New US-World Bank partnership to de-risk investment in Ukraine
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Projects backed by a joint U.S.-Ukraine investment fund will receive additional war-risk coverage after the World Bank and the U.S. International Development Finance Corporation signed an agreement at the Ukraine Recovery Conference in Gdansk on June 25.
The partnership with the World Bank's insurance arm, the Multilateral Investment Guarantee Agency or MIGA, will insure DFC projects in Ukraine against political and war-related risks.
The agreement includes additional security for investors through the U.S.-Ukraine Reconstruction Investment Fund, which grew out of the much-publicized "minerals deal" talks between Kyiv and the DFC and was ultimately designed to invest across a broad range of sectors.
"For Ukraine to rebuild, you're going to need private-sector money. The only way the private sector will come into this is through the right risk-reduction methodologies," said Ajay Banga, the 14th president of the World Bank Group, at the signing.
"This is an effort by DFC and us together to help reduce the risk so that the private sector can feel confident about the opportunity to invest in Ukraine’s future."
Limited access to war-risk insurance has been a major barrier for many foreign investors seeking to enter the Ukrainian market. While MIGA offers war-risk insurance products on paper, only one Ukrainian company, Dragon Capital, has secured MIGA coverage so far.
The DFC’s decision to partner with MIGA was driven by the World Bank’s global reach and expertise in providing political-risk insurance, Connor Coleman, head of investments at the DFC, told the Kyiv Independent during the press conference.
"Both MIGA and the DFC are leaders in providing political-risk insurance across the board. So MIGA was the only choice we wanted to partner with for something like this," he said.
The U.S.-Ukraine Reconstruction Investment Fund, known as URIF, is a jointly managed, private equity-style fund will invest in projects across key sectors of Ukraine’s economy that align with Washington’s strategic priorities and Ukraine’s economic needs. Rather than leading projects, the fund will invest as a minority shareholder.
The fund announced its first project in March with Sine Engineering, a Ukrainian dual-use company. At least two more projects are expected this year, with the DFC signaling interest in Ukraine’s energy and critical minerals sectors.
"The next projects are coming this year, and we need a large facility to help de-risk those investments and attract core private-sector capital into those projects," Ukraine's Economy Minister Oleksii Sobolev said at the signing.
