On October 20, former Inter-American Development Bank Treasurer Søren Elbech visited the Golub Center for Finance and Policy for a lunchtime discussion with students and faculty. Drawing on his experience in capital markets in both the public and private sectors, Elbech shared insights about the operations and unique challenges faced by development banks, such as multinational politics and the central mission of the IADB. The IADB is comprised of 48 member countries—of which 26 are borrowers and 22 are funders—and Elbech answered questions about the process through which projects are selected for funding and the incentives of each actor.
Throughout the conversation, Elbech utilized the illustrative example of funding eco-friendly projects. As a development bank, the IADB often funds “green” projects that aim to be environmentally friendly. While he feels that bonds are generally an excellent way of transferring money from those who have it to those who need it, Elbech explained how current incentive structures essentially add a premium to “green bonds” that is ultimately paid not by the investors but by the developing country borrower. A lively discussion then followed about how these incentives might be modified to better serve both the mission of the IADB and the interests of environmentally-conscious investors.