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The world is on an unsustainable path. Financial sector participants are becoming more conscious of the impact of their economic, social and environmental footprint. As the investor community makes progress towards integrating environment, social and governance (ESG) factors into investment mandates, particularly for equities and corporate debt, integrating these factors into the sovereign debt asset class has lagged- although investment practices and approaches are evolving. As the financial ecosystem changes, the Debt Management Office (DMO), as the main financing arm of the state, would benefit greatly from understanding how these changes affect the core Public Debt Management (PDM) mandate and how to respond to the growing investor demand for sustainable finance. The paper presents an overview of areas in which DMOs can respond to the changing world and proposes six ESG market readiness factors as well as a framework to help formulate DMO strategy in the area of ESG investing. The paper also concludes that in less developed markets, given weak institutional arrangements, it is often better to concentrate development efforts on the local capital market as this will ultimately support a more sustainable economy in the long run.

Debt Markets --- Environment --- Finance and Financial Sector Development --- Green Issues --- International Financial Markets --- Public Sector Development --- Sovereign Debt

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Over the years, the demand for seamless and inexpensive cross-border payments has grown in parallel with growth in international e-commerce, remittances and tourism. Yet, cross-border payments have not kept pace with the intensive modernization that has characterized domestic payment services worldwide. An alternative avenue to modernize delivery of cross-border payment services is being increasingly explored in the context of central banks issuing their own digital currency. A central bank digital currency (CBDC) could well incorporate options and features specifically designed to execute cross-border payments, with a view to reducing the inefficiencies and rents discussed above by shortening the payments value chain. This report discusses the use of CBDCs for cross-border payments. The report reviews the models that have been developed for this purpose to date and discusses critical legal issues that arise in the context of cross-border use of CBDC. This report is organized as follows. Section II specifically discusses the models developed jointly by the Bank of Canada, Bank of England, and Monetary Authority of Singapore; Section III evaluates how cross-border CBDCs address challenges of the existing correspondent banking arrangement; Section IV discusses the legal issues involved in cross-border use of CBDCs, and Section V concludes the report with some general remarks.

Cryptocurrency --- Currencies and Exchange Rates --- Finance and Financial Sector Development --- Financial Regulation and Supervision --- Financial Structures --- International Financial Markets

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There is growing interest in impact investing, the idea of deploying capital to obtain both financial and social or environmental returns. Examination of every equity investment made by one of the largest and longest-operating impact investors across 130 emerging market and developing economies shows this portfolio has outperformed the S and P 500 by 15 percent. Investments in larger economies have higher returns, and returns decline as banking systems deepen and countries relax capital controls. These results are consistent with imperfect integration of international capital markets and the thesis of impact investing that some eligible markets do not receive sufficient investment capital.

Capital Markets and Capital Flows --- Emerging Market Economies --- Finance and Financial Sector Development --- Impact Investing --- International Capital Markets --- International Financial Markets --- Private Equity --- Venture Capital

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Small and medium enterprises (SMEs) face significant financing gaps that stifle innovation and economic growth. The credit gap alone is estimated at dollar 4.5 trillion as of 2017 for emerging markets and developing economies (EMDEs) only. Bank financing has been the traditional source of external financing to SMEs; however, since the global financial crisis that started in 2007, there has been an active debate about the role that capital markets can play in SME financing. This report seeks to enhance practitioners' understanding of the potential role that capital markets can have in SME financing in EMDEs. the report reviews global experiences in the use of capital markets solutions and, more generally, in market-based solutions to expand SME financing with a view to identifying key preconditions and challenges for EMDEs implementing the solutions. The report looks at both indirect and direct mechanisms for SME financing, such as capital markets solutions, lending conditions, instruments such as SME loan securitization and others, as well as both debt and equity financing solutions.

Access to Finance --- Capital Markets --- Emerging Markets --- Finance and Development --- Finance and Financial Sector Development --- International Financial Markets --- Private Sector Development --- Small and Medium Size Enterprises

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John J. McCloy, President of the International Bank for Reconstruction and Development, spoke about the prospects for success by the European Recovery Program and the role of Bank in it. He commented on the world leadership role of the United States. He reviewed the five loans the Bank has made to date. He concluded by discussing South America countries and their needs for technical assistance and advice in connection with their development.

Capital Markets and Capital Flows --- Finance and Development --- Finance and Financial Sector Development --- Financial Crisis Management and Restructuring --- International Cooperation --- International Financial Markets --- Private Investment --- Technical Assistance