New partnerships for growth: FCDO Minister's speech at the LSE

FCDO Minister for Development Anneliese Dodds gave a keynote speech to the UK financial sector at the London Stock Exchange today on partnerships for growth.

"Thank you so much, Julia [Dame Julia Hoggett, CEO of the London Stock Exchange], and a very good morning to all of you.

Thank you so much for joining us today, I really appreciate it.

It was an absolute thrill to see the market open this morning.

I am very keen to hear from as many of you as possible, so I'm not going to speak for too long.

I want to leave plenty of time for questions.

But I do want to share a few reflections with you this morning.

This is, as Dame Julia kindly said, the second time I had the privilege of opening the London Stock Exchange.

I had the privilege of speaking in this room almost two years ago, and it was then as now a very moving moment, because sat in the front row were some of the first women, in fact the first women, and others who set foot on the London Stock Exchange because they had not been allowed to do so until then.

What a privilege to have been there for that moment, as for this moment.

Two years ago, when I was here, I spoke about my own family background – with my dad having worked in financial services.

And I want again to place on record, my respect for the work that goes on in this building, and across the country.

Businesses in the financial sector power jobs and growth across the UK, and indeed often around the world as we've just heard.

Well, of course, a lot has changed in the last two years, since I was last here.

I am addressing you, not as a shadow minister – but now as the Minister for Development, and for Women and Equalities.

We have a new government focused on growth and restoring our reputation on the world stage.

And the Prime Minister and the Chancellor have set us all a guiding mission to grow our economy, and bring opportunity to people across our country.

They have been clear that supporting growth and development around the globe is not just the right thing to do.

It is an essential part of how we unlock growth, jobs, trade, investment, and pride in our economy here at home as well.

Indeed, as the Foreign Secretary said in a major speech at the start of the new year, in today's contested, competitive world, what we need now is a whole new level of global engagement – drawing on our greatest strengths.

That absolutely includes the expertise, experience, and dynamism in this room.

Clearly, the City of London and wider UK financial sector must be at the heart of how we meet the opportunities and challenges of our time.

Twenty years ago, people marched and campaigned to Make Poverty History.

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That call was heeded and huge progress was made.

Debt was cancelled, and development assistance was ramped up.

Lives were saved and lives were changed.

Today, the challenges we face are growing and becoming increasingly complex – not least because our world is so deeply interconnected.

We have all seen how shocks can indeed reverberate across the globe.

A vicious cycle of conflicts.

The pandemic.

The climate and nature crisis, and others.

We have seen supply chains disrupted, and investor confidence shaken – harming our economy, here at home.

Yet we have all seen the power of harnessing this interconnectedness as well.

By working together – we can get ahead of global shocks, mitigate their impact, and unlock new opportunities for growth.

For outward investment by UK businesses.

To build future markets for UK exports.

To support low-and-middle-income countries to grow their economies as well.

As the UK's Minister for Development, and for Women and Equalities, I am determined to build genuine partnerships across the Global South, based on genuine respect, and in service of our mutual interests.

Indeed, in all of the visits I've undertaken over the last 6 months, from Indonesia to Malawi, to the major global gatherings of the UN General Assembly, the World Bank Annual Meetings, and the climate summit at COP29 – I heard loud and clear that our drive for growth is an ambition our partners all share.

They want respectful, modern partnerships that benefit us all, too.

They want to tap into your expertise and the innovative financial solutions you are pioneering – to harness the power of private finance.

They want to work with us to build resilience to shocks.

To escape the trap of unsustainable debt.

To break down the barriers to private investment.

And they want to work with us to champion much-needed reform of the global financial system, so we unlock more opportunities for everyone – from millions of women and girls around the world whose game-changing potential has yet to be unleashed, to investors right here in the City of London.

Your hard work is at the heart of these partnerships.

Already, 115 African companies are listed here.

London is the world's number one hub as I said before for green finance.

All of this puts the UK in pole position to be the leading source of investment for emerging markets – and to build on the reputation you have worked so hard to develop.

So today, I want to focus on four key areas, where the government and the City can make the most of the important roles we have to play – to support stable, resilient long-term growth, here at home, and around the world.

Mobilising private capital – to help us maximise the impact of public and private finance.

Reforming international financial institutions – to make sure they are bigger, better, and fit for the future.

Tackling unsustainable debt – to achieve the fast, orderly restructuring that helps countries avoid default and supports stability.

And scaling up insurance – to get more finance in place before disasters strike, to protect and promote growth across the world.

First – mobilising private capital.

Together, we can maximise the impact of billions of dollars of public money – and unlock many billions more.

Consider that globally, there are some $121 trillion of assets under management.

Currently, Africa accounts for less than 1% of the overseas portfolio allocation of UK pension funds.

Yet Africa's GDP growth – and I know I don't need to tell many in this room of this - is projected to outpace the global average – and almost 70% of UK savers say they want their investments to consider impact on people and the planet.

It is time to lean in.

So, I was delighted to hear the Chancellor announce her plans – to consolidate the UK's fragmented £1.3 trillion pension fund landscape, and create larger, more agile funds, capable of investing in high-growth emerging and developing markets.

This is exactly the kind of opportunity we need to embrace.

And I'm delighted that today, a new report from leading UK-based institutional investors sets out how the UK can continue to be the climate finance hub for the world.

The report makes it clear that investing in other countries to accelerate the transition to clean energy is critical – to growing our economy at home, and to building financial stability long-term, in the UK, and right around the world.

The Energy Secretary is rightly championing this through the new Global Clean Power Alliance, that the Prime Minister launched at the G20 in Rio.

Well, today I am pleased to announce that alongside the Economic Secretary to the Treasury, I am convening an Investor Taskforce – to increase UK private investment for climate and development, in markets around the world.

We are building partnerships with public markets like the London Stock Exchange to pursue this.

In just four years, our flagship MOBILIST initiative has mobilised almost $250 million for listed products focussed on climate and development globally – including recent investments, like the infrastructure securitisation through Bayfront.

This method of structuring bank infrastructure loans makes it possible for institutional investors to purchase them through investment-grade listed instruments.

MOBLIST also helped achieve a $100 million first close for the Green Guarantee Company that will provide up to $1 billion of guarantees – for institutional investors buying green bonds, including those listed on the London Stock Exchange, and green loans issued in the private credit market.

Today, I am pleased to announce up to £100 million of additional funding for MOBILIST – so we can build on this innovative work pioneering public market investment in emerging markets.

This will allow MOBILIST to provide a platform for even more partners to draw on UK financial expertise – unlocking opportunities for investments in green growth, and helping more businesses to access new and affordable sources of capital across Asia, Africa, and Latin America.

MOBILIST is not the only way that we are doing this.

When I visited the London-based Private Infrastructure Development Group, funded by the UK and others – I saw how they are developing and de-risking infrastructure projects across Africa and Asia.

The UK financial sector has been a key partner for them.

For example, one arm of the group – GuarantCo – has guaranteed bonds and loans, to unlock $5.7 billion of private investment in infrastructure, benefitting over 44 million people.

And – breaking news – I am delighted that a new $50 million deal with Standard Chartered Bank – signed today – will allow them to expand further.

As another example, take British International Investment, or BII – the world's oldest Development Finance Institution, at the forefront for 75 years.

The BII teams were full of ambition when I visited their HQ in November.

I am always proud to tell our partners that 25% of BII's new investment commitments already meet the 2X Challenge standard – to increase investment in women.

By making this a priority, BII is funding everything from affordable housing led by women in India, to making lines of credit accessible to small-scale retailers run by women in Nigeria – supporting jobs and growth.

And when I sat down with key African investors alongside partners from the City in the autumn, I was able to highlight that over half of BII's portfolio is invested in Africa, and at least 30% of BII's investments are in climate finance.

So today, I want to encourage you to engage with their live call for proposals that is open right now.

BII are looking for innovative pilots to be funded through a new facility announced by the PM at UNGA in New York – that we expect to mobilise over $500 million of institutional investment.

We are supporting public markets to mobilise finance in other ways as well.

UK support has been instrumental in helping Ethiopia to launch its first public stock exchange just a few weeks ago, with support from the UK government through Financial Sector Deepening Africa – or ‘FSD Africa' for short.

This exchange brings transparency and international-standard accounting to listed companies – and the diverse ownership that should improve accountability, and broaden both the gains from growth, and the buy-in.

We are sharing UK expertise on financial regulation with our partners as well.

Through a partnership with the Foreign, Commonwealth, and Development Office, the Bank of England is now supporting more than 10 countries to improve monetary policy and strengthen financial stability – from Nigeria to South Africa, and from Bangladesh to Indonesia.

And in the last few days we have signed a new partnership with the Financial Conduct Authority, that will lead to them sharing knowledge with partner countries – to ensure that markets are competitive and fair.

That is good for our partners – and it is good for us as well.

Last year, Tanzania's NMB Bank cross-listed East Africa's first sustainability bond on the London Stock Exchange and the Dar es Salaam Stock Exchange – again, with support from FSD Africa, and an anchor investment from BII.

The $73 million raised through this ‘Jamii' Bond will support renewable energy, food security, jobs, and growth.

In fact, thanks in no small part to your hard work, these sorts of listing are becoming a trend on the London Stock Exchange.

Last year, the Brazilian Government dual-listed its first $2 billion sovereign sustainable bond on the London Stock Exchange.

That was followed by a full listing of its second $2 billion sustainable bond, a few weeks later.

All of this was enabled by UK support that helped Brazil develop a Sovereign Sustainable Bonds framework.

Now, as we heard earlier, just a few weeks ago, the first $500 million Climate Investment Funds Capital Markets Mechanism bond was issued on the London Stock Exchange.

It generated considerable investor interest.

As has already been mentioned of course, it was over-subscribed six times over.

Further issuances could raise up to $7.5 billion over ten years, for new investments in clean energy in developing countries – leveraging UK government contributions, and those from our international partners.

So, I could not have been more delighted to open the market this morning – and to congratulate the Climate Investment Funds and World Bank Treasury on issuing this promising new bond today.

Now, of course, no one in this room is going to invest in developing economies, or provide climate finance – simply because it is a nice thing to do.

You are making those investments and building those partnerships because they represent a remarkable opportunity – to marry investment in the economies and technologies of the future, with the experience and expertise of the City of London.

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Let us keep up the momentum – so the London Stock Exchange continues to be the preferred choice.

My second point is about reforming international financial institutions.

We are asking a lot of all of you – but of course, there are certain things that only governments can do.

And reforming the multilateral development banks or MDBs is one of the biggest ways that we are holding up our end of the bargain.

Every year, the World Bank Group and various regional development banks multiply every pound the UK government and other shareholders put in.

Last year alone, they raised around £30 billion from bond issuances in London.

Together with finance raised on other markets around the world, this allowed them to deploy over $170 billion to low-and-middle-income countries.

This finance is on much more affordable terms than many of our partners could access directly – thanks to the banks' triple-A credit ratings.

They use this to invest in high-impact public and private projects.

Green infrastructure, healthcare, education, women and girls – all underpinning the foundations for growth around the world, and here in the UK.

So clearly, pursuing reforms that make the MDBs bigger, better, and fit for the future is key.

As the Prime Minister set out at the UN General Assembly last year –that is exactly what we are using the UK's influence to do, in partnership with the Global South.

Indeed, when I travelled to Washington D.C in October, as the UK Governor of the World Bank Group, I made it my priority to agree changes to its risk appetite, that will unlock an additional $30 billion over ten years.

This builds on UK government guarantees that have made it possible for the World Bank and other MDBs to lend an additional $6 billion, across Africa, Asia, and the Pacific.

Ahead of the next big ‘Financing for Development' summit in Seville this summer – we must do more.

To make sure the MDBs can shoulder more risk.

To create more opportunities for private companies to invest in emerging markets.

And to empower the women and girls who have the power to lift up whole families, communities, countries, and economies.

Thirdly – we have to tackle the unsustainable debt that is dampening global growth.

As we take the next steps now, we need the City to be at the forefront of expertise and solutions, to make sure that countries facing unsustainable debt burdens can restructure it effectively.

Clearly, fast, orderly restructuring can help countries avoid default, and support stability.

This is squarely in the interest of lenders, such as bondholders and commercial lenders here in the City.

Obviously, it is squarely in the interests of borrowers too.

I heard that loud and clear from the governments of Malawi and Zambia during my visit at the end of last year.

With some 95% of African bonds issued under English Law, the UK has a key role to play.   We need to leverage this.

Half of the lowest income countries are now in debt distress, or at high risk of it.

Some 3.3 billion people are living in countries that are spending more on servicing their debt, than on the health and education services that underpin long-term, global growth.

So, I want us to build on the successes of Collective Action Clauses that featured in over 90% of new bond issuances.

These have been rolled out widely since their introduction in 2004.

They have played an important role in ensuring a smooth process and strong private sector participation, in recent debt restructuring negotiations in Ghana and Zambia – avoiding situations where one or two bondholders can hold up a deal.

This is a great example of what market-friendly innovation can achieve.

My challenge to the commercial banks now is to introduce the equivalent clauses for syndicated lending – that the UK government has worked with the International Capital Markets Association, legal and financial advisors based in the City, and international partners to develop.

No lender has implemented them – yet.

So today, I am announcing that the UK government will offer support for the first ten transactions that put ‘majority voting provisions' into existing or new lending to low-or-middle-income countries.

Together, we can speed up debt restructuring negotiations with syndicated lenders – and get growth recovering more quickly in cases where debt has become unmanageable.

We can do more on Climate Resilient Debt Clauses as well.

The UK government was the first bilateral creditor to offer these clauses.

Several other lenders have followed since.

The difference they can make is significant.

They allow repayments to be paused when a shock hits.

This frees up fiscal space for countries responding to a crisis.

Helps avoid default.

Supports stability.

And safeguards growth.

Just look at Grenada.

At the end of last year, following Hurricane Beryl – these clauses were triggered on government-issued bonds

The result was $30 million of interest payments being suspended over the following year – thanks to the bondholders who pioneered these clauses.

Already, we are going further.

In October, I announced that the UK will support small states to take up Climate Resilient Debt Clauses in their World Bank loans, by covering the fees.

In the long run these should be offered at no cost – improving sustainability, and offering benefits both to borrowers and lenders.

All of this builds on the leadership of countries like Grenada and Barbados who championed these clauses.

Today, I am reiterating our call on all creditors to offer these clauses in their sovereign lending, by the end of this year – including private sector lenders here in the City.

I want to see greater transparency on debt as well.

This improves investors' understanding – and reduces the hidden debt that poses substantial risks for creditors here in the City.

It lowers the cost of borrowing for our partners.

And it allows citizens across the world to hold their governments to account for borrowing and using resources.

Already, the UK government publishes all its new lending quarterly, on a loan-by-loan basis.

Now, we want to see other public and private creditors meeting the same standards of transparency in their lending – especially to low-income countries.

The UK will keep under review if further action is needed – working together with the private sector, to combat high levels of indebtedness.

Fourth and finally, we need to get insurance and other contingent finance in place before disasters strike, so we protect and promote growth around the world.

Extreme weather events are on the rise, as we all know.

Millions of the world's poorest and most vulnerable people are bearing the brunt of repeated shocks.

Yet currently, less than 2% of crisis finance is of the ‘pre-arranged' variety – that makes sure every pound spent yields three or four times its worth in benefits.

Changing that is so important – to help countries receive the rapid payments they need to avoid losses.

To reduce the need for humanitarian support.

And to protect growth and jobs.

Once again, the City is well-placed to meet the needs of this growing, and largely untapped market – as a global leader in innovative insurance and managing risk.

In Africa, the Caribbean, South-East Asia and the Pacific, the FCDO has helped to establish regional insurance schemes – helping countries get cheaper prices by buying insurance from the private sector as a group, pooling their risk.

London reinsurers underwrote a quarter of the first eight pools that have allowed Africa to transfer over $1 billion of risk, through the UK-funded African Risk Capacity.

On a visit at the end of last year, I saw first-hand the difference that payouts from the African Risk Capacity are making to people in Zambia and Malawi, as they respond to a devastating recent drought.

I was proud to tell them that this was made possible by UK government subsidies for insurance premiums – for countries that otherwise wouldn't have been able to afford them.

Now, I want us all to engage with the ground-breaking report published by a high-level industry panel, that I helped to launch last week – on how we can strengthen the provision of insurance and other contingent finance, and scale up the use of pre-arranged finance.

Improving modelling, and the way we price risk.

Championing innovative parametric insurance.

De-risking investments upfront.

This work is so important for giving investors confidence, expanding markets in development economies, improving returns, and strengthening the UK's role as a leading global financial hub.

Cultivating a virtuous cycle of global resilience and growth is in all our best interests.

Your expertise, innovation, and investment are critical.

So, my pledge to you is that I will make it a priority to build stronger partnerships between the Foreign, Commonwealth, and Development Office and the City.

So we face up to unprecedented challenges.

Embrace new opportunities.

And reinvigorate hope for our shared future – and for sustained and sustainable economic growth here and overseas – by working towards it together, in the months and years ahead.

Thank you."