Over the past three decades, global poverty has declined by nearly 70 percent as hundreds of millions of people have been lifted out of poverty. Despite this tremendous progress, more must be done to fill an enormous void: the U.N.’s Sustainable Development Goals face a funding shortfall of $2.5 trillion per year – and public investments alone will not be enough.

To bridge this gap and tackle development challenges at scale, the U.S. government has increasingly sought to catalyze private sector resources and expertise. This has meant attracting new investments, including impact investing, a category of investments designed to generate a financial return while making a positive social impact.

Impact investors can range from philanthropic organizations that have created their own sustainable investment tools, to American energy companies in the Midwest helping bring electricity to remote regions of Southern Africa, to venture capitalists on the coasts investing in microfinance opportunities in South Asia.

Empowering American Investors

Reflecting this evolving landscape, the White House and Congress agreed that U.S. development finance must be strengthened and modernized. As a result, legislation was introduced in both the House and the Senate—known as the Better Utilization of Investment Leading to Development (BUILD) Act of 2018—proposing the creation of a Development Finance Institution (DFI) that would empower the Overseas Private Investment Corporation (OPIC) with additional authorities and functions.

First created in 1971, OPIC is the U.S. government’s premier agency for facilitating American private investment in developing nations. Once at the forefront of the international development community, OPIC has fallen behind its sister agencies throughout the world which have enhanced authorities, staff sizes, and budgets.

Testifying before Congress about the benefits of the proposed legislation, OPIC President Ray Washburne argued that a “new, modernized DFI could be far more innovative and competitive, creating countless opportunities for communities throughout the developing world who will benefit from the economic impact of its investments.”

If authorized, the legislation would help the U.S. government better leverage private resources to address major development goals like increasing access to energy while creating an enabling environment for American investors to be successful. The new DFI will have the ability to train businesses that plan to expand into emerging economies, to provide first loss and currency risk guarantees for American investors working in risky markets, and to make equity investments in companies looking to secure financing.

Making America More Competitive

Modernizing America’s development finance capabilities isn’t just smart for American business—a new DFI will also better help the U.S. government compete with rivals like Russia and China, countries that have dramatically increased their state-sanctioned investments in violence-prone regions of geostrategic importance. Over the past few years, China has spent $1 trillion through its Belt and Road Initiative, a massive infrastructure investment program seven times more expensive than the Marshall Plan, which spans 60 percent of the global population.

While the U.S. will never be able to outspend China—nor should it—President Trump has made the case that an enhanced development finance institution would “provide strong alternatives to state-directed initiatives that come with many strings attached.” Unlike Beijing’s state-led model of development, the DFI will help incentivize American businesses to invest in fragile countries like Honduras or Ukraine where private sources of financing may be unavailable.

As Senator Chris Coons (D-DE) argued at the recent Chevron Global Development Forum, “the United States needs to show up with investment proposals in countries with growing populations and fragile institutions.” By engaging willing countries, the U.S. government will partner with the private sector and the broader impact investing community to catalyze massive development gains in unstable regions that are in our national interest.

BUILDing a Better DFI

Already, the House and Senate have taken steps to quickly turn the BUILD Act into law. Yesterday, the legislation was unanimously approved by both Republicans and Democrats on the House Foreign Affairs Committee. Today, Ray Washburne testified before the Senate Foreign Relations Committee about the benefits of modernizing OPIC, laying the groundwork for SFRC to approve its own version of the bill.

If passed by the full House and Senate, Congress will likely build on its bipartisan tradition of reforming foreign assistance to maximize its efficiency and effectiveness across Administrations, while also strengthening America’s ability to leverage the burgeoning impact investing community to address some of the world’s most pressing development challenges.