Trust Funds and Partnerships

The World Bank manages the liquid assets of trust funds and FIFs in a single, commingled investment portfolio (the “pool”) that provides the following benefits:

a)       Agile portfolio management that includes a selection of model portfolios to accommodate various liquidity needs, risk and return profiles of various funds that are managed within a comprehensive risk management framework.

b)      Access to a variety of investment products and longer-term maturity investments to enhance investment returns and income over time.

c)       Engagement with trusted market counterparties and banking relationships to ensure best execution and pricing for investments and trade settlements.

d)      Access to cost-effective and advanced investment infrastructure platform resulting in low administrative costs to participants e.g., legal agreements with market counterparts to facilitate access to a diverse array of investment products.

Active liquidity management to make cash available for disbursements to recipients when required and optimize investments over the longer term.

Preservation of capital is the primary investment objective of the investment pool, reflecting development partners’ sensitivity to any potential losses of capital that could arise from adverse movements in the international capital markets. Recognizing that individual trust funds and FIFs within the pool might have different investment horizons due to differing liquidity needs, and risk tolerances, the World Bank Treasury offers model portfolios with specific investment objectives, investment horizons and risk tolerances. The asset allocations for each model portfolio are designed to achieve these investment objectives.

The asset allocation for each model portfolio defines the suitable types of investment instruments (asset classes) and their weights in the model portfolio, together with the appropriate benchmark for each asset class. The asset allocation process is governed by the overall market risk tolerance limits. Individual trust funds and FIFs participate in the model portfolios in accordance with their investment horizon and risk appetite.

Generating persistent investment income  within an overarching conservative investment style is the cornerstone of asset management services at the World Bank. This is achieved through an effective asset allocation process, established risk management process, and active portfolio management. The World Bank maintains strict oversight over the portfolio governance and performance, making amendments as necessary during the period. The investment portfolios of trust funds and FIFs have   generated a cumulative total investment income of over USD2.6 billion over the past 5 years, resulting in additional development resources for the funds participating in the Pool.

Investments for Trust Funds  and FIFs benefit from a robust governance and oversight process. The investment strategies for trust funds and FIFs are periodically reviewed and approved at the appropriate governance level within the World Bank. Various departments and financial committees, including the Board’s Audit Committee, maintain oversight and review of the investment strategies. The risk profile and performance of the trust fund investments are monitored on an ongoing basis. Further, investment policy and asset allocations are assessed in regular Management discussions, while investment returns are reported at least monthly.

Further to its twin goals of ending extreme poverty and promoting shared prosperity on a livable planet, the World Bank is committed to a broader and ambitious development agenda focusing on the Sustainable Development Goals (SDGs) and helping its client countries to achieve their climate action targets.

Since July 2019, the World Bank Treasury has been incorporating ESG factors in the investment process for all the portfolios it manages. The default Sustainable and Responsible Investment (SRI) approach used by the World Bank Treasury is ESG Integration. In addition to this default approach, in FY21, the World Bank Treasury implemented a Sustainable Fixed Income Strategy (“Strategy”) aimed towards achieving positive development impact using the Thematic Investment approach.

The Strategy, which was initially implemented with an investment universe focused on sovereign bonds, governmental agency bonds and supra-national bonds, seeks to select suitable investment through a process of positive identification. This means investing in bonds that the World Bank Treasury has identified as generating a positive and preferably measurable environmental and/or social impact in addition to the traditional financial characteristics such as positive expected risk-adjusted returns.

As the SRI ecosystem evolves and expands its scope and trajectory, the World Bank Treasury will seek to respond by continuing to adapt to the needs of its development partners in the management of the investment portfolios of trust funds and FIFs.