the specifics of each project. Some improvements can be measured relatively directly (such as the lower incidence of a specific illness because of a vaccination campaign), whereas some have to be measured by proxy (such as the avoidance of greenhouse gases, which is expected to lead to improved lives around the globe) due to issues in methodology or of attribution.

sustained over time.

Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness

Hela Cheikhrouhou Vice President at the International Finance Corporation (IFC)

To be able to assess whether a project is successful or e ff ective, clear expectations for the future values of the indicators have to be set when designing the project – and such values should of course show a clear improvement over the current (or baseline) value for the project to be worthwhile undertaking. During and after project implementation, the indicators need to be measured to assess the extent to which their target values have been achieved. This serves to not only assess e ff ectiveness but also, in case of their non- or insu ffi cient achievement, to ask questions and learn about why the expected results have not materialized. Feeding these lessons back into the design of operations, to avoid or mitigate known pitfalls, allows development institutions to continually improve their e ff ectiveness. 2. E ffi ciency The e ffi cient use of development resources requires assessing to what extent development benefits are achieved at a reasonable cost or not. This assessment helps not only inform decisions about where to direct resources for maximum impact, but also provides information needed to avoid wasting resources on too-costly and therefore unsustainable projects. The tool used to assess e ffi ciency is most commonly called “economic analysis” and includes quantitative and/ or qualitative analysis of the costs and benefits accruing to all relevant project stakeholders, such as beneficiaries, the government, private sector actors, the environment, and other a ff ected parties. Ideally, this analysis is quantified to

“Level the environmental playing field” OFQ : How can we ramp up blended finance and other creative finance mechanisms to attract more private sector investment? Hela Cheikhrouhou: The world of blended finance is very diverse. It includes first-loss insurance policies, which are a powerful way of absorbing the real or perceived risks that stop private investors, whether local or international, from coming in at scale. In countries where foreign currency reserves are low, first-loss policies are a particularly e ff ective way of absorbing currency risk to crowd in private investors. Another way to encourage the private sector is to level the environmental playing field. There’s currently no uniform price on carbon to incentivize action, but market- based mechanisms can make the economics of a climate friendly investment as good as the economics of less environmentally friendly solutions, especially where they fill viability gaps.


ILLUSTRATION: EgudinKa/Shutterstock.com


PHOTO: Oleksii Didok/Shutterstock.com; ILLUSTRATION: MicroOne/Shutterstock.com

the extent possible in the form of a cost-benefit analysis which produces measures (such as the economic rate of return, the cost-benefit ratio and the net present value of the project’s net economic benefits) that can be compared across projects. Too-low values of these measures can flag potential threats to project e ff ectiveness and sustainability, and an analysis that separates these cost-benefit flows by stakeholder groups can furthermore help identify winners and losers, and therefore project risks. As some benefits are di ffi cult to credibly quantify, economic analysis can also take the shape of cost-e ff ectiveness analysis (where only costs of di ff erent options are compared) or a qualitative discussion of all relevant costs and benefits and their likely magnitude. For projects with the private sector an assessment of e ffi ciency also

requires the assessment of the purely financial returns, as too-low financial returns can jeopardize private sector interest in, and continued support to the project. On the other hand, very high private sector returns can call into question why development finance is needed, as commercial sources could be expected to fund ventures of such clear profitability. 3. Impact In the development world, impact is understood as those e ff ects that development is ultimately about, but which are often di ffi cult to attribute to single development interventions.

It is not enough to know whether a financed activity or asset has been delivered. One must also understand whether it has resulted in measurable improvements for the a ff ected populations.

Take household income for example, which is a measure that is considered to be one of the main determinants of people’s quality of life.

Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness


OPEC Fund Development Forum 2023

A development project that helps farmers in a certain region of a developing country uses more e ff ective farming techniques ultimately aims to have a positive impact on farmers’ household incomes – this is what the project is in large part about. However, farmers’ household incomes are not only determined by farming techniques, but also, for example, by weather events a ff ecting the harvest, the prices that farmers can sell their harvest for (which are often influenced by swings in global commodity prices, the market structure, etc.), changes in government subsidies and taxes, the employment status of other household members, and many other factors. To assess the impact of a single project on a measure such as household incomes, the e ff ects of the project

have to be separated out from all other factors that have a bearing on this variable. Many impacts also take a very long time to materialize - such as increased incomes due to a project that improves access to education. Assessing project impacts is therefore di ffi cult (and often methodologically impossible) and usually costly. Di ff erent impact evaluation methods of varying rigor exist, all of which strive to isolate the e ff ect of a specific intervention, or group of interventions, from other influences on the target variable. While some

Akinwumi Adesina President of the African Development Bank (AfDB)

consider impact evaluations the gold standard for truly assessing

“We’ll literally be able to ‘green’ the Sahel” OFQ : The Sahara o ff ers huge opportunities for solar energy generation, but is it economically feasible to harness that potential? Is that on the AfDB’s agenda? Akinwumi Adesina: The Sahel region of Africa has the highest solar irradiation in the world — but also the lowest rate for access to electricity. That’s why the AfDB launched the “Desert to Power Initiative”, which aims to harness the power of the sun and develop a total of 11,000 MW of solar power systems across 11 countries. It will provide electricity for 250 million people. It will also reduce carbon emissions for people relying on firewood and charcoal, which is the primary source of cooking energy in many of those countries. The initiative is really a game changer. The Sahel is dry, but if we have solar power and solar-driven irrigation systems, we’ll literally be able to “green” the Sahel.

To assess the impact of a single project on a measure such as farmers' household

incomes, the e ff ects of the project have to be separated out from all other factors.

Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness

PHOTO: Hryshchyshen Serhii /Shutterstock.com



OPEC Fund Development Forum 2023

development e ff ectiveness, their cost, time requirements and methodological limitations prevent their application to all projects. However, there are certain types of projects that are considered a good use of impact evaluation resources. These include pilots of government programs that are based on di ff erent design options and rolled out at a large scale. Impact evaluations of the small initial pilots can help governments decide not only which option to scale up, but also provide a sense of the magnitude of the e ff ects that can be expected at a larger scale. Other good candidates for impact evaluations are highly innovative projects, the e ff ects of which have to be well-understood to assess their suitability for replication. Even when projects do not undertake an impact evaluation, their assessments should nevertheless provide clarity on the assumed chain of e ff ects which are expected to lead to impacts in those long-term measures that development ultimately intends to improve. 4. Sustainability Projects can be very e ff ective in delivering development results in the short term, but the true test for the good use of scarce development resources is the question of whether the development benefits can be sustained over time. Even e ff ective projects can constitute a waste of resources if they are not sustainable.

Take for example the aforementioned road project – if the road is paved but then not maintained over time, the gained benefits can be reversed as the road deteriorates. Addressing known or likely risks to sustainability through e ff ective project design is therefore important, to mitigate the risk of misallocating development resources to unsustainable interventions. Sustainability also includes the social and environmental impacts of and risks to a project. Adverse environmental and/or social impacts can diminish or

Warren Evans Special Senior Advisor (Climate Change) at the Asian Development Bank (ADB)

even outweigh the overall development benefits of projects and pose risks to the continued stakeholder support that is needed for the continued delivery of development results.

“With any innovative

initiative, the first stage is critical” OFQ : What pioneering work is the ADB doing that could be a model for other regions? Warren Evans: Right now our biggest initiative is the Innovative Finance Facility for Climate in Asia and Pacific. This is a brand new way of mobilizing climate finance, whereby donor guarantees are used to carve out part of our existing loan portfolio, take them o ff our books, and so free up a large amount of climate finance. For every US$1 billion in guarantees we estimate that we’ll be able to mobilize US$4-5 billion in climate finance. We believe this concept could be applied by virtually every Multilateral Development Bank and perhaps bilaterally as well. If we can make this work, then it could become a new model for mobilizing climate finance.

Impact evaluations of the small initial pilots can...provide a sense of the magnitude of the e ff ects that can be expected at a larger scale.

Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness


PHOTOS: i_am_zews/Shutterstock.com (inset); Nataly Reinch/Shutterstock.com (backdrop)

OPERATING PRINCIPLES FOR IMPACT MANAGEMENT The Impact Principles are a framework for investors for the design and implementation of their impact management systems, ensuring that impact considerations are integrated throughout the investment lifecycle 11 . In 2019, IFC (World Bank Group) launched the Operating Principles for Impact Management, and then in 2022 it was handed over to the Global Impact Investing Network (GIIN) to strengthen the cohesion of impact measurement and management across the industry. By the end of 2022, there were 169 signatories representing 39 countries and US$510 billion in assets under management. Close to 90 percent of its signatories had published a disclosure statement.

The Operating Principles for Impact Management 12 are:



Define strategic impact objectives, consistent with investment strategy: “The Manager shall define strategic impact objectives for the portfolio or fund to achieve positive and measurable social or environmental e ff ects, which are aligned with the Sustainable Development Goals (SDGs), or other widely accepted goals.” Manage strategic impact on a portfolio basis: “The Manager shall have a process to manage impact achievement on a portfolio basis. The objective of the process is to establish and monitor impact performance for the whole portfolio, while recognizing that impact may vary across individual investments in the portfolio.” Establish the Manager’s contribution to the achievement of impact: “The Manager shall seek to establish and document a credible narrative on its contribution to the achievement of impact for each investment. Contributions can be made through one or more financial and/or non-financial channels.” Assess expected impact of each investment: “For each investment the Manager shall assess, in advance and, where possible, quantify the concrete, positive impact potential deriving from the investment. The assessment should use a suitable results measurement framework that aims to answer these fundamental questions: (1) What is the intended impact? (2) Who experiences the intended impact? (3) How significant is the intended impact?” Assess, address, monitor and manage potential negative impacts: “For each investment the Manager shall seek, as part of a systematic and documented process, to identify and avoid, and if avoidance is not possible, mitigate and manage Environmental, Social and Governance (ESG) risks.”

Monitor the progress of each investment: “The Manager shall use the results framework to monitor progress toward the achievement of positive impacts in comparison to the expected impact for each investment. Progress shall be monitored using a predefined process for sharing performance data with the investee.” Conduct exits considering the e ff ect on sustained impact: “When conducting an exit, the Manager shall, in good faith and consistent with its fiduciary concerns, consider the e ff ect which the timing, structure, and process of its exit will have on the sustainability of the impact.” Review, document, and improve decisions and processes based on the achievement of impact and lessons learned: “The Manager shall review and document the impact performance of each investment, compare the expected and actual impact, and other positive and negative impacts, and use these findings to improve operational and strategic investment decisions, as well as management processes.” Publicly disclose alignment with the Impact Principles and provide independent verification of the alignment: “The Manager shall publicly disclose, on an annual basis, the alignment of its impact management systems with the Impact Principles and, at regular intervals, arrange for independent verification of this alignment.”








11 They do not prescribe specific tools and approaches, or specific impact measurement frameworks. The expectation is that industry participants will continue to learn from each other as they implement the Impact Principles. (Operating Principles for Impact Management, 2022). 12 https://www.impactprinciples.org/9-principles



Viewing projects through a development e ff ectiveness lens helps teams design and implement operations that address the recipient’s most pressing needs.

How DFIs and other impact investors assess development e ff ectiveness

Viewing development projects through a development e ff ectiveness lens helps project teams design and implement operations that address the recipient’s most pressing development needs in an e ff ective, e ffi cient and sustainable way. Development e ff ectiveness considerations are embedded in decisions by development finance institutions throughout the project cycle, from the design to the evaluation of development projects. Development e ff ectiveness specialists typically support project teams to ensure that all development e ff ectiveness aspects are considered, results set and tracked, and lessons learned extracted and fed back into new operations. Once a project is properly designed and its objective and expected results are set, project monitoring should ensure that data on the extent of achievement of targets is collected and documented. This information collection during implementation can also serve as an early warning tool to help bring projects back on track, in cases where expected development results do not materialize, or experience delays. A systematic approach to assessing and tracking development e ff ectiveness also allows for a more informed and e ffi cient evaluation process once a project is completed. Several development finance institutions use specific assessment and tracking tools and systems that help standardize and facilitate the process, provide guidance to project teams and help track e ff ectiveness

Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness

throughout a project’s life. 10 These tools are generally guided by the development e ff ectiveness criteria outlined earlier. A large number of impact investors focused on investments in the private sector have agreed on another set of principles which reflect these same development e ff ectiveness criteria and also include guidance on the processes of including these considerations in investment decisions and monitoring (see box, left). The multitude of development challenges around the world needing to be addressed by limited development finance resources heighten the need to know what works, and why, so that resources can be used in the most e ff ective and e ffi cient way possible. Incorporating development e ff ectiveness considerations in strategic and investment decisions, and employing a systematic approach to gathering and using information on development results achieved allows DFIs to make informed choices for maximum impact.

References • https://www.oecd.org/development/e ff ectiveness/aide ff ectivenessglossary.htm • https://international-partnerships.ec.europa.eu/policies/european-development-policy development-e ff ectiveness_en#what-is-development-e ff ectiveness • https://www.impactprinciples.org/9-principles • https://sdgs.un.org/goals • https://www.oecd.org/development/multilateral-development-finance-2022-9fea4cf2-en.htm • https://www.europarl.europa.eu/RegData/etudes/BRIE/2017/599401/EPRS_BRI(2017)599401_EN.pdf • https://www.adb.org/sites/default/files/evaluation-document/35884/files/oct01-oed-working-paper.pdf • https://ieg.worldbankgroup.org/blog/rethinking-evaluation-development-e ff ectiveness • https://www.oecd.org/development/e ff ectiveness/40987004.pdf • https://www.oecd.org/dac/evaluation/daccriteriaforevaluatingdevelopmentassistance.htm • https://www.evalcommunity.com/career-center/type-of-indicators/#:~:text=Output%20indicators%20 are%20a%20type,from%20a%20program%20or%20project

10 Examples of such tools are the AIMM tool of the International Finance Corporation, the Development E ff ectiveness Matrix (DEM) of the Inter-American Development Bank, the DELTA tool of IDB Invest, the Development E ff ectiveness Rating (DERa) tool by DEG, the OFRF project-level tools of the OPEC Fund for International Development, among many others.



OPEC Fund Director-General Abdulhamid Alkhalifa sets out how a new tool makes the institution’s work more e ff ective and e ffi cient to meet rising demand WHY DEVELOPMENT EFFECTIVENESS MATTERS

OPEC Fund Quarterly : The development e ff ectiveness tool was introduced under your leadership of the OPEC Fund. Why is it more important than ever? Abdulhamid Alkhalifa: We have ambitious goals as a development finance institution: We want to expand our activities and step up our delivery of development support. The global environment is volatile, and the challenges are huge. While demand is high, financial means are scarce. In this situation, it is of paramount importance to deploy our funds in the most cost- e ff ective and e ffi cient way. Looking at all our investments through a development e ff ectiveness lens allows us to take informed decisions on how to use our resources to maximize development impact. Tracking development results enables us to be accountable to our stakeholders and to learn from our activities. This is crucial to safeguard the responsible use of the money our shareholders and bond investors have trusted us with, maximize the impact of our projects and share relevant information with co-investors and other stakeholders for strengthening existing and building new relationships on the basis of mutual trust.

OFQ : Is this the first time the OPEC Fund has looked at its development e ff ectiveness? AA: Since inception, our work has always aimed to improve the livelihoods of our beneficiaries. Our institution has been around for nearly half a century. In that time, the world has, in a way, gotten smaller while the problems it faces have gotten bigger. Issues are no longer just regional, but global. But so too are opportunities for cooperation and collaboration. The OPEC Fund sees itself as part of the global coalition to deliver the United Nations 2030 Agenda for Sustainability. As part of our more recent e ff orts, we took the Sustainable Development Goals (SDGs) as our starting point and lens to view how we had been working for so many decades. OFQ : What are the foundations of the refined approach to development e ff ectiveness? AA: Our anchor is the OPEC Fund Results Framework (OFRF), based on the guidance set out in the Strategic Framework 2030 and approved by our member countries in September 2022. This results framework tracks key corporate performance, strategic

PROFILE: ABDULHAMID ALKHALIFA Abdulhamid Alkhalifa has been Director-General of the OPEC Fund since November 2018 and was recently reappointed for a second term. He previously served at the World Bank and held senior positions in his native Saudi Arabia.



More than 342K MSMEs financed

By seeing firsthand what works today, we can refine our focus for the best results tomorrow.

117 healthcare facilities upgraded

Abdulhamid Alkhalifa, OPEC Fund Director-General

PHOTO: Kursova Photography (main image); MehmetO/Shutterstock.com (inset)

OFQ : What are the main benefits of the program? AA: Think about that old business question, “How do you measure

alignment and results indicators across four levels (global/regional development progress, operations’ results, operational e ff ectiveness, organizational e ffi ciency). An accompanying project-level toolkit ensures that our operations are prepared in a way that ensures the consistent assessment, monitoring and evaluation of their development e ff ectiveness.

introduced under OFRF are not only expected to gradually increase the share of projects for which results data is available, but will also put particular emphasis on measuring project deliverables, as well as the extent and benefits of their use. By seeing firsthand what works today, we can refine our focus for the best results tomorrow. OFQ : Is the framework already being implemented? AA: Yes, but we are phasing it in gradually in case we still need to make final adjustments and fine-tuning. We have fully rolled out the OFRF’s project- level toolkit and are currently in a two- year trial period of the OFRF’s aggregate indicators, the launch of which we expect in 2025. OFQ : To what extent is the framework a consequence of the OPEC Fund’s successful market debut at the

success?” For the OPEC Fund, success is having an even more comprehensive picture of our reach and benefits of our projects. The improved development results tracking and monitoring practices

OPEC FUND PROJECT RESULTS 2018-2022 Reviewing the period 2018-2022, the first OPEC Fund Development E ff ectiveness Report finds significant development impacts. Key results include: • 3.77 gigawatts in new or refurbished energy capacity (of which 334 megawatts renewable) • 2.86 million households with new or improved access to electricity • 1.76 million farmers supported, including 400,000 female smallholders • 342,096 MSMEs financed • 240,409 households with new or improved water connections • 15,723 kilometers of transmission lines built or rehabilitated • 10,853 kilometers of roads built or rehabilitated • 167 educational facilities built or upgraded • 117 healthcare facilities upgraded

beginning of the year? AA: I would not go as far as saying the development e ff ectiveness framework is a result of our bond framework. Going to the markets is embedded in our Strategic


167 educational facilities built or upgraded

Strengthened development

OFQ : What was one of the key findings? AA: The review found that all approved projects contribute to at least one SDG, with a majority contributing to two or more. Our top two SDGs were aligned to SDG 8 – Decent Work and Economic Growth and SDG 9 – Industry, Innovation and Infrastructure. This is in line with the OPEC Fund’s strong support for economic growth and development through infrastructure (including transport, energy, water & sanitation), as well as through the financial sector, rural development and multisector projects. OFQ : The report also looks closely at the concrete results our projects delivered to improve people’s lives in our development partner countries. AA: That’s right and although we look at only a comparatively narrow period from 2018-2022 the results are impressive. For instance, in that time OPEC Fund-supported projects helped provide 240,409 households with new or improved water connections, 2.86 million households with new or improved access to electricity and supported 1.76 million farmers, among many other notable metrics.

Framework 2030 and serves the goal of making the OPEC Fund an even more helpful and financially-sustainable multilateral development bank that is relevant to the needs of partner countries. Since the launch of the Strategic Framework in 2019 we have introduced far-reaching and intertwining reforms at all levels. The development e ff ectiveness framework is one of the main pillars of this new structure we are introducing by providing full accountability to our shareholders, the market and the beneficiaries of our projects. OFQ : The most public-facing aspect of this undertaking seems to be the inaugural Development E ff ectiveness Report, which was published in June 2023. AA: That’s right. It is a flagship report, of which we are very proud. It takes stock of progress made and knowledge generated on the development e ff ectiveness of the OPEC Fund’s activities to date. At the same time, it establishes a firm foundation to build upon.

e ff ectiveness will provide a strong foundation for the OPEC Fund to grow the scale, scope and impact of its operations.

Abdulhamid Alkhalifa, OPEC Fund Director- General


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