[Senate Hearing 118-303]
[From the U.S. Government Publishing Office]




                                

                                                        S. Hrg. 118-303
 
BUILD ACT REAUTHORIZATION AND DEVELOPMENT FINANCE CORPORATION OVERSIGHT

=======================================================================

                                HEARING



                               BEFORE THE



                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE



                    ONE HUNDRED EIGHTEENTH CONGRESS



                             FIRST SESSION



                               __________

                            OCTOBER 4, 2023

                               __________



       Printed for the use of the Committee on Foreign Relations
       
      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 




                  Available via http://www.govinfo.gov
                  
                  
                  
                  
                          ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
 55-726 PDF            WASHINGTON : 2024
                 


                 COMMITTEE ON FOREIGN RELATIONS        

             BENJAMIN L. CARDIN, Maryland, Chairman        
ROBERT MENENDEZ, New Jersey            JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire          MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware         MITT ROMNEY, Utah
CHRISTOPHER MURPHY, Connecticut        PETE RICKETTS, Nebraska
TIM KAINE, Virginia                    RAND PAUL, Kentucky
JEFF MERKLEY, Oregon                   TODD YOUNG, Indiana
CORY A. BOOKER, New Jersey             JOHN BARRASSO, Wyoming
BRIAN SCHATZ, Hawaii                   TED CRUZ, Texas
CHRIS VAN HOLLEN, Maryland             BILL HAGERTY, Tennessee
TAMMY DUCKWORTH, Illinois              TIM SCOTT, South Carolina
                Damian Murphy, Staff Director          
       Christopher M. Socha, Republican Staff Director          
                   John Dutton, Chief Clerk          



                              (ii)        

  


                         C  O  N  T  E  N  T  S

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                                                                   Page

Cardin, Hon. Benjamin L., U.S. Senator From Maryland.............     1

Risch, Hon. James E., U.S. Senator From Idaho....................     3

Nathan, Scott A., Chief Executive Officer, Development Finance 
  Corporation, Washington, DC....................................     4
    Prepared Statement...........................................     6

              Additional Material Submitted for the Record

Responses of Mr. Scott Nathan to Questions Submitted by Senator 
  Benjamin L. Cardin.............................................    30

Responses of Mr. Scott Nathan to Questions Submitted by Senator 
  James E. Risch.................................................    34

Responses of Mr. Scott Nathan to Questions Submitted by Senator 
  Jeanne Shaheen.................................................    44

Responses of Mr. Scott Nathan to Questions Submitted by Senator 
  Ted Cruz.......................................................    45

Responses of Mr. Scott Nathan to Additional Questions Submitted 
  by Senator Ted Cruz............................................    49

Responses of Mr. Scott Nathan to Questions Submitted by Senator 
  Chris Van Hollen...............................................    51

Responses of Mr. Scott Nathan to Questions Submitted by Senator 
  Tammy Duckworth................................................    52

Prepared Statement of Anthony ``Tony'' Zakel, Inspector General, 
  U.S. International Development Finance Corporation Office of 
  Inspector General..............................................    53

Five Letters to the Development Finance Corporation on Solar, 
  Mission, Purpose, Zimbabwe, Brazil, and Climate Matters........    60

                                 (iii)

  


BUILD ACT REAUTHORIZATION AND DEVELOPMENT FINANCE CORPORATION OVERSIGHT

                              ----------                              


                       WEDNESDAY, OCTOBER 4, 2023

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:02 a.m., in 
room 419, Dirksen Senate Office Building, Hon. Benjamin L. 
Cardin, chairman of the committee, presiding.
    Present: Senators Cardin [presiding], Menendez, Shaheen, 
Coons, Murphy, Kaine, Van Hollen, Risch, Romney, Ricketts, 
Young, and Hagerty.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
                   U.S. SENATOR FROM MARYLAND

    The Chairman. This hearing of the Senate Foreign Relations 
committee will come to order. Let me start by making something 
crystal clear to the international community, to the U.S. 
foreign policy community, to our nation's allies and 
adversaries. As this committee moves forward, we will continue 
our work on behalf of the American people, as we have done for 
more than two centuries.
    The world faces challenges as well as opportunities. This 
committee, the Senate Foreign Relations Committee, its members 
and staff, play a critical role in meeting the challenges 
America faces in national security.
    As I accept the chairmanship with great humility, thanks to 
the support of our members, thanks to the support of Ranking 
Member Risch, and thanks to our dedicated and hardworking 
committee staff, we will continue to advance our values and 
national interests on the global stage.
    My priority is simple, to strengthen America's diplomacy, 
to make sure our diplomats have the tools that they need, and 
Congress provides the appropriate oversight in carrying out 
that responsibility. All needs to be done in promoting American 
values, American values of democracy, anti-corruption, good 
governance, human rights, transparency. These are the values 
that give strength to America's foreign policy.
    Effective international development is a critical part of 
this effort. The American approach to entrepreneurism with 
individuals building businesses that contribute to our shared 
economy has fueled much of this country's success.
    Promoting growth that sustains a middle class and holds 
government accountable is vital. Over the decades, we have 
experimented with different ways to make economic diplomacy 
part of our efforts abroad.
    From the Marshall Plan, to loan programs for women in rural 
areas to purchase cattle, we have different tools in different 
contexts, but we know that economic development and finance are 
essential for stable economies, and stable economies lead to 
stable countries which lead to prosperity and security for all.
    Today, I would like to hear about how the Development 
Finance Corporation, the DFC, is fulfilling its mandate. It was 
established in 2018 by the BUILD Act, which I know many of our 
colleagues on this committee worked tirelessly to get that 
done. This is the first hearing the Foreign Relations committee 
is holding to look at how you are doing and what we need to 
consider as the authorization comes up for renewal.
    Mr. Nathan, I want to welcome you to this very important 
hearing. From West Africa to the Western Hemisphere, DFC's 
loans, insurance, and investments make a positive impact on 
development, on energy and health care, on technology and 
innovation, on women's empowerment and addressing the climate 
crisis.
    I want to commend the work of the DFC. You have improved 
energy security with DFC investments in the Kurdistan region of 
Iraq, you made telecom networks more reliable in the Gambia and 
Sierra Leone, and you have strengthened conservation efforts 
through the blue bonds in Ecuador. You are helping secure 
global solar energy supply chains and investments in India.
    Your work harnesses renewable sources, and you do so 
without forced labor that we have seen in the People's Republic 
of China. The kinds of investments and development models that 
the DFC champions are what makes the United States a better 
partner in comparison to China's debt trap diplomacy efforts.
    As we consider the reauthorization, we need to continue to 
make sure that the United States remains the preferred 
investment partner. We need to make sure we have the tools to 
match our allies' capabilities, and that we are good stewards 
of the taxpayer monies. Here are some of the challenges that we 
confront that I hope we will have a chance to discuss during 
this hearing.
    We need to talk about the scoring issues with the equity 
investment program. We need to tackle DFC's maximum contingent 
liability cap, and we need to figure out how we can expand the 
eligibility pools where DFC can pursue deals. I also believe we 
need more transparency on financing deals.
    The DFC has been slow to establish accountability measures 
required by the BUILD Act. I specifically refer to the 
Development Advisory Council, an independent accountability 
mechanism.
    The DFC must diversify more of its funding away from the 
world's biggest banks, and it must make sure to properly vet 
micro lenders so we can right any wrongs when loans do not go 
as planned. I hope you will lay out your proposal to reorganize 
the DFC. How do you see this improving the DFC's operations and 
its ability to advance our national security and foreign policy 
objectives?
    Mr. Nathan, I also expect you to address the concerns the 
committee's heard from DFC labor unions, and how you are going 
to involve the workforce in your reorganization plans. Finally, 
I want to underline that I am committed to working with 
everyone on this committee to develop the BUILD reauthorization 
and move it forward.
    With that, let me turn to our very distinguished ranking 
member, Senator Risch, with my thanks for his help, as I have 
assumed the chairmanship.

               STATEMENT OF HON. JAMES E. RISCH, 
                    U.S. SENATOR FROM IDAHO

    Senator Risch. Well, thank you, Mr. Chairman, and welcome 
to the chairmanship. You and I have worked together on a number 
of things in the past and look forward to doing so in the 
future. For those of us who watch this committee, changes are 
inevitable on the committee, but we have a process in place for 
a seamless transition.
    There is nothing more nonpartisan and bipartisan than the 
national interests and the national security of the United 
States of America. This committee certainly leads us forward in 
that regard.
    Together, we will move that forward, and appreciate working 
with you, Mr. Chairman. Well, thank you for having this hearing 
today. It is the United States interest to promote economic 
freedom, which lifts hundreds of millions of people out of 
poverty and achieves shared prosperity. It is also in our 
strategic interest to protect economic freedom from 
encroachment by authoritarian regimes that seek to undermine 
free markets.
    That is why in 2018, Congress authorized the creation of 
the Development Finance Corporation, an agency with unique 
authorities to make development finance more efficient, 
effective, and impactful.
    I am concerned, however, about DFC's ability to balance its 
dual mandate to advance and protect economic freedom, 
particularly when this Administration at times seeks to use the 
DFC to promote its agenda.
    At times it appears some people have forgotten that 
development is even in the name. It comes as no surprise that 
the Administration and many of my colleagues are eager to put 
DFC resources to work in specific regions, favorite countries, 
or hand-picked sectors, but the DFC cannot be everything to 
everyone all at once.
    The DFC can play an important role with many other U.S. 
Government agencies in an overall strategy of countering China, 
but the DFC cannot save the world on its own. The DFC mission 
is market-oriented development. Too many mandates imposed by 
Congress, or the Administration, will strangle this mission.
    Flexibility is key here. The DFC's success depends on its 
ability to find willing private sector borrowers with good 
projects in developing countries. The more policy--Congress or 
the Administration--forces on DFC, the harder it will be for 
the DFC to find those partners.
    Repeated efforts to launch investments in high income 
countries invite rightful skepticism toward the DFC's 
commitment to maintaining a development focus. U.S. taxpayers 
should not be subsidizing rich countries who have the money to 
pay their own policy priorities. Nowhere is the abandonment of 
DFC foundational principles more evident than in the energy 
sector.
    Instead of listening to what developing countries want and 
need, the Administration is pushing a zero carbon mandate that 
will fail to close the energy gap and will only push, push 
other countries closer to China and Russia who do not impose 
those mandates. However, it is--and moreover, it is outrageous 
that the agency would rely so heavily upon solar energy 
projects built on the backs of Uyghurs slave labor.
    There is no place for slave labor in any DFC supported 
projects, indeed for anything that the United States touches, 
including solar supply chains. The United States cannot 
compromise its values to achieve messaging-related climate 
objectives.
    It must continue to make it clear that forced labor is 
unacceptable. With that being said, there are plenty of 
opportunities to enhance the DFC's work to creative legislative 
fixes. I am eager to hear from the DFC on what it needs to 
succeed in achieving its mission. Thank you. I yield.
    The Chairman. Thank you, Senator Risch. Thank you for that 
opening statement. I think you really highlighted one of the 
issues that I hope will have a chance to get into, how you 
balance strategic and development goals in missions.
    That is really one of the key points, and I appreciate the 
ranking member raising that in his opening statement. It is now 
my honor to introduce our witness today. Chief Executive 
Officer Scott Nathan currently leads the Development Finance 
Corporation at a critical moment for enhancing U.S. development 
priorities.
    Prior to his leadership of DFC, Mr. Nathan served in the 
Obama administration, including being the special 
representative for commercial business affairs at the State 
Department, where he led a team of Foreign Service Officers and 
civil servants who focused on protecting U.S. economic 
interests abroad and advocated on behalf of American exports.
    Mr. Nathan also worked in the private sector and served as 
the board chair of the League of Conservation Voters. Mr. 
Nathan, I look forward to hearing from you today. Your full 
statement will be included in a record, without objection. I 
ask that you try to summarize your comments in approximately 5 
minutes so we can be engaged in a conversation the way this 
committee, I think, performs its hearings most effectively.
    Mr. Nathan.

    STATEMENT OF SCOTT A. NATHAN, CHIEF EXECUTIVE OFFICER, 
        DEVELOPMENT FINANCE CORPORATION, WASHINGTON, DC

    Mr. Nathan. Chairman Cardin, Ranking Member Risch, and 
members of the committee, thank you for having me here today to 
discuss the United States International Development Finance 
Corporation.
    I want to thank Congress, and especially this committee, 
for its continued support of DFC. It is now almost 4 years 
since DFC launched, and with reauthorization coming in the next 
2 years, I welcome this opportunity to talk about our 
organization.
    With your support, we are continuing to build our capacity 
to finance the private sector in countries where we work to 
make developmental and strategic impact. In fiscal year 2022, 
DFC did more than $7.4 billion in transactions across 138 
deals, and in the fiscal year that just concluded a few days 
ago, we significantly surpassed that total with more than $9 
billion in new deals, a record for DFC.
    I am proud of our team and encouraged by our results, but I 
know DFC can do more, even more, as we continue to develop and 
execute on our strategy. DFC is making a difference through 
transactions in economic sectors and regions of deep strategic 
significance to the United States.
    In energy across a range of technologies, DFC is helping to 
provide reliable access to power in countries from Malawi and 
Nigeria to Ecuador and India. Also in India, we have lent 
nearly $1 billion in the last 18 months to two projects there 
that advance the diversification of the solar power 
manufacturing supply chain away from reliance on the People's 
Republic of China.
    At the same time, with investments in Central and Eastern 
Europe, DFC is promoting energy security by helping communities 
become less dependent on Russia to meet their energy needs. DFC 
prioritizes transactions in high quality infrastructure, 
providing support for seaports, airports, and railways that 
connect communities to the opportunities of the global 
marketplace.
    Over the past year, for example, DFC financing supported 
the modernization of a seaport in Ecuador and an airport in 
Sierra Leone. DFC is also investing in digital infrastructure, 
including safe, secure, and open information technology 
networks.
    For example, DFC supported the acquisition by an Australian 
company of the Pacific Island assets of Digicel, helping to 
secure high quality, trusted mobile and network services in 
these important markets.
    Similarly, in Africa, we are financing the build out of 
digital infrastructure with trusted equipment across numerous 
markets. DFC is also working to secure supply chains for 
minerals that are vital to U.S. national security. Last month, 
DFC's Board approved a loan for a graphite mine in Mozambique 
to help diversify global supply of this important material, 
this important mineral away from PRC dominance.
    DFC is also providing support for the small businesses that 
are the engines of every free and dynamic marketplace. In 
Ecuador, Turkey, Ghana, Sri Lanka, and in dozens of other 
countries, DFC is bolstering the ability of banks and other 
financial institutions to lend to the small businesses that 
generate jobs and opportunity.
    We look to support entrepreneurship and more open economies 
wherever we work. Our strategic competitors do not make these 
kinds of investments; the United States does. Food security is 
another priority area for DFC, an effort that has become even 
more urgent as Russia's brutal and illegal war against Ukraine 
endangers global agricultural supply chains for communities 
well beyond the region.
    Additionally, DFC support for more resilient health systems 
is helping to prepare vulnerable communities for the next 
health emergency. In every area where we partner with the 
private sector, DFC transactions carry U.S. values of openness, 
respect for local laws and conditions, and high environmental 
labor and quality standards.
    To accomplish this, we continue to enhance our capacity to 
screen transactions, and monitor and measure our impact. Over 
our short history, DFC has significantly increased its capacity 
to do strategic and highly developmental transactions.
    We inherited a structure that provided great results, but 
now, with a broader toolset and a dual mandate, and even higher 
expectations for what DFC can deliver, we need to be more 
strategic in our planning and more focused and proactive in our 
business development.
    To improve our effectiveness and efficiency, DFC is engaged 
in a process of realigning our transaction teams around a set 
of enduring priority sectors, infrastructure, energy, health, 
agriculture, and support for small business.
    Organizing around sectors will allow DFC to promote greater 
accountability by optimizing investment planning and resource 
allocation across our priorities and enable better solutions 
for our clients.
    This process has benefited from extensive input from all 
parts of our organization, and we have engaged staff through 
numerous workshops, interviews, town halls, and more than 100 
consultations and meetings.
    As DFC grows to better fulfill the promise of the BUILD 
Act, we need to make sure we are organized to put the resources 
Congress has given us to the best use. Our authorization under 
the BUILD Act expires in October of 2025, and DFC has begun 
planning for reauthorization.
    We are eager to share our successes and challenges with 
Congress in the coming months, and continue ongoing discussions 
on a range of issues, including maximum contingent liability, 
fee spending authority, hiring and incentives, country 
eligibility, and our equity and other tools. We look forward to 
continuing these discussions with you so the DFC can fulfill 
the promise of the BUILD Act.
    Thank you for the support that makes our work possible and 
for your continued commitment to helping DFC achieve even more. 
I look forward to your questions.
    [The prepared statement of Mr. Nathan follows:]

                 Prepared Statement of Mr. Scott Nathan

    Chairman Cardin, Ranking Member Risch, and Members of the 
Committee, thank you for having me here today to discuss the United 
States International Development Finance Corporation.
    I want to thank Congress and especially this committee for its 
continued support of DFC. You have provided DFC with the tools that 
have allowed us to increase the developmental and strategic impact of 
our investments in communities around the world.
    We are continuing to build our capacity to support the private 
sector. DFC financing enables reliable access to energy and supports 
high-quality infrastructure, including safe and secure digital 
connectivity. We are investing to strengthen health and food systems, 
while also supporting the small businesses that are vital to generating 
jobs and opportunity.
    We need to show up and offer our partners a choice based on our 
values and private enterprise, so that they don't feel trapped into 
accepting too much debt and end up with projects that aren't needed or 
are of poor quality. In the 4 years since Congress created it, DFC has 
made great progress in this regard.
    In fiscal year 2022, our transaction volume was more than $7.4 
billion across 138 deals, and in the fiscal year that just concluded 
last week, we significantly surpassed that total with more than $9 
billion in new deals, a record for DFC. There will be more details on 
our year-end results soon, but I am proud that DFC's impact continues 
to grow.
    I am encouraged by our results. But I know DFC can do even more as 
we continue to develop and execute on our strategy, and work more 
effectively with our partners in the U.S. Government, our Development 
Finance Institution peers, and the private sector.
    DFC is making a difference through transactions in economic sectors 
and regions of deep strategic significance to the United States. These 
include a series of investments we are making in the energy sector. 
Across a range of technologies, DFC is providing reliable access to 
power in countries from Malawi to Nigeria to Kenya. We have lent nearly 
one billion dollars over the last 18 months to two projects in India 
that advance the diversification of solar manufacturing supply chains. 
At the same time, with investments in Central and Eastern Europe and 
the Caucasus, DFC is promoting energy security, helping communities 
become less reliant on Russia to meet their energy needs.
    DFC also prioritizes transactions in high quality infrastructure, 
providing support for seaports, airports, and railways that connect 
communities to the opportunities of the global marketplace. For 
example, over the past year, DFC financing supported the modernization 
of a seaport in Ecuador and an airport in Sierra Leone.
    DFC is also investing in 21st century infrastructure, including 
secure, safe, and open information technology networks. DFC supported 
Telstra, an Australian company, in its acquisition of certain assets of 
Digicel, helping to ensure high quality, secure mobile and network 
services in Papua New Guinea and several Pacific Islands. We are 
financing the build out of data centers and other digital 
infrastructure with trusted equipment in Kenya, South Africa, and 
Ghana, helping to make these markets more attractive destinations for 
global businesses.
    With the growth of new industries in the 21st century, critical 
infrastructure also includes supply chains for minerals that are vital 
to U.S. national security and economic competitiveness. Last month, 
DFC's board approved a loan to Twigg Exploration and Mining Limited for 
their operations in Mozambique, helping to diversify the global supply 
chain for graphite, and to develop an additional source for a critical 
mineral whose supply is currently dominated by the PRC. DFC's efforts 
complement those underway at the Department of Energy to support a 
processing facility for graphite in Louisiana.
    Earlier this year, we also approved financing for the first major 
helium production facility in sub-Saharan Africa, introducing modern 
technology that will help address, in a more efficient and less carbon-
intensive way, a global shortage of an element that is critical for 
medical equipment, defense production, and telecommunications.
    In energy, infrastructure, and in every area where we partner with 
the private sector, DFC's transactions carry U.S. values of openness, 
respect for local laws and conditions, and high environmental, labor, 
and quality standards. Supporting high-quality, sustainable projects 
has been a focus for DFC from our beginning, and we have continued to 
enhance our capacity to monitor and measure our impact.
    DFC is also providing support for the small businesses that are the 
engines of every free and dynamic marketplace. In Ecuador, Turkey, 
Ghana, Sri Lanka, and in dozens of other countries, DFC is bolstering 
the ability of banks to lend to the small businesses that generate jobs 
and opportunity. Last month, I visited Vietnam, where DFC recently made 
$400 million in loans to two private banks to support lending to small- 
and medium-sized businesses. We want to support entrepreneurship and 
the development of open and vibrant economies wherever we work. Our 
strategic competitors do not make these kinds of investments. DFC does.
    Food security is another priority area for DFC, an effort that has 
become even more urgent as Russia's brutal and illegal war against 
Ukraine endangers agricultural supply chains for communities well 
beyond the region. Two and a half years ago, DFC set a five-year, $1 
billion target for transactions in food security. This year, we have 
already hit and exceeded that target, years ahead of schedule. This 
work continues, and we are committed for the long term to working with 
the private sector on improving agricultural yields, increasing incomes 
for smallholder farmers, and fostering innovation in food distribution 
networks.
    DFC's support for more resilient health systems also promotes the 
well-being of people and the stability of communities, providing a 
necessary foundation for the development of a vibrant private sector. 
Here, DFC has moved from COVID-19 response to pandemic preparedness, 
broadening the scope of our financial support to include improving the 
delivery of care. We are also bolstering the capacity of our private 
sector partners to treat childhood disease and produce vaccines for 
potential outbreaks.
    While we work across the globe, we are focusing our efforts on 
countries of particular, strategic significance. For example, last year 
alone, in Ecuador, DFC did more than $1.2 billion in transactions. Our 
support for Ecuador's private sector includes financing for the 
country's first on-grid solar power facility, the modernization of port 
infrastructure, and the expansion of a hospital that provides pediatric 
and maternal care in the country's capital.
    Also in Ecuador, DFC's political risk insurance helped to enable 
the Galapagos Marine Bond and the largest debt for nature swap in 
history. This innovative transaction will protect a diverse ecosystem 
from illegal overfishing and materially reduce the country's 
outstanding debts, making Ecuador less vulnerable to economic coercion.
    Over our short history, DFC has significantly increased its 
capability to do strategic and highly developmental transactions. We 
inherited a structure from previous agencies that provided great 
results, but now, with greater expectations, a broader tool set, and a 
dual mission explicitly focused on both developmental and foreign 
policy goals, we need to be more strategic in our planning and more 
focused and proactive in our business development.
    In order to achieve this and improve our effectiveness, and 
efficiency, DFC is engaged in a process of realigning our transaction 
teams around a set of enduring priority sectors--infrastructure, 
energy, health, agriculture, and support for small business--sectors 
that historically have been the primary areas of activity for DFC and 
OPIC. Organizing around sectors will allow DFC to promote greater 
accountability by optimizing investment planning and resource 
allocation across our priority sectors, scale our structure and 
capacity in line with our growth, provide our full toolkit of products 
and sector expertise to solve client problems, and expand career 
development opportunities for DFC staff.
    This process has benefited from extensive input from all parts of 
our organization, and we have engaged staff through numerous workshops, 
interviews, town halls, and more than 100 consultations and meetings. 
As DFC grows to better fulfill the promise of the BUILD Act, we need to 
make sure we are organized to put to best use the resources Congress 
has given us.
    We have also begun planning for and have held initial consultations 
about renewing our authorization which is scheduled to expire in 
October of 2025. We are eager to share our successes and challenges 
with Congress in the coming months. As previously discussed with this 
committee, current budgetary rules for the scoring of DFC's equity 
investments limit our ability to make full use of this important tool 
Congress gave us in the BUILD Act. With an equity authority that allows 
DFC to invest at scale earlier in platforms that focus on energy, 
infrastructure, critical minerals, and other priority sectors, we can 
generate greater deal flow, make greater impact, and come closer to 
meeting the full promise of the BUILD Act.
    We know there has been a lot of discussion already from this 
Committee and from others on a range of issues to be considered in a 
reauthorization discussion, including equity, DFC's maximum contingent 
liability, fee spending authority, hiring and incentives, and country 
eligibility.
    We look forward to continued discussion with you to maximize our 
ability to drive the developmental and strategic benefits that Congress 
envisioned when you created DFC.
    In DFC's short history, we have made great progress. Thank you for 
the support that makes this work possible and for your continued 
commitment to helping DFC achieve even more. I welcome your questions.

    The Chairman. Thank you, Mr. Nathan, for your service, and 
for your statement, and for being here today. We will now have 
5-minute rounds for members to ask questions.
    I want to start on the point to Senator Risch made during 
his opening statement, and that is how you are balancing the 
strategic concerns with development objectives. Let me just put 
this in context.
    We all understand that China's Belt and Road Initiative 
requires us to be strategic in how we use all of our tools, 
including those at DFC, but the--very clear about it, the BUILD 
Act mandated that development mandates be front and center.
    How do you go about balancing the strategic importance of 
what you are doing with the development opportunities that are 
out there?
    Mr. Nathan. Thanks for the question. The BUILD Act was very 
clear that we have a dual mandate, and this is a difference 
from our predecessor agencies, to advance the foreign policy 
interests of the United States and to make development impact 
in the poorest countries of the world.
    I do not see these two mandates as intention. I think they 
work very well together. It is through development, through 
providing economic opportunity, through alleviating poverty, 
through creating greater stability through economic growth that 
U.S. foreign policy interests are served.
    Stability, economic opportunity, and free enterprise are 
directly in the United States' interest. That said, we do 
transactions across a range of sectors. Last year we did over 
130 transactions. We did a similar amount the year before.
    Every transaction has different elements to it. Some are 
very explicit in terms of the national security component 
related to the global competition with our strategic 
competitors. Others are more related to economic growth.
    I maintain that every deal has both development impact and 
advances the foreign policy interest of the United States.
    The Chairman. I agree with that. I do not think they are 
inconsistent, but it is helpful for us to have a better 
understanding as to how you go about making that balanced 
decisions.
    One of the questions we have as we are considering 
reauthorization, is there any authorities that you currently do 
not have that would make that process easier for you that we 
should be considering in the reauthorization bill?
    Mr. Nathan. Yes. I should say on the development impact, we 
do have a framework that has been refined over time, but it was 
developed at the beginning of DFC, called our Impact Quotient, 
which looks at all different factors in terms of giving a 
development score for every deal.
    We also look at the foreign policy impact against the 
countries' strategies that the State Department promulgates and 
individual national security components. In terms of things 
that hold us back, we would like to have a little bit more 
flexibility on country eligibility.
    At the moment, under the BUILD Act, country eligibility is 
determined by income level under the World Bank income 
classification, and this tool is really blunt in terms of what 
countries are included and what countries are not.
    More flexibility on that will enable us to help the poorest 
communities in countries that might not meet those income level 
classifications.
    The Chairman. As you review this, in regards to specific 
recommendations on--including eligibility, it would be useful 
if you share that information with our staff so that we can get 
up to where we need to be as we are considering the 
reauthorization language.
    I want to ask a question in regards to the realignment of 
DFC programs by sector rather than by for financial product. I 
am interested as to the input you are receiving from the 
workforce.
    We understand there is a challenge as to whether the deal 
teams will remain in place or not and what feedback you are 
receiving from the workforce as you make this change in 
structure.
    Mr. Nathan. We have engaged in a process throughout the 
year in terms of refining our strategic priorities and then 
translating that into an organization that is best aligned to 
achieve those priorities. This process is ongoing.
    As I mentioned in my testimony, we have had over 100 
meetings, numerous workshops, town halls, other means for 
gathering input from the staff in all parts of our 
organization. It is incredibly important to be able to ground 
truth the structure that is being developed and make sure that 
it is as effective and efficient as possible.
    That is why, as this process has gone on, we have taken 
that input and changed elements of it, and that will continue 
to be the case. The organization, in the 4 years since 
launching, has more than doubled in size in terms of the 
employees. The structure that existed previously worked very 
well for OPIC.
    As we grow, we need to make sure that we are able to 
continue to focus on business development. The key is making 
sure our deal pipeline is filled with the best transactions to 
lead to the highest developmental and strategic impact, and 
having an organization aligned around sectors allows us to 
better meet client needs, to have consistency in business 
development, have focus and planning on the goals that we have 
for what kind of impact we can make in each sector, as opposed 
to by deal size or product type, which was far more siloed and 
relied on a smaller team.
    As our team grows, I think our current structure would have 
trouble with efficiency and effectiveness and the realignment 
process, and the process that is underway is designed to 
improve that.
    The Chairman. I would be interested in the specific ways 
that during gauging the workforce as you make these decisions, 
so there is harmony and understanding and input from the 
workforce.
    Mr. Nathan. Yes, as I mentioned, we have had over 100 
individual meetings. We have had workshops, town halls, 
interviews, and this process is ongoing.
    The Chairman. Senator Risch.
    Senator Risch. Thank you, Mr. Chairman. First of all, I 
would like to enter in record, I have written five letters to 
the agency in recent months, one on solar, one on mission and 
purpose, two on Zimbabwe, and finally on Brazil, climate 
matters.
    The Chairman. Without objection.

[Editor's note.--The information referred to above can be found 
in the ``Additional Material Submitted for the Record'' section 
at the end of this hearing.]

    Senator Risch. First of all, I want to thank you, Mr. 
Nathan. As you know, I put a hold on opening the office in 
Brazil because it was solely focused on climate, and I wanted a 
broader aperture than just climate.
    You agreed to that. I lifted it, my hold. Thank you very 
much. Let us talk for a minute about solar. It is common 
knowledge, of course, that there is slave labor involved in the 
solar industry through China, and people are concerned about 
that.
    Can you tell us, what sideboards do you have in place to 
make sure that the United States is not financing projects that 
entail slave labor?
    Mr. Nathan. Thank you, Senator. I appreciated the dialogue 
that we have had with both you and your team since I have been 
in place on this important issue. I absolutely agree that there 
is no place for slave labor in any supply chain that gets the 
support of the United States.
    Under the Uyghur Forced Labor Prevention Act, the Forced 
Labor Enforcement Task Force was created. While that Act does 
not bind DFC, we are following the rules that are outlined in 
that piece of legislation.
    The FLETF list of companies that are prohibited is one that 
is incorporated into our contractual requirements in any solar 
deal we do, but beyond that, we have a strategy to diversify 
the solar supply chain away from China.
    In the last 18 months, we have made two investments, one to 
a U.S. company called First Solar that is building and is about 
to open a solar power manufacturing facility in Tamil Nadu in 
southern India. This plant will produce cadmium telluride-based 
technology panels that have no involvement with China in any 
way.
    Recently, our Board approved another transaction of $425 
million loan to TP Solar Limited for solar panel manufacturing 
in India, again, diversifying away from China. This is a 
strategy that we want to deploy elsewhere and are looking for 
more opportunities to diversify the solar manufacturing supply 
chain away from China entirely.
    Senator Risch. I appreciate that. That is a good 
explanation. I am assuming that you have a team of some kind 
that knows the industry and the supply chain and can smell 
these things out of if you have got Uyghur influence, Chinese--
--
    Mr. Nathan. Absolutely.
    Senator Risch. Thank you very much. I want to talk a little 
bit about the balancing act that you have, and I understand it 
is a balancing act. I want to give you an example and let us 
have a discussion of it so all of us can have a little better 
understanding.
    Suppose you are faced with a situation in a developing 
country where the developing country has a considerable 
resource or access to coal, and they want to build a coal 
plant. Obviously, they will contact you, and certainly they 
would engage the Russians and the Chinese also. How do you meet 
that?
    Obviously, you are going to say to them, let us--is there 
another way we can do this other than coal? They say, no, there 
is not. What do you do? How do you balance that?
    Mr. Nathan. Yes, so we are constantly balancing the 
probability of a deal getting through, all the different 
eligibility criteria, statutory criteria we have, the 
requirement to do social, labor, environmental screening, 
meeting the IFC performance standards.
    We want to be realistic with our partners, not take things 
down the road, and then at the end of the day, not be able to 
close on a transaction, but these transactions take time. Some 
of the transactions that we approved in the last year were 
initiated in 2019 or 2020. This is also part of the balancing 
act that we are undergoing.
    We look at all of the different factors involved: 
development, impact, employment, human rights, all of the 
factors that go into our analysis, and at the end of the day, 
if we can support projects that generate economic opportunity 
and have strategic impact, then I feel like we are doing what 
the BUILD Act has intended for us to do.
    Senator Risch. Let me drill down a little deeper. If the 
scenario I painted for you comes on your desk and it is a coal 
plant, fired plant, or nothing, and the Chinese are going to 
build it if we do not, is this a ``no'' and is that an 
automatic disqualifier that it is a coal----
    Mr. Nathan. I am sorry, I missed the sector that you are 
talking about. My understanding is that it is Administration 
policy agreed with our G7 allies to provide no financing to the 
coal industry at the moment.
    Senator Risch. In that case, China wind up with the 
project.
    Mr. Nathan. Yes, although my understanding is that China 
has also articulated that they will not finance coal projects 
either, but----
    Senator Risch. Yes, we have all seen how that is working.
    Mr. Nathan. Yes, I understand that. That is why I said, 
they have articulated.
    Senator Risch. So----
    Mr. Nathan. Yes.
    Senator Risch. Well, my time is up. Thank you.
    Mr. Nathan. Thanks.
    The Chairman. We will now turn to the person who can really 
tell you about the Congressional intent of the BUILD Act, its 
author, Senator Coons.
    Senator Coons. Thank you. Chairman Cardin. Ranking Member 
Risch, thank you for this hearing. Thank you, Mr. Nathan, thank 
you, Scott, for your leadership at the DFC.
    It has been a long and strange road to the moment we are at 
right now, the transition from OPIC and its scope and 
authorities, and risk tolerance, and mission, and where the DFC 
is today.
    I respect the questions and the framing, and also share 
some concerns about making sure that the restructuring and the 
transition is oriented towards making the DFC agile, 
responsive, and engaged in the moment.
    I want to focus my engagement with you this morning on 
equity scoring. One of two things that we did not do I think 
right up front, we instead gave a couple of years, the total 
lending cap at $60 billion as opposed to $100, and the way that 
your equity authority is treated is scored.
    Along with Senator Cornyn, earlier this year, I introduced 
the Enhancing American Competitiveness Act, and this is to 
address how your equity is scored. That bill does not amend the 
Fair Credit Reporting Act, to be clear.
    To those who are concerned about it. It would create a 
scoring mechanism to assess the fair value of equity 
investments similar to how a loan is scored, and it would allow 
the DFC with smaller amounts invested to leverage much larger 
amounts of private capital. At least that is my understanding. 
I would be very interested in hearing from you.
    To what extent has the current scoring of equity served as 
a constraint on what the DFC is able to do? Are there specific 
projects you could cite that you have had to forego because of 
the current scoring?
    How would that do in terms of competing with the PRC and 
the development impact, which I think needs to be at the focus 
of everything? If we have another few minutes after that, what 
other key priorities do you have before we get to 
reauthorization that we have to address in the near term?
    Mr. Nathan. Thanks very much for the question, and of 
course, for all of your support over the years. To make the 
equity problem simple, we get a program budget, an 
appropriation for program funds.
    That can be used for equity. That can be used for what is 
called positive subsidy for debt transactions that require it, 
and that is often in countries that are in particular--have 
difficulty at the moment. Ukraine being an example of that.
    We also use that subsidy for technical assistance. 
Technical assistance grants is a tool given to us by the BUILD 
Act that we did not previously have. All of these different 
tools compete for that pot of subsidy.
    Equity at the moment, for every dollar that we invest in 
equity, is using a dollar of that appropriation as if it is a 
grant, as if there is no offsetting asset by virtue of making 
the equity investment. It assumes that every equity investment 
we make will lose 100 percent. While I do not believe DFC is 
likely to have the highest record in equity investing, it would 
be extraordinary to lose 100 percent in every single investment 
we make.
    The Cambridge Associates data on emerging market equity--
private equity investments shows on average high single-digit 
returns over almost any time period you look at and I do not 
think we are going to be any different than that. This is a 
real constraint. It means we are constrained by the 
appropriation.
    We do not get the kind of leverage that we do in our 
lending activity. Last year, of the $7.4 billion of 
transactions we did, roughly half a billion dollars of that was 
equity. The rest was debt and political risk insurance on a 
tiny bit of capital----
    Senator Coons. In the minute or two we have left, what 
difference would it make if we fixed your equity scoring 
challenge?
    Mr. Nathan. It would enable us to be earlier in 
investments, to be more influential and have a seat at the 
table. To provide more risk oriented capital to developers. An 
example of the kind of thing that I would like to do if we had 
more is our investment in TechMet, which is a critical mineral 
investment platform with a strong, pro-U.S. bent to it.
    I would love to find other platforms that provide deals in 
the energy sector, in the infrastructure sector, in the health 
and agriculture sector. By backing developers earlier, we can 
influence their choice of vendors, their choice of other 
investors or co-financiers.
    We can influence the direction and also produce potential 
deal flow for our lending activity. We are currently too 
constrained to do that. It is hard to build a team also without 
certainty around how much capital we have to invest.
    This is really my highest priority to fix this issue, and I 
appreciate your attention to it.
    Senator Coons. I will just conclude if I could. If I hear 
you right, one of the core goals of the BUILD Act was to 
strengthen our ability in development finance to partner and 
syndicate. Some of our key partners: South Korea, Japan, the 
Nordics, UK, have development finance institutions.
    When we only have debt, we are at the end of the process. 
When we have equity, we are early in the process. We can 
syndicate better, we can shape deals better, we can get better 
leverage from our very deep private sector.
    Frankly, we are blessed to have two colleagues here today 
who know a lot more about this field than I ever will. I think 
we need to fix this and not wait another year or two or three, 
and the funds that we are appropriating--and you got your full 
request in the Senate version SFOPs, those dollars will go much 
farther, and you are a critical resource in our global 
competition for more transparent, more sustainable development 
finance.
    Thank you, Mr. Chairman.
    The Chairman. Senator Ricketts.
    Senator Ricketts. Thank you, Mr. Chairman. Thank you, Mr. 
Nathan, for being here. I want to hit upon what Ranking Member 
Risch was talking about with regard to the energy development.
    On his first day in office, President Biden enacted an 
Executive Order, and I am going to quote it here, ``to promote 
ending international financing for carbon intensive fossil 
fuel-based energy while simultaneously advancing sustainable 
development and a green recovery.''
    However, here in the United States, we are attempting to do 
the same thing. Would you agree that we are trying to move to 
more renewables?
    Mr. Nathan. In the United States, yes.
    Senator Ricketts. Yes, right. What do you--who do you think 
is the highest--the State consumes the most renewable energy as 
a percentage of their overall energy consumption.
    What State do you think that is? I just got it from the 
International Energy Administration's report. I am not 
expecting you to know that answer, but if you know it, jump in.
    Mr. Nathan. It might be your state is what I----
    Senator Ricketts. Oh, I wish it was Nebraska. It is not 
actually Nebraska. We are number 11th.
    Mr. Nathan. Okay.
    Senator Ricketts. At about 25 percent. The top State is 
actually South Dakota at 50 percent. Think about that, 50 
percent renewable energy when we really are making a push here. 
Let me just hit some of the States around the area here. 
Pennsylvania is 6.1 percent and ranks number 42.
    Let us see, again, Maryland is 5.8 percent. It ranks number 
44. Virginia is at 7.8 percent, number 38. New Jersey, 4.3 
percent, number 47. You can see that even with the push that we 
have here, many States are single digit percentage of renewable 
energy.
    Yet, you just said you would not finance a coal plant is 
the--and of course, we also had the instance earlier this year 
where the Biden administration vetoed a $180 million IDB 
proposal for debt financing for Guyana shore base 
infrastructure that would develop their oil and gas resources.
    I think 12 out of your current--12 projects out of the 
current act of 980 are actually in that field of oil and gas or 
quarrying or mining or stuff like that. It seems to me that if 
you have developing nations are looking to become energy 
independent from places like Russia, that you are going to need 
to help them develop their energy resources, it cannot just be 
renewable energy because that is not going to be the only 
thing. Is your policy to only develop renewable energy? Are 
your projects that you are funding only going to be green 
energy projects?
    Mr. Nathan. No. I can give some examples. For example, in 
Sierra Leone, we are financing and have also recently provided 
additional political risk insurance to a gas-fired power 
generation plant to a country that has incredibly low 
electricity penetration to the population. It has no reliable 
source of electricity at the moment.
    This plant will be a development game changer for them in 
terms of providing reliable electricity. In Eastern Europe, 
with the energy security issues that you referenced, we have 
provided support through our political risk insurance and 
through guarantees to help the purchase of U.S. LNG cargoes in 
Poland, to provide diversification away from Russian gas in 
Moldova, and we continue to look at other energy security 
possibilities like that.
    Senator Ricketts. When I cite that figure of just 12 for 
the mining, quarrying, oil and gas extraction, are you telling 
me that you are actually going to be looking to expand that as 
far as like oil and gas, helping developing countries get more 
baseload energy to be able to provide that electricity, as well 
as renewable projects?
    Mr. Nathan. Well, I want to differentiate between oil and 
gas exploration, which typically, the way that DFC works is we 
have a requirement to be additional. If there is commercially 
available financing, we are not looking at the project.
    We are not trying to crowd out the private sector, we are 
trying to crowd in the private sector. Oil and gas development 
typically is financed at a corporate level, and then the money 
is pushed down to projects in individual countries. There is 
not really an opportunity for us to get involved in that.
    What I am talking about is provision of power, electricity, 
reliable heating, being freed from reliance on Russian gas, 
freed from the reliance on dirty diesel or burning dung and 
waste product for cooking. These are things that I think DFC 
has a role in looking at.
    Senator Ricketts. Okay, great. Well, I would love to follow 
up with you with regard to that, because I do think it is 
important that we understand that developing nations need to 
have baseload energy as well as renewable, and that we open the 
door to Chinese or Russian influence when we do not do that, 
too.
    I think Senator Risch's point earlier, if I--if we can, I 
have just one more quick question, Mr. Chairman. You also 
mentioned earlier about trying to find the graphite, I think 
you said earlier.
    Mr. Nathan. Graphite mine, yes.
    Senator Ricketts. Yes. Are you coordinating with other 
agencies with regard to those critical minerals to be able to 
develop, say, batteries technology, or is that coordination 
with other people to target those?
    Mr. Nathan. Well, thank you for the question, because that 
is directly on point for the graphite mine in Mozambique. The 
Department of Energy is financing a processing facility in 
Louisiana, which will be an off-taker of that mine. Yes, is the 
answer to your question.
    Senator Ricketts. Okay, great. Thank you very much, Mr. 
Nathan.
    The Chairman. Thank you. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. In 117th 
Congress, I introduced an economic statecraft for the 21st 
Century Act, which directs a whole-of-government approach to 
confront China's anti-competitive and predatory international 
economic policies.
    It calls on for the establishment of the Office of 
Strategic Investments at the DFC to coordinate Federal 
Government initiatives intended to counter adversaries. What is 
your view of that?
    Mr. Nathan. Well, we incorporate strategic considerations 
into every investment that we make. It is a critical component 
of meeting our dual mandate. Anything to bolster our ability to 
do that, I am certainly interested in talking about and willing 
to look at.
    Senator Menendez. Yes, I look at it as strategic 
investments that are focused on dealing with adversaries. 
During your nomination hearing, we discussed the potential the 
DFC has to be a vehicle for providing support to our friends 
and allies who are under increasing economic and diplomatic 
pressure from Beijing.
    I still believe that to be the case. Since the DFC was 
first authorized 5 years ago, what changes have you seen in 
China's foreign lending and development practices, and do any 
of these trends suggest that we should further refine the DFC's 
authorities?
    Mr. Nathan. What we have seen is some volatility in China's 
lending practices, some years really pushing out a great deal 
of capital and other years being far more cautious, because 
they have lost a lot of money in some of the areas where they 
have invested, and countries are becoming more aware of the 
quality problems and the debt burdens that go along with 
receiving that financing and are becoming more wary.
    When I travel, I find a great deal of receptiveness to 
finding an alternative. People want us to show up and offer a 
choice, and that is what we are trying to do. These are 
partners that are traditionally allies of China, allies of 
Russia, but who are looking to diversify their relationships, 
and we need to be there for them.
    Senator Menendez. Is there anything as a result of that, 
what you have witnessed, that it requires, in your view, any 
changing of authorities or additional authorities in order to 
meet the challenge?
    Mr. Nathan. Well, certainly having an improved equity tool 
that is no longer constrained by the budgetary treatment would 
enable us to have a great deal more flexibility. Clearing up 
some of the issues related to our use of political risk 
insurance, and full 100 percent guarantees would give us 
broader tools in that regard.
    Being able to operate in a broader set of countries where 
there is still high development potential, but currently we are 
constrained by the World Bank income classification levels, 
would be another one.
    Senator Menendez. I appreciate that. Now, economic 
development is critical to addressing challenging issues 
throughout the Western Hemisphere. The region is experiencing 
an unprecedented growth in migration due to civil unrest, 
deterioration of the rule of law, a corresponding lack of 
economic opportunity.
    Solving our challenges at the border, we have 20 million 
people in the Southern hemisphere who are displaced from their 
native countries seeking refuge or asylum. They are presently 
in other countries.
    If we fail to meet that challenge, we will have 20 million 
feet marching North to the United States, and our challenges at 
the border will be minor now compared to what that would mean.
    In thinking about how we deal with this, I put out a plan 
and I recommended the establishment of an enterprise fund 
managed by the DFC to increase investment in companies across 
the Americas that hire a significant number of those 
individuals in their countries.
    How can the DFC work with other institutions to support 
economic development throughout the Americas for those 
countries hosting significant numbers of migrants and refugees?
    Mr. Nathan. We are looking--we are always looking for 
partners, partners who can increase the available pool of 
financing or who can share deal flow.
    That could be the Inter-American Development Bank, who we 
are engaged in discussions with right now in this regard, more 
local development banks, and especially the private sector.
    We have done, in the last year, deals with financial 
institutions in Honduras and El Salvador--totally directed at 
what you are talking about providing jobs, economic 
opportunity, and growth in order to keep people in place and 
not have an economic necessity of leaving their home.
    Senator Menendez. Yes. I commend your attention to the 
concept of this Enterprise Fund as a way to further out and 
achieve that goal. It is in our national interest, and it 
creates greater stability in our hemisphere. Thank you, Mr. 
Chairman.
    The Chairman. Thank you. Senator Hagerty.
    Senator Hagerty. Thank you, Mr. Chairman. Welcome back.
    Mr. Nathan. Thank you.
    Senator Hagerty. Scott, is good to see you. I would like to 
acknowledge Senator Coons and my friend Senator Corker, who had 
a great deal to do with the BUILD Act that has empowered what 
you are doing.
    One of the things that struck me when my colleagues put 
this together was its ability to counter China. I think the CCP 
has been top of mind for us in many respects. They championed 
the ability of this--to strengthen our hand versus China. I 
want to focus on that in my conversation with you today.
    Our balance sheet relative to China is very small. China 
has invested roughly $1 trillion in 147 different countries in 
their Belt and Road Initiative. You have a $60 billion balance 
sheet. What I would like to talk with you about is how you 
focus those relatively small resources.
    You and I have talked about my concerns over ESG oriented 
investments, those types of things, which while perhaps 
laudable, do not get at what our critical strategic priorities 
happen to be. I would like to get your thoughts on how we deal 
with the fact that you have a small sheet--how we focus our 
investments.
    You have talked about, Mr. Nathan, investments in solar 
panels and things of this nature. I am much more interested in 
potential dual-use infrastructures like ports, rail, air, those 
types of investments, what we know the CCP is focused, and 
where our presence can be extraordinarily valuable in terms of 
countering them.
    I want to highlight that and get your thoughts on that, as 
well as one other thought, and this is the fact that you have 
the ability to hire an outstanding team. Former OPIC, the DFC 
is known for having really, really great professionals, and how 
do you punch above your weight when you have a small balance 
sheet?
    My thought would be hiring the absolute best professionals 
you can get. You can lead investments even with a small equity 
component, as Senator Coons was saying. You can put yourself in 
front with the best talent and we can help free up your equity 
a little bit more, which Senator Coons and I have talked about 
this.
    I am all in favor of doing that, but can you talk to us a 
bit about focus and talent.
    Mr. Nathan. Thank you for the questions, and thanks for the 
dialogue we have had over the last year. First, on the question 
related to strategic investments, I am really proud of what we 
have done in the last year.
    We are going to report our results later this week, but it 
will include investments in the modernization of a seaport on 
the Pacific in Ecuador. It will include more than $500 million 
going to the modernization of a port in Sri Lanka, a port in 
Colombo, where the container terminal we are supporting looks 
directly at the container terminal that the Chinese are 
supporting.
    This is done in concert with the Development Bank of India. 
They have a very strong interest in seeing shipping in that 
area be free and unencumbered by coercion. Similarly, we 
expanded our financial support for a port on the Black Sea in 
Georgia, where because of the conflict in Ukraine and Russia's 
aggression, this has become more important than ever.
    We did the financing of an airport expansion in Sierra 
Leone, which will have huge impact on this very poor country 
and my staff are concerned----
    Senator Hagerty. All laudable. I commend that direction. I 
would be interested in what percentage of your total 
investments these types of dual-use strategic investments 
comprise.
    Mr. Nathan. From a dollar point-of-view, they are huge 
because these kind of deals absorb hundreds of millions of 
dollars.
    I do not have an exact number, but in terms of the 
Partnership for Global Infrastructure and Investment, the vast 
majority of our deals, probably $8 billion out of the over $9 
billion of deals will qualify under that kind of----
    Senator Hagerty. Let me encourage a continued focus there, 
a continued discussion on talent----
    Mr. Nathan. Yes.
    Senator Hagerty. You don't have to do all that today, but--
--
    Mr. Nathan. Yes. You are absolutely right that in a 
transaction-based organization like ours, without good people, 
we can do nothing. Human capital is the most dear thing that we 
have. We have a fantastic team, great people with deep 
transactional experience, and then the whole organization that 
supports that, but we are growing, and so it is a very 
competitive environment for hiring at the moment, particularly 
for people who have deep transactional experience, the lawyers, 
the investment officers.
    I have discussed with our staff that one of the things I 
will raise in reauthorization is whether we can have some 
greater flexibility on hiring and incentives in order to 
compete in this very difficult labor market at the moment. That 
would be very helpful.
    Senator Hagerty. I happen to believe that that could be 
your key source of competitive advantage, Mr. Nathan. In a 
different form, I would love to get an update on where you 
stand with the Trilateral Infrastructure Project. I signed that 
on behalf of the United States when we put it together, so I 
look forward to getting an update from your team.
    Mr. Nathan. I would be happy to do that. I think you would 
be pleased to know that during the Trilateral Summit--Japan, 
Korea, the United States--we also signed an agreement with our 
counterparts in those countries, also in addition to the 
Trilateral Infrastructure Partnership that you were involved in 
signing.
    Senator Hagerty. Great. Great. Thank you.
    The Chairman. Thank you, Senator Hagerty. Senator Murphy.
    Senator Murphy. Thank you, Mr. Chairman. Good to see you, 
Scott. Thank you very much for your service. Senator Cardin 
referenced the ongoing desire to open up an office in Brazil to 
help quarterback our increasing efforts there, and I wanted to 
use that as a means to talk about the way that you view the 
utility of DFC in-country presence.
    One place where DFC presence seemed to be working was in 
the Balkans. There was a Belgrade office that was open, and it 
was a unique means for the United States to be able to project 
influence all across the region, even though it was located in 
Belgrade. Folks from Kosovo and other Albanian majority nations 
thought that the DFC was a fair actor.
    It is closed now, which I think was a mistake, but it does 
seem, with the opening or the proposed opening of a site in 
Brazil, that you do see the efficacy of actually having some 
folks on site. I wonder if there is any opportunity to take 
another look at the presence in the Balkans.
    Over the last couple weeks, we have seen events there 
spiral nearly out of control. My read is, is that that very 
small investment paid dividends in terms of deals, but also had 
a calming effect on the region writ large.
    Mr. Nathan. Thanks for the question. You are absolutely 
right that increasing our international presence is important. 
Our peers in the development finance institution world have 
usually between 15 and 30 percent of their staff abroad, 
gathering local information, doing business development, and 
having a presence on the ground, coordinating with their 
embassies and so forth.
    We have 1 percent of our staff. We have five people. It is 
way too small. It requires funding and it requires the 
Congressional notification. Just to make sure that we are on 
the same page about what happened in Belgrade, that office 
never opened because it never cleared in time Congressional 
notification. There were people there on temporary duty 
assignment.
    Senator Murphy. Right. They had really good staff, or the 
people trusted----
    Mr. Nathan. Yes, yes, on temporary duty assignment. This 
all happened long before I arrived at DFC, but I have looked 
into it. We are now, after a comprehensive review of where 
would be best to expand this presence, we now have a plan to 
try to take it to 3 or 4 percent of our staff, a tripling or a 
quadrupling of our staff.
    We are looking region by region. There are some issues with 
space at embassies or where we can get people. We have to 
coordinate with the State Department. We have to 
Congressionally notify every single office that we open, but we 
are working hard at it and have begun discussions.
    The Brazil office, that was funded by the State Department. 
As the ranking member mentioned, we are contributing funding in 
order to broaden out the mandate from what the State Department 
funding was restricted to.
    Senator Murphy. That is good news. I hope that you will 
find bipartisan support for that effort. Again, I hope you will 
take a look at that region in particular. Last question is 
this, China takes advantage of countries with high levels of 
corruption and really weak rule of law. DFC cannot really 
operate in environments where you have public officials on the 
take.
    I just wanted you to say a few words about how important 
the work that the U.S. Government does, in particular through 
State and USAID to fight public corruption, how important those 
efforts are to your ability to find the space to do deals. This 
is an advantage China has. They are willing to do deals with 
officials who are looking for handouts.
    We are not. My guess is, is that you rely on the work that 
the United States and Europe are doing to try to run anti-
corruption programing in places that are of interest to you.
    Mr. Nathan. First, I would say it is not always an 
advantage. I think having our values be clear, transparency, 
rule of law, private enterprise is something people in these 
countries want to be associated with.
    It often actually has a political advantage to be 
associated with an American project because it shows that it is 
clean and that has advantage, but I take your point that many 
circumstances, particularly in competitive situations, 
corruption is a problem and is an important tool.
    Working with our interagency colleagues, State Department, 
USAID, but also others who are important for helping create an 
enabling environment and reform, economic reform, creates more 
opportunities for business to operate.
    That is important for our deal flow. In terms of corruption 
and transparency, these are things that we are committed to 
making sure the standards are very high. We work with all of 
our colleagues at post or in the intelligence community as we 
conduct know your customer work and due diligence in vetting on 
our partners.
    Oftentimes that results in information that causes us to 
not be able to pursue deals, but these standards are important. 
I do not think we should compromise our standards in order to 
win a deal. Having our values be clear through what we do, I 
think, is one of the most important elements of what DFC and 
the other parts of the U.S. Government do.
    Senator Murphy. Well said. Thank you, Mr. Chairman.
    The Chairman. Senator Romney.
    Senator Romney. Thank you, Mr. Chairman. First, Mr. Nathan, 
I applaud you for your willingness to step away from the 
Baupost Group to help us at the Government level. For those 
that do not know, Baupost is one of the most, if not the most 
successful private equity and investment firms in our country.
    Thank you for that. I want to associate myself with the 
comments made by, in particular, Senator Hagerty with regards 
to our strategic interests, particularly as it relates to 
China. I sometimes feel that we in Congress and in the Senate 
live in fantasy-land, which is we think we can do everything 
for everybody.
    We think we can solve the problems of health, of food, of 
energy, the list goes on and on. Not just here, but all over 
the world. Frankly, there is not enough money for that. As we 
think about all the projects you might do that would deal with 
the issues you just described, our food challenges, energy 
challenges, creating more jobs for people, alleviating poverty.
    My goodness, we cannot alleviate poverty here, how in the 
world are we going to alleviate poverty all over the entire 
world? We are not. It would be massively beyond our capacity. 
Senator Menendez, for instance, spoke a moment ago about we 
need to try and alleviate poverty in Latin America so there 
will not be as many people coming here, but our wages are far 
higher than everywhere else in Latin America.
    We cannot raise the economy of Latin America to a level 
that people do not want to come here. Spending money around the 
world to alleviate things that we wish would go away, but we 
are never going to get there, would only make sense, in my 
view, if it has a strategic significance for us.
    If it is something that deals with the interests of the 
United States of America and our national security, I am 
pleased that you indicated, yes, that is exactly what you feel, 
that you have a dual mission.
    You consider two things. It is not easy to consider two 
things at once, but you recognize that a strategic interest is 
essential for us to make an investment by the DFC. How do you 
evaluate a strategic interest? What--in your view is--what is 
the strategic interest of the United States of America?
    Mr. Nathan. Advancing our foreign policy interests, I think 
includes greater stability, openness, in particular countries 
where we are trying to strengthen democracy and our allies.
    We take advantage of the national security strategy and all 
the sub strategies for individual countries to understand in 
the operating environment where we are looking at deals, what 
the issues are, and how our deals relate.
    Then in a more global sense, it is what Senator Hagerty 
referred to, the global competition with China and other 
potential authoritarian governments. That is securing for us 
diverse supply chains and material that we need, these are all 
parts of the considerations.
    Senator Romney. Yes, I agree with you, particularly with 
regards to the--when you came down to saying, yes, with regards 
to China in particular, which is saying how do we make sure 
that we have supply chain of the materials we need, that they 
do not establish monopolies to keep us from getting able to 
receive the key elements that we need for our economy and so 
forth.
    That makes all the sense in the world to me. How do you 
assess those strategic choices? Do you work with other 
agencies? Is that something that you deal with on your own? How 
do you decide, for instance, is it going to be a port we are 
going to invest in, or is it going to be a factory that makes 
widgets?
    Mr. Nathan. Yes. We take input, obviously, from all of our 
Board agencies. That State, USAID, Commerce, and Treasury, and 
then beyond that, throughout the rest of the interagency, 
including the White House and the National Security Council.
    We have 600 people who are focused on doing and supporting 
and accounting for the deals. We need to take advantage of 
posts on the ground, our embassies, and colleagues throughout 
the interagency in order to do that.
    Senator Romney. Yes, I would just close by saying that I 
believe our strategic interests and national security revolve 
around, if you will, China, Russia, authoritarian States versus 
ourselves, and that it is entirely consistent with your 
mission, as I understand it, to invest in those things that 
promote our national interest--that that keep China and other 
authoritarian States from impeding our capacity to trade with 
the world, to lead the world, and to have a prosperous life 
here in the United States.
    Would encourage and encourage your--the DFC effort not to 
say, just how can we alleviate poverty around the world, and 
how--because that is a task monumentally beyond our financial 
capacity, to instead say which things are specifically in the 
interest, the national security interests of the United States 
of America, particularly as it relates to China.
    Because today, that is our foreign policy and national 
security challenge, is China, Russia, the authoritarian states. 
Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Romney. Senator Kaine.
    Senator Kaine. Thank you, Mr. Chairman. Mr. Nathan, I join 
Senator Romney in saying I think the country is fortunate to 
have you in this position at this time. My colleagues have 
asked a number of good questions.
    I really want to focus on Latin America, but to illuminate 
some issues that are not just Latin America-based, but using 
Latin America as an example. You referenced, and I think 
Senator Cardin did in his opening comments, the fact that you 
are limited in where you must prioritize investments by the 
World Bank classification of countries by income.
    You should prioritize lower middle income countries, and 
you need a waiver to invest elsewhere. There is only five 
countries in Latin America that meet the World Bank category, 
and they are, let's see here: Bolivia, El Salvador, Haiti, 
Honduras, Nicaragua are the only five that fit within those 
World Bank classifications.
    Now, by waiver, you, the DFC is involved in other 
countries: Peru, Brazil, Ecuador, Dominican Republic, 
Guatemala, Colombia, Mexico, but you have to get a waiver to do 
that. Russia is not worried about World Bank--China is not 
worried about World Bank classifications. They will make 
investments wherever they think they can advance their 
interests.
    In the current set up, we have at least put a hurdle in 
your way. As I travel around the Americas, what I hear again 
and again from some of the nations that are not in the five is, 
we are your friends, we are doing things the right way, we can 
really advance more quickly, be a good example in the 
neighborhood, hopefully abate some of the migration pressures, 
but you limit investments in our country and China does not.
    Talk a little bit about the limitation and the waiver 
processes. Is the waiver sufficient, or if you--as you 
contemplate reorganization, what suggestions would you have to 
Congress in this space?
    Mr. Nathan. Thanks so much for the question. Under the 
BUILD Act, to operate--to do transactions in an upper middle 
income country, you are right that we need a waiver from the 
President that it is in the economic or national security 
interest.
    That has been delegated to the State Department. We have 
spent a lot of time negotiating with the State Department to 
try to create exemption pathways for certain categories of 
investments so that we know in advance that we can do deals in 
upper middle income countries that are in those sectors.
    Senator Kaine. You do not have to go down the road and----
    Mr. Nathan. For every single deal.
    Senator Kaine. Right.
    Mr. Nathan. That is working. It is why in the last year 
Ecuador became the second biggest exposure for DFC in our whole 
portfolio globally.
    Senator Kaine. This port investment that you talked about.
    Mr. Nathan. It is a port investment. It is a hospital 
investment. It is a power deal. It is the largest debt-for-
nature swap in history that will help Ecuador by reducing debt 
to help them deal with economic coercion, and also provide 
funding for conservation activities and the enforcement against 
illegal and unregulated fishing in the Galapagos.
    We have done a whole series of transactions. It is 
partially because we have had a government who has been a great 
partner and a President there who has been fantastic. He is 
leaving office soon.
    Senator Kaine. Sadly, yes----
    Mr. Nathan. Ecuador, I think, is a good model for where it 
is working.
    Senator Kaine. You are right----
    Mr. Nathan. There is still friction in other circumstances.
    Senator Kaine. Do you think the waiver process is 
sufficient to give you the tools that you need? Because, again, 
as I am traveling in the region, I am hearing, wow, we wish--
China does not have these restrictions.
    We wish you were a little less restrictive in the space. I 
completely get why BUILD would have prioritized the countries 
of the greatest economic need, but there are other imperative 
values as well.
    Mr. Nathan. The waiver process is working, but it is not 
perfect, and also creates in the areas that are not in the 
exemption pathway, a significant sort of time delay and an 
administrative and work hurdle.
    Senator Kaine. Let me give you an example. The chairman and 
I met yesterday with the President Elect of Guatemala. 
Guatemala is not on the five country list. He won a surprise 
election on a very aggressive anti-corruption campaign.
    I think the U.S. would have a lot at stake in seeing his 
efforts succeed when he is inaugurated in January, but right 
now, Guatemala might not get the national security waiver or 
might not be able to demonstrate an absence of private capital, 
and yet it would be in the security interests of the United 
States for an anti-corruption government in the Northern 
Triangle to be successful.
    I would hope--I said this to the chairman yesterday, I 
sometimes think we spend a lot more time figuring out ways to 
use sanctions to punish enemies than we do figuring out ways to 
reward good behavior.
    The DFC is one of the areas where we can reward good 
behavior, and I just hope that the restrictions in place do not 
make that unnecessarily challenging, especially vis a vis 
China. I yield back, Mr. Chair.
    The Chairman. Thank you, Senator Kaine. Senator Young.
    Senator Young. Thank you, Chairman. Welcome, Mr. Nathan. 
Thank you for your service. The first thing I would like to 
discuss is the DFC's sort of general focus. We know it is on 
development. That is laid out in its charter. In fact, its 
decision making process is advised by a counsel focusing on 
developmental priorities, and for good reason.
    There is definitely a need for that. One of the things the 
committee is going to have to think about moving forward as we 
consider the future of the DFC is what focus we are explicitly 
putting on the agency emphasizing countering national security 
concerns in addition to developmental priorities.
    This is something I know my colleagues have brought up. 
What current consultative mechanisms exist beyond the Board of 
Directors to ensure interagency opinions on national security 
risks or priorities from DoD, the intelligence community, 
National Security Council, for example, and how are these 
shared and incorporated into financing decisions?
    Mr. Nathan. Senator, thanks for the question. You are 
absolutely right that these considerations are at the fore of 
our decision making. The first area is thinking about where we 
should be spending time looking for deals, what countries.
    As Senator Kaine indicated, for example, we are spending a 
lot of time in Guatemala looking for deals despite the 
certification hurdle because of all of the foreign policy and 
national security interests that would be involved there.
    We consult with the embassy, with the State Department, our 
regional bureau. The intelligence community is very important 
in certain circumstances for thinking about where our strategic 
competitors might also be focusing.
    Senator Young. Is there a formal consultative process or 
protocol that DFC goes through to try and prioritize these 
different countries?
    Mr. Nathan. There is a lot of consultation. It is not a 
formal process.
    Senator Young. Okay.
    Mr. Nathan. Yes.
    Senator Young. Perhaps, would one make sense or do you feel 
like a more flexible process----
    Mr. Nathan. Yes, I refer back to what Ranking Member Risch 
referred to. The flexibility is extremely important because 
each different circumstance would require different 
consultation.
    For example, in the Western Hemisphere, I have recently had 
meetings with the Combatant Commander for SOUTHCOM, who is very 
focused on economic development and the tools that DFC has in 
order to promote democracy and free enterprise.
    That is extremely valuable, but in other Combatant 
Commands, it might not be as relevant. I think we need to be 
able to use the tools that are within the interagency and 
across the Government for the correct circumstances.
    I want to assure you that consultation and gathering 
information and doing this analysis is a central part of our 
work.
    Senator Young. Thank you. The other thing I want to address 
is financing of hard infrastructure projects, specifically 
digital infrastructure. Something I would like to see in this 
space is the funding for strengthening digital infrastructure 
like DFC support to the Africa data center's new facility in 
Kenya.
    These secure and reliable networks, I think, are going to 
have to be a priority. You are taking some actions in this 
area, but we cannot limit this priority to basic advisory 
opinions or technical support.
    Given limited time here, about 40 seconds, would you please 
comment on what DFC is doing to support grid development, in 
particular microgrids, and how you are coordinating that 
development financing with complementary bodies, MCC, U.S. 
Trade Development Agency, Cyberspace and Digital Policy Bureau 
at the State Department, etcetera.
    Mr. Nathan. Thanks for the question. First, I completely 
agree with you on the digital infrastructure front. We have had 
recent success in that area, $300 million loan to Africa Data 
Centres.
    I am actually heading to Ghana next week where they are 
opening another data center with trusted equipment. There are 
other opportunities in the mobile telephone space. It is very 
important for us to push forward with secure, safe, open 
networks, with trusted equipment, and that we support an 
alternative offering to what China is offering.
    On the microgrid area, we have had success in funding some 
of that activity, particularly in Africa, for distributed 
energy, for areas that are not connected to larger grids. You 
are right that our interagency partners, often our source of 
deal flow or technical expertise, that is certainly something 
that we rely on, and this is an area that we would definitely 
like to advance further. Providing reliable access to 
sustainable electricity is a key to development and is in our 
strategic interest.
    Senator Young. Thank you.
    The Chairman. Thank you, Senator Young. Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman. Thank you, Mr. 
Nathan, for being here. I want to begin by recognizing DFC's 
finalizing the commitment for up to $300 million in the 
Investment Fund for the Three Seas Initiative. I think that is 
a very important investment, and especially given Ukraine 
recently being granted a partner nation to the investment 
initiative.
    I hope you will consider this as another way that we can 
support what is happening in Ukraine. Like most of us on this 
committee, I was very disappointed that when we passed the 
continuing resolution on Saturday that it did not fund Ukraine 
in the way that we had talked about and believe it should be.
    I wonder for the benefit of those people who say why are we 
support in Ukraine, would you talk about the interconnection 
between our economy here and what is happening in Ukraine, and 
why our investments there have some real benefit for the 
American public and the businesses in the U.S.?
    Mr. Nathan. First, I would say, Senator, I think it is the 
right thing to do. I have been to Ukraine three times in the 
last year. Our predecessor agency had $800 million worth of 
exposure there through a variety of different investments, and 
we have continued to expand that portfolio to support the 
private sector in Ukraine.
    That is support for small business. That is in the 
agricultural space. That is health care. A thriving private 
sector in Ukraine, which is possible at the moment, will help 
them be in the position for reconstruction and recovery as 
opposed to being further damaged. We are committed to keeping 
people employed, having them pay taxes, support the war effort 
and support the government.
    We are trying through many different possible projects to 
do that, and we are starting to have a great deal of success, 
but in a broader way, particularly in the agricultural space 
and food security, Ukraine plays such an important role in the 
Middle East, North Africa, across the African continent, the 
World Food Program, as the biggest source of grain still to the 
World Food Program.
    It is in our interest to not have people starving around 
the world. It is also the right thing to do. Anything we can do 
to support Ukraine in that regard, I think, is worthwhile.
    Senator Shaheen. Thank you. I would also argue it is in our 
national security interests not to have a Vladimir Putin who 
feels free to go into any country that he likes and take it, 
and the message that that sends to China and to Iran and North 
Korea is very important.
    I understand before I got here that you testified that 
about 1 percent of the employees of DFC are outside of the 
United States. Is that correct? I was very happy to see that 
your request, which the Appropriations subcommittee has fully 
funded, includes funding for 10 DFC country offices.
    I certainly support that. I think it is hard for us to 
figure out what the needs are if we do not have people there on 
the ground. I certainly share Senator Murphy's concern about 
the missed opportunity in the Balkans.
    Right now, we have several countries in the Balkans that 
are on the verge of outright conflict: Serbia and Kosovo, and 
Bosnia. We also have several countries there that have made 
tremendous progress, as have those countries in some areas on 
democracy building. Montenegro and North Macedonia are members 
of NATO.
    Those are places that we want to invest because we do not 
want Southern Europe to explode in the same way that we are 
seeing the land war in Ukraine. Can you talk about what 
criteria you are looking at and to what extent you might be 
considering offices someplace in the Western Balkans?
    Mr. Nathan. Yes. As part of our strategic review of, and 
our planning for how to deploy officers, we looked at, by 
region, where we are likely to locate offices that can be 
useful to a region from a connectivity point of view to avoid 
the difficulty of travel that comes up.
    We looked at where we are likely to get the most leverage 
from having a person on the ground for business development and 
filling our pipeline of potential deals.
    Senator Shaheen. Are you looking at anywhere in the Western 
Balkans?
    Mr. Nathan. Yes. We would consider Europe as part of our 
plan. Whether it would be in Central Europe, in Ukraine or in 
the Balkans is still up in the air. One of the things about 
Europe is that it is easier for our people to get there from 
Washington, as opposed to if you are looking at certain places 
in West Africa or in South Asia.
    Senator Shaheen. You have not been to Georgia recently, 
have you?
    Mr. Nathan. I was there actually a year ago. I was in 
Tbilisi.
    Senator Shaheen. You think it is easy to get there.
    Mr. Nathan. Yes, but you should try to get to Freetown, 
Sierra Leone. None of it is easy. I will say in Georgia, I was 
delighted to visit there because DFC has a 30-year history of 
investing there, and obviously with our predecessor. From 
Washington, DC, we have done over 60 deals in Georgia over that 
history.
    Senator Shaheen. Yes, I would hope that Georgia would be 
one of the places you are also considering for an office, 
because of its strategic location in between Europe and Central 
Asia. I know I am out of time, Mr. Chairman, but let me just 
also weigh in and say that I certainly support the equity 
scoring fix that has been raised and hope that that can get 
done. Thank you.
    The Chairman. I noticed Senator Van Hollen appreciated that 
you took the extra 2 minutes so that he could make it to the 
committee. Senator Van Hollen, if you are ready, you are on.
    Senator Van Hollen. Thank you, Mr. Chairman. Senator 
Shaheen, thank you for taking a little more time. Let me also 
just second what Senator Shaheen and I am sure others have said 
about the importance of fix--making the equity fix.
    I know, Mr. Nathan, that is something you have focused on. 
Thank you and your team at the DFC for all you are doing. I 
want to pick up on a question that I understand was asked 
earlier on political risk insurance, because, of course, the 
DFC grew out of OPIC, and OPIC specialized in political risk 
insurance.
    My understanding is that we could be helping a lot of 
investments in Ukraine potentially, which is going to be 
essential for reconstruction in Ukraine, but that there is an 
impediment right now in terms of the scoring on political risk. 
Is that right? If you could please talk a little bit about 
that.
    Mr. Nathan. You are absolutely right that political risk 
insurance is an extremely valuable tool for mobilizing private 
capital, which is really what DFC is all about, mobilizing 
private capital to address the kinds of issues that we have 
been discussing today.
    You are also right that political risk insurance, 
particularly war risk insurance, is key to attracting private 
capital today in Ukraine, for obvious reasons.
    Taking that tail risk off the table for potential lenders 
or investors is critical so that they can focus on making the 
commercial and business analysis, and not have to worry about 
the larger macro or war issues.
    You are also right that the tool is somewhat constrained at 
the moment, and here I do not want to go too deep on the 
technicalities of it, but it is not quite for a scoring reason, 
but because of a disagreement about whether political risk 
insurance on debt should be considered as a guarantee or as 
insurance.
    The BUILD Act talks about political risk insurance as an 
insurance tool. That is our position. If we are able to use 
political risk insurance to its full promise, I think the 
potential to make an impact in Ukraine for financing not only 
recovery in the future, but today, to help businesses stay 
alive and have money flowing to the private sector today is 
huge.
    Senator Van Hollen. This disagreement you are referencing, 
it is my understanding that is a disagreement between DFC and 
OMB. Am I correct about that?
    Mr. Nathan. That is correct.
    Senator Van Hollen. Okay. If we took OMB's interpretation, 
would DFC actually be more constrained in providing political 
risk insurance that OPIC was?
    Mr. Nathan. You are very well informed. Yes, that is 
exactly the case. The issue there is whether we would need to 
obligate subsidy against, or our appropriation, against 
political risk insurance. Not something OPIC ever did, or we 
have viewed that we have ever had to do.
    In situations like Ukraine, which is obviously of greater 
risk than most other markets today for clear reasons, the 
amount of subsidy that would have to be obligated, if we were 
even allowed to do that, would be very large, or we would have 
to price the product in a way that no person would ever accept 
that pricing and use the tool to begin with.
    Senator Van Hollen. Right.
    Mr. Nathan. I think, exactly----
    Senator Van Hollen. I appreciate that. I was here for the 
discussions over transforming OPIC into DFC, and I think I can 
speak, at least for most members, that the idea was to expand 
the authorities of DFC compared to OPIC, not constrain them in 
any way from what OPIC had.
    It would be a step backwards if folks are essentially 
saying that DFC does not have the tools when it comes to 
political risk insurance that OPIC had. If I could just turn 
quickly to just the--some of the internal machinery, and I know 
the way DFC is set up, you need other agencies to provide 
input.
    My team recently met with representatives from a company 
called Africell, which is a U.S. company investing in 
telecommunications networks in Africa without using Chinese 
technology, trying to encourage the move away from that, but 
they found their experience with DFC painfully slow, and they 
ended up going to look for others.
    Could you describe any way we can help you, and I know this 
is a sort of an open question, but what can we all do to help 
turn around the time--to help fix the timeliness of your 
decision so you can be more flexible and nimble?
    Mr. Nathan. Thanks for the question. First, I should say 
Africell is an important partner of ours. They have received 
$100 million of financing. We have supported their expansion in 
Sierra Leone. I visited them in Gambia and we are considering 
ways that we can support their expansion elsewhere in Africa.
    These situations are complicated. There are multiple 
factors that go in. They experienced some financial difficulty 
and defaulted on our loan. We are in the process of helping 
them get through that. They have also been quite effective in 
speaking to people about that. In general, I agree with the 
thrust of your question, which is we need to be faster, we need 
to be more responsive, we need to be more responsive to 
clients.
    Part of that is making sure that we are organized in a way 
that can address client needs with our full suite of tools that 
can have consistent business development in a sector related to 
clients. That is why we are realigning the investment 
organization around our priority sectors so we can have that 
consistency.
    In terms of the process of reauthorization, there is a 
whole set of issues that slow us down, that create uncertainty. 
Some of them have been addressed today, issues related to 
certification and notifications. Some of it is just the nature 
of what we do. That through the Know Your Customer process, 
there is uncertainty through the vetting process.
    It is necessary that we do that. I do not want to change 
our standards on that, but streamlining approvals and 
certifications and notifications and those kind of things will 
allow us to be quicker. Working with our Board to be quicker 
with approvals is important.
    Getting through the kind of vetting that I mentioned in a 
more expeditious manner would mean that we can meet those 
client needs more rapidly and be more responsive.
    Senator Van Hollen. Thank you. I look forward to following 
up with you on some things we can do to help. Thank you, Mr. 
Chairman.
    The Chairman. Thank you, Senator Van Hollen. Mr. Nathan, as 
you can see by the participation of our committee, there is a 
great deal of interest in this subject, and we do welcome your 
thoughts as we are moving towards a reauthorization process.
    I want to make one observation about the response I think 
it is to Senator Murphy's and Senator Romney's questions on 
good governance and anti-corruption. Several times you 
mentioned your reliance upon our embassy or mission for the 
information.
    One of the challenges we have--we are going to try to help 
you with legislation that Senator Young and I have gotten 
through this committee. It is now in the National Defense 
Authorization Act.
    To build the capacity of our missions to be able to 
evaluate good governance and anti-corruption issues, because we 
find that as you are going through the strategic aspects of 
your work, that the mission may well be focused on how to help 
Ukraine or how to deal with supply chain issue, or how to deal 
with some other military issue, and the capacity in regards to 
anti-corruption does not always go front and center.
    I would be curious as to how you make those evaluations, if 
you do not have the capacity within the mission to really 
advise you and give you the most up-to-date information about 
the corruption issues within the country that you are dealing 
with.
    We are trying to build up that capacity within our 
embassies, and we hope that that legislation will be successful 
in the National Defense Authorization Act. I am going to also 
have a few questions for the record for you in regards to how 
you are utilizing the Development Advisory Council, the 
independent accountability mechanisms, and how you are dealing 
with the--your advisor, the specific position that was--that 
you had the Chief Development Officer.
    The record will remain open for--till the end of business 
Friday, for members who may have questions for the record. 
Before we adjourn, I am going to recognize Senator Risch for 
any additional comments he may want to make.
    Senator Risch. Thank you, Mr. Chairman.
    The Chairman. Good. If not, then the committee will stand 
adjourned. Thank you very much.
    [Whereupon, at 11:34 a.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record


              Responses of Mr. Scott Nathan to Questions 
                Submitted by Senator Benjamin L. Cardin

    Question. Independent Accountability Mechanism. About 5 years after 
the BUILD Act was passed and more than 3 years after DFC became 
operational, the accountability mechanism mandated by the BUILD Act 
still does not have procedures to guide the complaint process. This 
undermines the effectiveness of this office to address concerns from 
communities about risks and impacts that can harm people, the 
environment, and the sustainability of DFC's investments.
    When will DFC launch a public consultation on the procedures for 
the Independent Accountability Mechanism?
    How will the DFC formally utilize finding and outcomes that result 
from the Independent Accountability Mechanism?

    Answer. The Independent Accountability Mechanism is functionally 
independent from DFC and reports directly to the Board and Congress. A 
process is currently under way for hiring a new Director for the 
mechanism and DFC anticipates that the new Director will be able to put 
procedures in place after their arrival. The IAM can provide advice or 
reports regarding Corporation projects, policies, and practices, with 
findings and recommendations for the agency. DFC assesses and responds 
to these recommendations.

    Question. Environmental Social Policy and Procedures. As you have 
expanded DFC's operations, it is also important to expand the resources 
devoted to environmental and social due diligence and monitoring. 
Although DFC has taken steps to hire additional staff, the level of 
staffing for these functions is still not commensurate with DFC's work 
and financing.
    How will you address this now and as we move towards 
reauthorization?
    DFC's Environmental and Social Policy and Procedures requires that 
DFC publish environmental and social impact assessments and other 
documents for sub-projects. This is important to understand the full 
impacts of DFC's financing.
    Where does the DFC publish such information on sub-projects is 
listed?
    What information does DFC track on financial intermediaries?

    Answer. Staffing: Having sufficient staffing to assess 
environmental and social risks of its projects is critical to DFC's 
ability to deliver development outcomes. DFC's staffing for 
environmental, social, and impact assessment and monitoring is 
significantly smaller than peer development finance institutions when 
compared to the size of portfolios being managed, according to a recent 
report from DFC's Inspector General. The reason for this is that DFC's 
administrative budget is smaller in comparison, and its flexibilities 
to match private sector salaries are more limited. DFC has already 
undertaken efforts to increase the size of its environmental and social 
team in the midst of a competitive hiring environment for professionals 
with these skills. Recruitment efforts will continue in the coming 
months to bring on more staff. As DFC's pipeline and portfolio continue 
to grow, and the complexity of projects increases, DFC will need 
additional resources to ensure environmental and social risks are 
adequately addressed.
    Environmental and Social Policy and Procedures: To receive and 
maintain DFC support, every project--whether supported with insurance, 
direct loans, equity, investment guarantees, or technical assistance--
must comply with DFC's environmental and social (E&S) standards. The 
policies and procedures for both the environmental and social risk 
assessment are described in the DFC Environmental and Social Policies 
and Procedures (ESPP) posted on DFC's website. The ESPP adopts the 
International Finance Corporation's Performance Standards on Social and 
Environmental Sustainability as the standard for the environmental and 
social review process. These are widely recognized and utilized as the 
benchmark E&S standards within the Development Finance Institution 
(DFI) community. Projects that are likely to have significant adverse 
environmental or social impacts, including sub-projects of Funds or 
financial intermediaries, are disclosed to the public for a comment 
period of 60 days prior to final approval. Documentation associated 
with the environmental and social impact assessment of these projects 
are disclosed on DFC's website.
    All applicants for DFC support go through a detailed credit, legal, 
know-your-customer, environmental, and social due diligence process. 
DFC evaluates each potential project on its own merits, including 
potential loans or guaranties to financial intermediaries. As part of 
this process, DFC discusses individually with potential clients their 
lending practices, any social policies in place, whether they adhere to 
international client protection principles, and other factors that DFC 
can incorporate into agreements on an individual basis to create 
development impact and protect consumers.

    Question. Development mandate. The BUILD Act mandated that 
development would be a core function of the new DFC. There is evidence 
that this commitment to development has been lacking--for instance, it 
took a significant amount of time to stand up both the Development 
Advisory Council and the Independent Accountability Mechanism and it is 
not clear what either is doing. I believe these mechanisms, as well as 
the Chief Development Officer, are critical to providing accountability 
for taxpayer dollars and ensuring DFC is fulfilling its BUILD Act 
mandate.
    Please describe the role the Development Advisory Council and the 
Independent Accountability Mechanism play in advancing DFC's mandate, 
including the number of staff and/or advisors for both the Council and 
the Mechanism.
    Please describe the role of the Chief Development Officer, 
including the number of staff in the CDO's office.
    Going forward, what role do you envision the Chief Development 
Officer, the Council and the Mechanism play in advancing DFC's mandate?

    Answer. The Development Advisory Council (DAC), which is comprised 
of nine members, advises the Board of Directors on meeting DFC's 
development mandate and makes suggestions for improvements with respect 
to meeting that mandate. The DAC has met with several key stakeholders 
to gather their observations and recommendations regarding the 
Council's work, and has used these meetings to inform its own 
recommendations for DFC management.
    The Independent Accountability Mechanism, which is managed by the 
Office of Accountability, works with project-affected parties and DFC 
clients to help resolve conflicts and conducts investigations about how 
DFC applied its relevant policies to a project. It is available to 
project-affected parties, as well as DFC's Board.
    The Office of Accountability is mandated to provide these services 
upon request in a manner that is accessible, fair, objective, and 
transparent. In providing its services, the office complements DFC's 
mission as a financial institution that promotes environmentally and 
socially sustainable development.
    The Director of the Office of Accountability coordinates all office 
services, including related contracting, updates its website, and 
manages its budget. To maintain the office's ability to provide 
services independently of DFC's financial operations, the BUILD Act of 
2018 stipulates that the Director reports directly to DFC's Board of 
Directors.
    The Chief Development Officer serves as a senior advisor to the CEO 
and the Board of Directors with a focus on maximizing the Corporation's 
development impact across its portfolio and its alignment with U.S. 
Government policy. He and his team of four full-time staff, two 
detailees, and one intern coordinate with stakeholders including the 
DAC, DFC's Policy Coordination Group and business lines, other DFIs, 
foundations, nongovernmental organizations, and civil society to 
gather, evaluate, consolidate, and promote specific recommendations 
(including those generated by the DAC) to achieve that impact. The CDO 
also directly oversees the operation of the Development Advisory 
Council and serves as an ex officio member. We anticipate that the OCDO 
will continue to strengthen and institutionalize this crucial role and 
we are exploring ways in which the CDO can be better integrated into 
the Corporation.

    Question. Coal Power. How many proposals for coal fired power 
plants, coal extraction, or coal power supply chains has the DFC or 
OPIC received in the last 10 years?

    Answer. Neither DFC nor its predecessor, OPIC, has received an 
application for a coal power project during the last 10 years. DFC has 
seen declining interest in support for these technologies, given the 
highly competitive pricing of renewable technologies, including many 
battery technologies developed in the U.S., as well as increased 
availability and the low cost of gas.

    Question. Microfinance. I appreciate DFC's work to advance 
development outcomes through microloans to borrowers. However, I remain 
concerned about DFC's use of financial intermediaries to not only 
provide these loans, but also to adjudicate any alleged predatory 
lending practices or issues the borrowers may face. In other words, I'm 
concerned DFC is tasking large financial institutions with being both 
the robber and the cop when it comes to microlending through financial 
intermediaries.
    Do you believe it is appropriate for banks to police themselves in 
this instance?
    What role does DFC play in ensuring banks are held accountable for 
any predatory practices? How often does DFC conduct spot checks and 
other forms of analysis to root out potential predatory practices?
    What is DFC's role if predatory activity is uncovered to respond to 
that activity and provide remedy to harmed individuals or communities?

    Answer. DFC takes seriously any allegations of predatory lending 
and other practices that negatively affect consumers. DFC project teams 
perform enhanced diligence on transactions that support microfinance 
institutions (MFIs) and financial institutions where DFC proceeds 
support micro-enterprise lending. This entails screening potential 
investments for adherence to Client Protection Standards, and 
confirming that providers do not over-indebt clients, treat clients 
fairly, and set prices responsibly. DFC also reviews the MFIs' problem 
asset management and collection policies and procedures.

    Question. Anti-Corruption. How does the DFC assess and evaluate 
whether the actors involved or beneficiaries of supported project are 
engaged in corruption, and what standards the DFC use to ascertain such 
determinations?
    How does the DFC account for whether the partner country for where 
DFC support or investments are being made are practicing good 
governance and what standard of good governance does the DFC apply to 
these assessments?

    Answer. DFC places a strong emphasis on honesty and integrity and 
seeks to partner with reputable and well-governed entities to ensure 
that the resources it mobilizes are used for the intended purposes. 
This requires us to conduct rigorous due diligence on the projects DFC 
supports as well as their direct and indirect owners and other relevant 
parties, to prevent DFC from unintentionally supporting parties 
involved in serious financial misconduct or other inappropriate 
behavior, including corruption and money laundering.
    To this end, DFC has robust know-your-customer (KYC) policies and 
procedures in place, pursuant to which DFC assesses information 
obtained through several sources including U.S. sanctions lists, 
commercial and public databases, and other agencies such as the 
Department of State, Department of Treasury, and the intelligence 
community to identify risks and make informed decisions.
    DFC also assesses whether our counterparties, and particularly 
financial institutions through which it mobilizes resources, have 
adopted or are committed to adopting, as a condition for receiving DFC 
financing, adequate compliance policies and procedures to prevent and 
control corruption and money laundering risks in their activities and 
to comply with applicable U.S. sanctions. DFC includes in its 
contractual documentation covenants related to the maintenance of such 
compliance programs and controls.

    Question. Realignment. Please describe the reasoning for placing 
Political Risk Insurance (PRI) in the Energy sector group, given PRI 
will remain cross sector.

    Answer. PRI is a critically important and valuable tool for DFC to 
unlock private investment in high risk geographies given its utility in 
covering some of investors' greatest concerns. Our goal is to expand 
DFC's capacity to do more PRI transactions in the future across all 
sectors. Placing PRI in the Energy sector group will offer the PRI team 
structure and support within a sector vertical as we strengthen DFC 
capacity to utilize this critical tool.

    Question. How do you envision an Energy sector VP to review cross 
sector transactions brought forward by the PRI team?

    Answer. It is planned that the PRI team will be overseen by a 
Deputy Vice President with experience in political risk insurance and 
who will be dedicated to reviewing cross-sector transactions.

    Question. Why was the ``joint'' finance and insurance positions 
created? How was the decision made to eliminate these positions?

    Answer. Finance & Insurance officers will continue to exist in the 
realigned sector structure; they are not being eliminated. The position 
ensures that investment teams are cross-trained and able to leverage 
key knowledge, skills, and capabilities relevant to both finance and 
insurance aspects of the transaction process. There are and will 
continue to be positions that only work on insurance to ensure we have 
breadth and depth of expertise as we continue to grow the PRI product.

    Question. Will the monitoring team also be restructured according 
to sector? Is DFC considering combining the origination and monitoring 
teams?

    Answer. Teams responsible for monitoring activities are aligning 
internally to support the sector-based structure and will continue to 
monitor transactions as they do currently. Investment officers will 
continue to originate transactions with the support of sector-aligned 
business development experts.

    Question. How is DFC determining which individual officers are 
assigned into specific industry verticals?

    Answer. Both qualitative and quantitative inputs informed the 
placement of staff within sector teams, and we consulted with all 
Managing Directors across the business lines. The composition of sector 
teams is guided by five design principles: (1) proactively break down 
product silos and foster collaboration; (2) keep teams together with 
current Managing Directors (MDs); (3) leverage sector expertise MDs and 
their teams have developed to date using a data-driven approach; (4) 
build for the future while recognizing DFC's context today; and (5) 
embed accountability, performance, and delivery in the design.

    Question. Given the industry focus, it would seem important that 
the person with the right background is matched with each more 
specialized position. Is an analysis of each individual's prior work 
experience, skill set, performance history and career interests being 
conducted prior to selection?

    Answer. The placement of individuals in a particular sector is 
informed by a data-driven approach that leverages the sector expertise, 
deal history, and existing client relationships of individuals and 
their teams. Managing Directors across the business lines were also 
consulted to provide input to the organizational design development 
process.

    Question. I understand that DFC plans to re-assign staff based on 
their current team reporting structure?

    Answer. There are a few key design principles to inform the 
realignment process: (1) proactively break down product silos and 
foster collaboration; (2) keep MD teams together to minimize 
disruption; (3) leverage sector expertise MDs and their teams have 
developed to date; (4) build for the future by looking at our sector-
specific ambitions; and (5) embed accountability, performance, and 
delivery in the design.

    Question. How does this ensure that each respective individual is 
being adequately consulted and evaluated during this process especially 
when most teams are currently not specialized?

    Answer. DFC has provided and continues to provide multiple 
opportunities for individuals to engage in the realignment process. 
Since May 2023, DFC management has held more than 100 meetings with 
staff across DFC, including over 30 meetings with senior leadership at 
the Vice President or Deputy Vice President level, 30 meetings with 
those at the Managing Director level, and 45 meetings with those at the 
Director level or below. We have also conducted two office hours and 
two key topic discussions which were each open to all staff and 
attended by more than 100 participants in each one. Strategy updates 
are shared in monthly town halls and individuals are encouraged to send 
questions or concerns to a dedicated strategy inbox that has so far 
fielded over 35 inquiries.
    As the realignment is implemented, individuals will have 
opportunity to discuss their new assignments in a series of 1:1 and 
group conversations with their supervisors and management.
    Approximately 86 percent of the work currently being performed 
aligns to the new sectors, and DFC envisions that the realignment will 
provide enhanced advancement and professional opportunities for staff.

    Question. Is an individual's entire work experience being 
considered including experience at OPIC/DCA and previous organizations?

    Answer. The placement of individuals in a particular sector is 
informed by a data-driven approach that leverages the sector expertise, 
deal history, and existing client relationships of individuals and 
their teams. In some instances, individuals may have developed sector 
relevant expertise and relationships prior to their affiliation with 
DFC.

    Question. How do national security interests benefit from the 
industry specialization approach? Will the organization be flexible 
enough to re-assign staff members based on changing national security 
and foreign policy priorities and considerations?

    Answer. A sector-based approach will enable DFC to build expertise 
more effectively in areas that shape the marketplace, maximize private 
capital mobilization, strengthen client relationships, and focus on 
strategic priorities, inclusive of national security and foreign policy 
objectives. It will also provide the ability to advance opportunistic 
transactions in non-prioritized sectors, which allows DFC to be 
flexible and responsive to national security crises. Sector teams will 
include new vacancies in alignment with anticipated growth for the 
agency.

    Question. Will each sector silo have its own policies and 
procedures? Or will policies and procedures be produced by product 
type?

    Answer. Sectors will be guided by sector strategies that align with 
the mission and strategic objectives of the organization and that 
include cross-cutting priorities as well as collaboration across sector 
teams. While the leadership in individual sectors may find efficiencies 
in creating sector-specific guidelines and processes, policies and 
procedures that govern the transaction process and required 
institutional approvals will continue to operate at a product level and 
be standardized across all sectors.
                                 ______
                                 

              Responses of Mr. Scott Nathan to Questions 
                  Submitted by Senator James E. Risch

    Question. Solar Projects / Slave Labor: I remain deeply concerned 
about DFC support for solar projects involving Chinese-sourced 
components or equipment. Relying on China for green energy presents 
significant geostrategic challenges and undermines our development and 
national security objectives.
    Please describe the concrete steps the DFC is taking to ensure 
clean supply chains, including for solar.

    Answer. DFC prohibits companies from using proceeds from its 
support--both directly and through intermediaries--for the purchase of 
solar panels that are manufactured by entities subject to U.S. 
sanctions or a Customs and Border Protection (CBP) Withhold Release 
Order, or listed by the Forced Labor Enforcement Task Force as 
described under the U.S. Uyghur Forced Labor Prevention Act.
    In addition, all DFC projects are obligated to comply with the 
International Finance Corporation's Performance Standards (IFC PS) for 
environmental and social risks. Labor standards in the IFC PS, 
including a prohibition of the use of forced or child labor, explicitly 
apply to projects' primary supply chains. DFC also participates in 
development finance-oriented supply chain working groups to identify 
opportunities to align supply chain risk mitigation practices with 
multilateral development banks, including the IFC, and peer development 
finance institutions.
    DFC is continuing to pursue opportunities to diversify solar, 
battery, and other supply chains. For example, DFC recently committed 
support to two investments in solar manufacturing in India including 
$500 million for a 3.3 gigawatt (GW) solar module manufacturing 
facility being developed by a U.S. company, First Solar, and a $425 
million loan to TP Solar for a 4GW solar cell and module facility. 
These investments will contribute to the development of alternative 
supply chains that reduce the risk of dependence on a single market.
    Critical minerals are also indispensable to clean energy 
technologies, including solar photovoltaics. DFC actively looks to 
invest in projects that support critical minerals production and 
processing, which would help meet increasing global demand, while also 
supporting positive developmental impacts. DFC is committed to 
identifying pragmatic opportunities to diversify critical minerals 
supply chains to enhance security and reliability in the global market 
and limit the potential for price volatility. It is also considering 
opportunities to invest in infrastructure that can enable more 
effective investment in critical minerals production (e.g., transport 
links and energy supply).

    Question. Please provide a breakdown of the number of solar 
projects approved during your time at DFC as well as the number of 
potential solar projects that are in the pipeline.

    Answer. The list below includes active/approved projects. The 
number of projects in DFC's pipeline is difficult to report given 
uncertainties about which projects will be confirmed as strong 
candidates through our due diligence processes.

------------------------------------------------------------------------
  Fiscal
   Year       Region     Country          Project             Amount
------------------------------------------------------------------------
                                   TP Solar Limited
 
2023        Asia       India       Loan to finance the      $425,000,000
                                    construction of a
                                    4GW solar cell and
                                    module manufacturing
                                    facility.
------------------------------------------------------------------------
                                   Alcazar Energy
                                    Partners II (https://
                                    www.dfc.gov/sites/
                                    default/files/media/
                                    documents/
                                    Alcazar%20Public%20P
                                    Information%20Summar
                                    y.pdf)
 
2023        MENA,      Multiple    Equity investment in      $50,000,000
             Europe                 a fund that will
                                    invest in renewable
                                    energy
                                    infrastructure
                                    projects, with a
                                    primary focus on
                                    solar PV and onshore
                                    wind greenfield
                                    projects.
------------------------------------------------------------------------
                                   SAEL (https://
                                    www.dfc.gov/sites/
                                    default/files/media/
                                    documents/
                                    SAEL%20PIndustries%2
                                    0Limited%20Public%P2
                                    0Information%20Summa
                                    ry.pdf)
 
2023        Asia       India       Equity investment to      $35,000,000
                                    support fund the
                                    development of new
                                    solar and waste-to-
                                    energy investments.
------------------------------------------------------------------------
                                   Husk Power Systems
 
2023        Africa/    India and   Equity investment to      $15,000,000
             Asia       Nigeria     support Husk to
                                    expand reliable
                                    energy access in
                                    Nigeria and India
                                    through solar PV
                                    mini-grid
                                    installations and
                                    services.
------------------------------------------------------------------------
                                   Solararomo S.A.
 
2023        Western    Ecuador     Political risk            $50,000,000
             Hem                    insurance for
                                    development,
                                    construction and
                                    operation of a 200-
                                    megawatt solar
                                    photovoltaic plant
------------------------------------------------------------------------
                                   Solararomo S.A.
                                    (https://www.dfc.gov/
                                    sites/default/files/
                                    media/documents/
                                    Solararomo%20Public%
                                    20 Information%20Sum
                                    mary.pdf)
 
2023        Western    Ecuador     Loan for development,    $144,000,000
             Hem                    construction and
                                    operation of a 200-
                                    megawatt solar
                                    photovoltaic plant
------------------------------------------------------------------------
                                   Bboxx Capital RDC
                                    SARL (https://
                                    www.dfc.gov/sites/
                                    default/files/media/
                                    documents/
                                    9000115586.pdf)
 
2023        Africa     Democratic  Corporate loan to         $10,000,000
                        Republic    finance long-term
                        Of Congo    working capital for
                                    the Borrower to
                                    expand the supply of
                                    solar home systems
                                    and related
                                    appliances in the
                                    DRC.
------------------------------------------------------------------------
                                   Greenlight Planet
                                    Solar Home Systems
                                    (https://www.dfc.gov/
                                    sites/default/files/
                                    media/documents/
                                    9000115468.pdf)
 
2023        Africa     Nigeria     Greenlight Planet         $50,000,000
                                    aims to distribute
                                    and finance high
                                    quality affordable
                                    off-grid solar
                                    system solutions.
------------------------------------------------------------------------
                                   Kosovo Credit
                                    Guarantee Fund
                                    (https://www.dfc.gov/
                                    sites/default/files/
                                    media/documents/
                                    9000104298.pdf)
 
2022        Europe     Kosovo      DFC and KCGF               $7,500,000
                                    collectively
                                    guarantee series of
                                    Kosovar Banks who
                                    ultimately lend to
                                    series of renewable
                                    energy IPPs (namely
                                    solar)
------------------------------------------------------------------------
                                   Africa Renewable
                                    Energy Fund II
                                    (https://www.dfc.gov/
                                    sites/default/files/
                                    media/documents/
                                    PublicInfo Summary_A
                                    fricaRenewable Energ
                                    yFundII.pdf)
 
2022        Africa     Multiple    Investment in a fund      $40,000,000
                                    that will develop
                                    and invest in mid-
                                    sized, grid-
                                    connected renewable
                                    energy projects,
                                    primarily run-of-
                                    river hydro, solar,
                                    and energy storage.
------------------------------------------------------------------------
                                   Brighter Life Kenya 2
                                    (https://www.dfc.gov/
                                    sites/default/files/
                                    media/documents/
                                    9000115661.pdf)
 
2022        Africa     Kenya       Receivables financing     $20,000,000
                                    facility to purchase
                                    off-grid solar home
                                    systems and mobile
                                    phones in Kenya.
------------------------------------------------------------------------
                                   FS India Solar
                                    Ventures Private
                                    Limited (https://
                                    www.dfc.gov/sites/
                                    default/files/media/
                                    documents/
                                    9000115523.pdf)
 
2022        Asia       India       3.3GW/Annum First        $500,000,000
                                    Solar thin-film
                                    module manufacturing
                                    facility in India.
------------------------------------------------------------------------
                                   Golomoti JCM Solar
                                    Corporation Limited
                                    (https://www.dfc.gov/
                                    sites/default/files/
                                    media/documents/
                                    9000105383.pdf)
 
2022        Africa     Malawi      Build Own Operate a       $25,000,000
                                    20MW Solar PV + 5 MW/
                                    10Mwh Battery
                                    Storage--20-yr PPA
                                    with ESCOM, in the
                                    Golomoti district in
                                    Malawi
------------------------------------------------------------------------
                                   Mirova Gigaton Fund
                                    (https://www.dfc.gov/
                                    sites/default/files/
                                    media/documents/
                                    9000115510.pdf)
 
2022        Africa     Africa      Debt fund making         $100,000,000
                       Regional     downstream loans to
                                    off-grid solar and
                                    clean energy
                                    transition companies
                                    globally, primarily
                                    SMEs in Africa and
                                    Asia
------------------------------------------------------------------------
                                   Orb Energy II (https:/
                                    /www.dfc.gov/sites/
                                    default/files/media/
                                    documents/
                                    9000104476.pdf)
 
2022        Asia       India       Financing for SME         $20,000,000
                                    borrowers to
                                    purchase commercial
                                    and industrial solar
                                    PV systems in India.
------------------------------------------------------------------------
                                   Virtuo Finance SARL
                                    (https://www.dfc.gov/
                                    sites/default/files/
                                    media/documents/
                                    9000115597.pdf)
 
2022        MENA       Egypt       up to $50 million for     $50,000,000
                                    DFC to participate
                                    in a green note
                                    purchase issued by
                                    Virtuo Finance
                                    S.A.R.L to on-lend
                                    to six solar
                                    projects in Egypt
                                    (300MW)
------------------------------------------------------------------------

    Question. How many natural gas plants have you approved? Where? How 
many are in the pipeline?

    Answer. Since 2021, DFC has approved support for one natural gas 
power plant, the CECA power plant in Sierra Leone, comprised of a $217 
million loan and $50 million in political risk insurance. DFC has made 
a concerted effort to identify opportunities in the gas-to-power space, 
recognizing its ability to provide critical access to energy, and we 
remain open to reviewing proposals for new investments--but the lack of 
bankable gas-to-power projects in low-income markets suggests less 
private sector demand for these projects. Instead, countries are 
increasingly prioritizing renewable energy, given its declining costs 
and because countries are increasingly interested in bolstering energy 
security and balancing their trade deficits by reducing reliance on 
imported fuels.
    Additionally, DFC provided a guaranty to support Polish energy 
company, PKN ORLEN, to manage price risks associated with LNG trading, 
which allowed the company to increase its access to non-Russian gas 
sources, including U.S. LNG. DFC also provided $400 million in 
insurance to ERU, a natural gas trading company, to support the 
diversification of Moldova's energy supply by enabling ERU to 
participate in gas tenders offered by local state-owned entities.

    Question. Climate Mandate: Under the Biden administration, the DFC 
has prioritized zero carbon options over the previously agreed ``all of 
the above'' energy approach. Our Russian and Chinese adversaries don't 
constrain less-developed countries' energy choices or dictate how they 
should develop their energy sectors.
    Are you concerned that such a strict approach undermines zero 
carbon and our strategic goals in the long-run by pushing less-
developed countries to embrace Russian and Chinese energy options? If 
not, why not?

    Answer. DFC's work is responsive to private sector demand, and the 
private sector will not pursue projects that are not commercially 
viable. A key predictor of commercial viability is a project's 
alignment with the needs of the local market from a technical and 
commercial point of view. By meeting the needs of local markets, DFC is 
positioning itself as a preferred partner and providing a higher-
quality alternative to the investments offered by authoritarian regimes 
like the PRC.
    At the same time, DFC remains open to supporting any type of energy 
project where there is a clear need and a strong investment case. We 
can support strategic projects in the gas sector, nuclear power or 
other industries that help ensure energy security, deliver strong 
developmental impacts or contribute to key geostrategic goals. DFC does 
not mandate or require energy projects to be of a specific type and we 
evaluate projects against multiple criteria on a case-by-case basis.

    Question. Is the DFC subject to the Biden administration's 
International Energy Engagement Guidance? If so, please describe how 
you implement the guidance in considering projects for DFC support?

    Answer. DFC is subject to the requirements of Executive Order 
14008, Tackling the Climate Crisis at Home and Abroad. DFC is in 
regular contact with interagency partners to coordinate and ensure 
alignment with the U.S. Government's foreign policy strategy, and 
support provided by DFC follows the approval processes established by 
the Corporation's governance frame. DFC remains open to supporting 
strategic energy projects across a diverse set of technologies that 
help deliver strong developmental impact or contribute to key 
geostrategic goals. It considers projects against several different 
criteria on a case-by-case basis.

    Question. During the hearing on October 4, 2023, I believe you 
stated that, pursuant to Administration policy, the DFC will not 
finance coal-based energy projects, even where local demand is strong 
for coal and U.S. financing could directly counter China.
    Does the same policy apply to natural gas and mixed fuels?

    Answer. Neither DFC nor its predecessor, OPIC, has received an 
application for a coal power project during the last 10 years. DFC has 
seen declining interest in support for these technologies, given the 
highly competitive pricing of renewable technologies, including many 
battery technologies developed in the U.S., as well as increased 
availability and the low cost of gas.
    DFC remains open to considering highly strategic projects across 
energy sources and has preserved the ability to support natural gas 
projects that would greatly support economic growth in the poorest 
countries, as well as projects that advance U.S. national security 
interests.

    Question. Requiring our partners to complete separate environmental 
reviews adds significant costs and time delays, putting U.S. proposals 
at a disadvantage over our low-standard competitors.
    How could the DFC improve the approach to make its proposals more 
competitive?

    Answer. While competitor states may move faster, this tends to 
result in projects that are of lower quality. Diligence and speed are 
both important. We continually evaluate our processes to optimize 
efficiency and are looking to streamline processes to shorten the 
length of our investment process. As we increase our staff and 
technical capacity, we anticipate a reduction in the amount of time 
required to diligence each project and are prioritizing this in our 
budget requests.
    DFC closely assesses potential projects to ensure they are 
commercially viable, and in the case of a loan, that the entity has the 
capacity to repay under its terms. DFC projects are further screened 
and monitored for environmental and social risks and positive 
development impact and undergo Know Your Client due diligence. This 
thorough underwriting is vital to ensuring the long-term viability and 
success of the projects DFC supports, which is fundamental for 
development and for the alternative model we are putting forward.

    Question. In April, I asked Administrator Power if there any 
earmarks or other statutory requirements that prevent USAID from 
supporting programming related to natural gas and nuclear energy. Her 
response is below: ``The Clean Energy Directive definition adopted by 
the Department of State and USAID prohibits the use of Clean Energy 
Directive funding for natural gas assistance programming. Nuclear 
energy support is allowed under the definition. Natural gas work that 
is supported with funding outside of the clean energy earmark must be 
approved under the Administration's international energy assistance 
guidance. It is Administration policy not to provide U.S. Government 
financing to unabated natural gas projects, consistent with Executive 
Order 14008 on Tackling the Climate Crisis at Home and Abroad. This 
policy has exceptions in rare cases when there are compelling national 
security, geostrategic, or development/energy access benefits and no 
viable lower carbon alternatives accomplish the same goals
    Does the DFC follow the same policy--that it will support natural 
gas projects ``when there are compelling national security, 
geostrategic, or development/energy access benefits and no viable lower 
carbon alternatives accomplish the same goals''?

    Answer. DFC remains open to considering highly strategic projects 
across diverse energy sources and has preserved the ability to support 
natural gas projects that would greatly support economic growth in the 
poorest countries, as well as projects that advance U.S. national 
security interests. We evaluate all projects across a range of criteria 
to ensure commercial viability, compliance with our investment 
policies, and alignment with U.S. foreign policy objectives.
    We have seen demand for projects focused on energy security rise in 
the past year, especially in Eastern Europe and the Western Balkans, 
and we are working to respond to this demand. DFC approved a loan of 
$125 million to support the acquisition, rehabilitation, and expansion 
of the Elefsina Shipyard in Greece, which intends to provide shipping 
services for energy-sector vessels and other commercial ships.
    In least developed countries with low levels of electrification, 
DFC is supporting natural gas projects to improve energy access. For 
example, in Sierra Leone, DFC provided a $217 million loan and $50 
million in insurance for a 103 MW thermal power plant which will double 
operating power generation for one of the world's poorest countries.

    Question. What constitutes a compelling national security or 
geostrategic benefit?

    Answer. DFC looks to the State Department for foreign policy 
guidance and consults frequently with the interagency both in how we 
source and review projects.

    Question. In addition, if there is a compelling national security, 
geostrategic, or development/energy access benefit but there is a 
viable lower carbon alternative at a higher cost, what is the DFC's 
policy in that situation? Will the DFC prioritize a higher cost but 
lower carbon alternative over the other criteria?

    Answer. DFC makes investments based on interest from private sector 
entities who seek the Corporation's support for specific proposals. DFC 
then assesses the viability of each proposal and its alignment with our 
investment criteria to determine whether DFC can support it. It 
assesses alternative options to specific projects as part of 
environmental and social due diligence, but because of the stage at 
which the Corporation usually provides financing, it is generally not 
positioned to propose alternative projects to potential clients in the 
event our investment teams determine that a project does not warrant 
additional consideration.

    Question. Project on Global Infrastructure and Investment (PGI): 
How does PGII interact with the DFC? Please answer comprehensively and 
provide actual examples.

    Answer. DFC is a critical component of the U.S.G.'s approach to 
PGI. DFC committed $7.4 billion in transactions in FY 2022, of which 
nearly 70 percent ($5.1 billion) contributed towards the U.S. PGI 
total. DFC committed $9.3 billion in FY 2023, of which nearly 90 
percent--$8.1 billion--contributed towards the U.S. PGI total. In 
practice, DFC projects often anchor PGI's focus on transformative 
economic corridors. For example, amongst the G7 countries, the United 
States is focusing on developing the Lobito/Trans-Africa Corridor. As a 
part of this, the DFC is currently performing due diligence for a 
potential financing package of $250 million to finance the Lobito 
Atlantic Railway Corridor--an open access rail line from Lobito Port in 
Angola to the DRC border. DFC's envisioned future organizational 
alignment around specific sectors--energy, infrastructure and critical 
minerals, small business support, food and agribusiness, etc.--align 
well with PGI's core objectives and focus pillars and will facilitate 
the continued alignment of DFC's work with the USG's PGI agenda. 
Specific examples from FY 2023 include the following key investments:

   Strengthening transportation infrastructure in Sri Lanka: A 
        $553 million loan to Colombo West International Terminal 
        Private Limited (CWIT) to support the development and 
        construction of the West Container Terminal, a deep-water 
        container terminal at the Port of Colombo. This project is a 
        marquee example of how DFC advances a more strategic and 
        economically sound approach to infrastructure development in 
        contrast to strategic competitors like the PRC. The PRC 
        sponsored a $1.2 billion deep water port--Hambantota--100 miles 
        south of DFC's investment that was marred by inflated costs, 
        misjudged demand, and a politically influenced unsuitable 
        location. Unable to repay its debt, Sri Lanka was obligated to 
        give the PRC a controlling equity stake and a 99-year lease for 
        Hambantota. By contrast, the DFC is investing in a private 
        sector consortium with strong local expertise and in a project 
        that has strong commercial economics, will create jobs, expand 
        shipping capacity in the region, and will further U.S. foreign 
        policy, helping to connect India and its South Asia neighbors 
        to one of the few natural deep-water ports in the region.

   The world's largest debt-for-nature swap in Ecuador: DFC is 
        providing $656 million in political risk insurance for the 
        swap, which will provide over $1.1 billion in debt relief for 
        Ecuador and will generate $450 million for marine conservation 
        in the Galapagos Islands.

   Bolstering clean energy manufacturing and diversifying 
        critical supply chains in India: A $425 million loan to TP 
        Solar Limited, a wholly-owned subsidiary of Tata Power 
        Renewable Energy Limited, will finance the construction and 
        operation of a greenfield 4 gigawatt (GW) solar cell and 4 GW 
        solar module manufacturing facility in India. This investment 
        will support India's ambitious program to increase renewable 
        energy generation while diversifying supply away from PRC 
        dominance.

   Improving port infrastructure in Greece: A $125 million loan 
        to support the acquisition, rehabilitation, and expansion of 
        the Elefsina Shipyard in Greece, which intends to provide 
        shipping services for energy-sector vessels and other 
        commercial ships. This advances U.S. foreign policy and 
        national security objectives by countering efforts by the PRC 
        to purchase the shipyard and supports economic growth and 
        employment in Greece.

    Question. Is PGII coordinating all executive branch engagement on 
infrastructure development, and does it help source potential projects 
for DFC support? Please answer to the best of your understanding. A 
response that refers SFRC to the White House and State Department will 
not be considered responsive.

    Answer. DFC has a robust pipeline of infrastructure projects that 
it has sourced over many years. Many marquee projects come from these 
years-long efforts. In addition, DFC works to vet potential additional 
projects referred by the PGI office at the Department of State.

    Question. What is DFC's involvement in the economic corridors that 
PGII is announcing, such as the one recently announced at the G-20 in 
India?

    Answer. DFC is currently conducting due diligence on an investment 
in Lobito Atlantic Railway in Angola. Pending the outcome of this 
diligence, this transaction would anchor the U.S. Government's 
envisioned Lobito/Trans Africa Corridor. Of the corridors announced at 
G20, DFC is only currently involved in conducting due diligence on 
investments along the proposed Lobito/Trans Africa Corridor.

    Question. Promoting & Protecting Economic Freedom: In 2021, I wrote 
a letter to the DFC about its complementary missions of promoting and 
protecting economic freedom. Focusing on the latter, the letter said as 
follows:

        ``It is in the strategic interests of the United States to 
        protect economic freedom from encroachment by authoritarian 
        regimes that seek to undermine or manipulate free markets for 
        their own goals. This why the BUILD Act also includes a 
        strategic mission to protect economic freedom and key U.S. 
        national security interests by providing an alternative to 
        state-directed investments by authoritarian governments . . . 
        The DFC must establish transparent policies, guidelines, and 
        mechanisms to thoughtfully manage and balance these 
        complementary missions. The outcome of such an approach should 
        be a mix of investments--some that are primarily development-
        focused, and others that have a strategic focus on advancing 
        defined U.S. foreign policy priorities through delivery of 
        development finance.'' [italics added]

    How has the DFC executed on a balance between development-focused 
projects and strategic projects?

    Answer. Our current portfolio reflects pursuit of both mandates. 
The dual mandate that Congress imbued DFC with--to both advance our 
strategic goals and objectives and to ensure development impact--are 
mutually reinforcing. We do not feel that we need to balance one 
against the other, but that we can pursue both simultaneously. Pursuing 
economic development is in the strategic interests of the United 
States, because by doing so we are contributing to economic stability 
and economic development options that developing countries prefer over 
those of our strategic competitors.

    Question. What projects can DFC point to that advance the national 
security interests of the United States, rather than purely being 
economic development projects?

    Answer. DFC pursues projects that contribute both to economic 
development and are in the national security interests of the United 
States. Economic development and national security objectives are 
mutually reinforcing, with economic development leading to greater 
stability and providing a foundation for a vibrant private sector, both 
of which are strongly in the interests of the United States. Some DFC 
projects have very clear national security and foreign policy impacts. 
One example is DFC's support for Telstra/Digicel/EFA in Papua New 
Guinea. In this project, DFC is providing a $50 million guaranty to 
support a telecom network acquisition in the Indo-Pacific region 
ensuring a safe and secure mobile network upon its upgrade to 5G. DFC 
supported the bid alongside other regional partners including Australia 
and Japan. This financing will counter an unsolicited acquisition bid 
by a strategic competitor-owned company. This investment will improve 
security and performance and deliver affordable mobile voice and data 
services in the Pacific islands.

    Question. Marou Chocolate: How did the DFC come to find out about 
the Marou Chocolate project? In other words, who brought the project to 
DFC?

    Answer. After an initial introduction by the U.S. Consulate in Ho 
Chi Minh City, DFC's Lower Mekong office developed the relationship 
with Marou and structured the transaction after having spoken to their 
equity investor, Mekong Capital.

    Question. Why was it determined that this company (Marou Chocolate 
Company Limited) needed U.S. Government financing? In other words, how 
did the DFC meet its ``additionality'' requirements in supporting this 
project, and what were the factors that precluded private sector 
investment?

    Answer. Capital from the private market is not available under 
terms that the Company could viably support. Given the size of the debt 
required for the project and the Company's lack of real estate assets 
in Vietnam, the Company was unable to secure a loan of this size on the 
local market, and with the tenor and grace period that made project 
economics possible.

    Question. What United States interests are served by supporting 
this project?

    Answer. This project advances the developmental interests of the 
United States by spurring economic growth in a priority country 
(Vietnam) and in a priority region, (Southeast Asia). This project is 
aligned with Department of State and USAID country strategies.

    Question. Changing the DFC's Mindset: What have you done to ensure 
DFC staff--including those who served at OPIC--are fulfilling 
Congress's intent for the DFC to take more risk in its investment 
portfolios? Please provide examples.

    Answer. Over the past year, DFC has undertaken a thorough review of 
its strategic goals and objectives to ensure we are focused on 
achieving our BUILD Act mandates. We are now in the process of 
realigning our organization to ensure the strategy is implemented.
    Our new organization will be aligned around key sectors, and 
leaders of the sectoral teams will be responsible for developing 
targets and objectives, as well as articulating risk appetite.
    In parallel, we have also initiated a proactive, centralized, 
forward looking project pipeline management process, led by our Chief 
Operating Officer. This process involves both an annual business 
planning process and a quarterly business review, and helps ensure 
hands- on management of potential transactions in process and that 
priorities align with our risk appetite.
    DFC's Exposure Management Committee, chaired by our Chief Risk 
Officer, conducts a regular review of our portfolio and CRO reporting 
helps ensure that DFC's Board of Directors is also apprised of DFC's 
risk posture.
    In one indication that DFC is taking more risk, over the past year 
DFC transactions have required more subsidy (i.e., projected net cost 
to the Government) than in prior years. See below for a breakdown of 
program funds usage by fiscal year.

   FY 2020: program funds usage = $157.6M

   FY 2021: program funds usage = $302.5M

   FY 2022: program funds usage = $612.4M

   FY 2023: program funds usage = $622.1M

    DFC's first priority is to implement its dual mandate to promote 
development and advance U.S. strategic interests by supporting 
commercial projects in often difficult market environments. Our efforts 
to implement this mandate draw us into ventures that are risky, and 
DFC's increased risk appetite is reflected through its evolving 
portfolio and increasingly large commitments. The examples below are 
reflective of DFC's larger commitment sizes, or work in challenging 
markets:

   Providing a $500 million loan to First Solar in India to 
        help diversify supply chains for solar photovoltaic modules, 
        one that the PRC currently dominates;

   Providing a $553 million loan to Colombo West International 
        Terminal Private Limited to construct a deep sea port in Sri 
        Lanka, despite the weak fiscal position of the Sri Lankan 
        Government;

   Providing a $150 million loan to Twigg Mining, a graphite 
        mining operation in Mozambique and managing environmental risks 
        associated with the project in order to ensure access to 
        resources necessary to support manufacturing of batteries to 
        support electric vehicles; and

   Committing $386 in new transactions in Ukraine over the last 
        year across a variety of sectors and all of its lines of 
        business, including through equity investments, political risk 
        insurance, debt financing, and technical assistance.

    Question. If personnel are not adapting this intent, do you have 
any recourse?

    Answer. Staff are adapting to this intent as articulated in the 
previous question and highlighted commitments. Through a combination of 
annual planning, emphasis on more proactive business development 
efforts, and pipeline management, we will continue to evolve the 
portfolio and ensure we are fulfilling the full intent of the BUILD 
Act.

    Question. DFC Front Office: Some private sector interlocutors have 
expressed concern that the front office within DFC does not have enough 
power vis-a-vis the permanent bureaucracy to advance priorities and has 
unusually limited involvement in investment decisions.
    What is your view on the role of your office within the DFC? Do you 
agree with the feedback above? In your view, are there changes that 
need to be made to strengthen the role of DFC leadership?

    Answer. The role of the Chief Executive Officer is to set the 
strategic direction of DFC and ensure that the organization has the 
guidance, resources, and support to execute on its dual mandate to 
achieve development impact and advance U.S. foreign policy interests. 
Since being confirmed as DFC's CEO in early 2022, I have taken several 
steps to fulfill those responsibilities. For example, over the past 
year DFC has undertaken a comprehensive review to refine its strategy 
and align its efforts to its strategic sector priorities. Through staff 
and stakeholder engagements, portfolio analysis, and benchmarking, DFC 
identified its priority sectors as agriculture, energy, health, 
infrastructure, investment funds, and small business and financial 
services. This process, which will realign DFC's investment teams into 
these sectors, clarifies what DFC's enduring priorities are and where 
we seek to grow to both internal and external stakeholders. In 
addition, I have directed my team to initiate a new annual planning 
process that will analyze market needs by sector and set goals for each 
team, which will inform how resources will support each sector's growth 
and broader organizational objectives.
    I have also used my role to marshal resources across the 
organization to meet urgent priorities, such as support for Ukraine 
following Russia's illegal invasion. DFC has committed more than $425 
million in new transactions in Ukraine since the start of the war 
across a variety of sectors and all of its lines of business, including 
equity investments, political risk insurance, debt financing, and 
technical assistance. I have personally traveled to Ukraine multiple 
times and dedicated staff to work closely with the rest of the 
interagency to ensure DFC is leveraging its resources to contribute to 
broader U.S. Government efforts to support the Ukrainian people.
    Lastly, at my direction and led by the Chief Operating Officer, we 
have initiated a proactive, centralized, forward looking project 
pipeline management process that helps ensure timely awareness and 
management of potential transactions to ensure alignment with U.S. 
priorities.

    Question. If DFC is considering a highly strategic project that 
aligns with U.S. foreign policy and national security priorities, but 
an internal DFC committee raises concern about environmental or other 
issues, what happens to the project? What is your role and the role of 
the Deputy CEO in these cases?

    Answer. DFC performs an environmental and social assessment for 
each project under consideration. This assessment follows the 
commitments and standards captured in the DFC's Environmental and 
Social Policy and Procedures (ESPP) which adopts the IFC Performance 
Standards and the World Bank's Environmental, Health and Safety 
Guidelines. Every project is screened for its eligibility against DFC's 
Categorical Prohibitions captured in the ESPP. If any categorically 
prohibited activities are surfaced during the analysis of a project, 
DFC cannot proceed to support the project an environmental and social 
clearance cannot be issued. If a project is considered eligible, DFC 
assesses the project's environmental and social risks and the client's 
ability to avoid, mitigate, manage, and monitor the identified 
environmental and social impacts according to the ESPP requirements. 
This process is documented in the internal environmental and social 
clearance document and the requirements mentioned above are 
incorporated into DFC legal agreements with the project sponsor. In 
cases where issues are raised by an internal approval committee that 
have not been considered through the assessment of the Project, DFC 
analysts would revisit the issue raised and update the assessment, 
documentation, and legal conditions as warranted.
    The CEO/Deputy CEO set strategic priorities and goals for the 
organizations and ensure high-level oversight and management to ensure 
resources are aligned to them. We maintain oversight over the project 
review process, and project teams make leadership aware of potential 
issues during the process.

    Question. Indo-Pacific Energy Projects: Please provide a breakdown 
by energy source of the energy projects DFC has supported in the Indo-
Pacific since the Biden administration took office.

    Answer.

----------------------------------------------------------------------------------------------------------------
 Year         Project               Description            Energy Source           Country            Value
----------------------------------------------------------------------------------------------------------------
  2023  TP Solar Limited     Loan to finance the       Solar power            India                 $425,000,000
                              construction of a 4GW     manufacturing
                              solar cell and module
                              manufacturing facility
----------------------------------------------------------------------------------------------------------------
  2023  SAEL                 Equity investment in      Solar power and        India                        Up to
        Industries Limited    solar energy and waste-   biomass/waste                                $50,000,000
                              to-energy power
                              generation company
----------------------------------------------------------------------------------------------------------------
  2022  HDF Energy           Technical assistance to   Solar power and green  Indonesia                 $600,000
                              support green hydrogen    hydrogen
                              and solar mini-grids
----------------------------------------------------------------------------------------------------------------
  2022  Orb Energy           Financing for small &     Solar power            India                  $20,000,000
                              medium enterprises to
                              install commercial &
                              industrial solar power
                              solutions
----------------------------------------------------------------------------------------------------------------
  2022  First Solar India    Loan to construct a       Solar power            India                 $500,000,000
         Solar Ventures       3.3GW solar module        manufacturing
                              manufacturing facility
----------------------------------------------------------------------------------------------------------------
  2021  Punjab               Construction of biomass   Biomass                India                  $10,000,000
        Renewable             briquette plants
        Energy
        Systems
----------------------------------------------------------------------------------------------------------------

    Question. People's Republic of China (PRC): Are there any projects 
since the Biden administration took office where DFC support, either on 
its own or in partnership with other countries, has blocked a PRC 
investment or prevented an asset from being acquired by the PRC? Please 
list every project that meets this criterion and provide explanations.

    Answer. The following projects are responsive to your question:

   Turkey ``Ceyhan'' (FY23): A loan of $550 million to Ceyhan 
        Polipropilen Uretim Anonim Sirketi will finance the development 
        of a polypropylene production plant that will primarily produce 
        durable products using highly efficient Honeywell UOP 
        technologies to greatly reduce carbon intensity. The facility 
        will serve as an anchor for high-skilled employment and 
        workforce development. DFC financing countered PRC interest in 
        the project.

   Ecuador ``Yilport'' (FY23): A $150 million loan to finance 
        the expansion and modernization of the Puerto Bolivar container 
        port. DFC is directly countering financing alternatives from 
        authoritarian government-controlled banks seeking to finance 
        the project if DFC is unwilling or unable to do so. This 
        project is expected to significantly increase the port's export 
        volumes, create up to 1,250 direct and indirect jobs, attract 
        up to $750 million in foreign direct investment, and generate 
        over $100 million in revenue transfers to the local 
        municipality.

   Greece ``Onex Elefsis Shipyards'' (FY23): A $125 million 
        loan to support the acquisition, rehabilitation, and expansion 
        of the Elefsina Shipyard in Greece, which intends to provide 
        shipping services for energy-sector vessels and other 
        commercial ships. This advances U.S. foreign policy and 
        national security objectives by countering efforts by the PRC 
        to purchase the shipyard and supports economic growth and 
        employment in Greece.

   Sri Lanka ``Colombo West International Terminal'' (FY23): 
        $553 million loan to support development, construction, and 
        operation of a deep-water container terminal in the Port of 
        Colombo--a contrast to the poorly constructed, poorly 
        maintained, PRC-built terminal on the other side of the port.

   Papua New Guinea ``Telstra'' (FY22): A $50 million guaranty 
        to support Australia company Telstra's acquisition of Digicel 
        Pacific's telecom network and assets, thereby ensuring the 
        continued provision of open, safe, and secure mobile service to 
        about 60 percent of Pacific telecom users, in partnership with 
        our Japanese (JBIC) and Australian (EFA) partners.

   Sierra Leone ``CECA SL Generation Limited'' (FY22/21): A 
        $217 million loan to CECA SL Generation Limited in FY21 and a 
        $50 million insurance contract in FY22 to support the 
        development, construction, and operation of an approximately 
        83.5-megawatt combined cycle thermal power plant and associated 
        infrastructure. This project displaced a handful of possible 
        power projects with authoritarian government participation that 
        the Government of Sierra Leone decided not to pursue. 
        Generation capacity is expected to increase by about 75 percent 
        and provide hundreds of gigawatt hours of power per year to 
        improve access to reliable energy supply for homes, businesses, 
        and health facilities.

   Brazil ``TechMet'' (FY22): A $30 million equity investment 
        into TechMet Limited, a U.S. aligned critical minerals mining 
        platform, to support its Brazilian nickel and cobalt mining 
        project. TechMet is committed to securing U.S. and allied 
        access to critical minerals and diversifying the sourcing of 
        critical minerals away from authoritarian governments. This 
        investment followed an initial $25 million equity investment in 
        2020 that allowed TechMet to support activities to pilot work 
        at the Brazilian nickel mine in preparation for scaling up the 
        project.

   Brazil ``Smart Rio'' (FY21): A $267 million loan guaranty to 
        Smart Rio that is supporting smart city and digital 
        infrastructure solutions to digitize essential services by 
        modernizing, installing, and maintaining public lighting 
        systems, Wi-Fi access points, traffic management modules, and 
        sewage monitoring sensors--while advancing inclusive growth for 
        Rio De Janeiro's residents by serving lower-income 
        neighborhoods. Strategic competitor-based enterprises are 
        increasingly active in smart city and digital infrastructure 
        solutions internationally, and this project's preference for 
        U.S. financing demonstrates the power of our values-based 
        partnership model.
                                 ______
                                 

              Responses of Mr. Scott Nathan to Questions 
                  Submitted by Senator Jeanne Shaheen

    Question. Please explain how current DFC investments in Ukraine are 
connected to and benefit America's economy and national security 
interests. What is the DFC's role in supporting U.S. companies invested 
in Ukraine? What is the long-term vision for U.S. investment in 
Ukraine?

    Answer. DFC support for the Ukrainian private sector is helping to 
bolster the strength and resilience of the country. Its economic health 
and stability is critical to the war effort and its defense against 
further Russian aggression. It is in also in our strategic and economic 
interest to mitigate the global effects of Russia's continued war of 
aggression. Global food security has been adversely affected by the 
war, and DFC's investments in this sector, both in Ukraine, the region, 
and beyond, are helping mitigate the impact of the war.
    DFC is actively offering the full range of its tools in Ukraine and 
in FY 2023 committed $410 million in new projects in the country. Its 
exposure in Ukraine is now more than $1 billion. DFC is in discussions 
with U.S. companies regarding opportunities to de-risk investments in 
the country even while the conflict is ongoing. As we look ahead to 
Ukraine's post-war recovery and reconstruction, the role of the U.S. 
private sector will be key to addressing the daunting needs and DFC 
anticipates an increased demand for debt financing and political risk 
insurance from American companies. Toward this end, DFC has had 
discussions with U.S. companies interested in contributing to this 
critical period of long-term rebuilding and welcomes other businesses 
to do the same.
                                 ______
                                 

              Responses of Mr. Scott Nathan to Questions 
                     Submitted by Senator Ted Cruz

    Question. Israel and Territories Administrated by Israel. In June 
2021, DFC announced the launch of the Joint Investment for Peace 
Initiative (JIPI), which the Corporation described in a press release 
as ``a new program that will increase cooperation between Israelis and 
Palestinians by promoting investments and financial tools that advance 
the development of the Palestinian private sector economy'' which 
``aims to attract private investment that promotes Palestinian economic 
development; increase economic cooperation between Palestinians and 
Israelis and between Palestinians and Americans; and contribute to 
greater integration of the Palestinian economy into the international 
rules-based business system.'' JIPI was created pursuant to the Middle 
East Partnership for Peace Act of 2020 (MEPPA), which authorized $250 
million for DFC and U.S. Agency for International Development (USAID) 
to implement programs over a 5-year period.
    The Biden administration has repeatedly, secretly issued guidelines 
prohibiting funding for projects involving Israeli individuals and 
entities in territories that came under Israeli administration in June 
1967. For example, recently Department of State issued written guidance 
prohibiting U.S.-Israel binational foundations from funding joint 
scientific and technological cooperation with such individuals and 
entities. DFC officials have indicated that DFC is also secretly 
implementing guidance limiting support for projects involving Israeli 
individuals and entities in territories that came under Israeli 
administration after June 1967, and have cited ``the applicability of 
existing U.S. foreign policy and agreements with host and counterpart 
governments when determining its ability to provide support.''

    Answer. DFC is not secretly issuing or implementing guidance 
limiting support for such projects, nor am I aware that any DFC 
officials have indicated otherwise. Relevant, applicable U.S. foreign 
policy and bilateral agreements are public and described below.

    Question. How much funding has DFC currently invested under the 
parameters of MEPPA?

    Answer. MEPPA authorizes the DFC CEO to establish the Joint 
Investment for Peace Initiative (JIPI, or the Initiative), which is a 
``program to provide investments in, and support to, entities that 
carry out projects that contribute to the development of the 
Palestinian private sector economy in the West Bank and Gaza'' (MEPPA, 
Section 8005(a)). The Initiative is the only DFC program under MEPPA. 
To date, DFC has invested $3.5 million in technical assistance through 
the Initiative, which was disbursed to support the continued operations 
of the existing Middle East Investment Initiative Loan Guaranty 
Facility 3 project. An additional $10 million loan to Ritz Leasing, an 
electric vehicle and infrastructure company in the West Bank, was 
committed at the end of FY23.

    Question. How much funding has DFC currently invested under the 
parameters of the Initiative?

    Answer. The Initiative is the only DFC program under MEPPA. MEPPA 
authorizes the DFC CEO to establish the Joint Investment for Peace 
Initiative (JIPI, or the Initiative), which is a ``program to provide 
investments in, and support to, entities that carry out projects that 
contribute to the development of the Palestinian private sector economy 
in the West Bank and Gaza'' (MEPPA, Section 8005(a)). The Initiative is 
the only DFC program under MEPPA. To date, DFC has invested $3.5 
million in technical assistance through the Initiative, which was 
disbursed to support the continued operations of the existing Middle 
East Investment Initiative Loan Guaranty Facility 3 project. An 
additional $10 million loan to Ritz Leasing, an electric vehicle and 
infrastructure company in the West Bank, was committed at the end of 
FY23.

    Question. Are there viable applicants that meet the baseline 
standards under DFC's mandates pursuant to MEPPA? If so, please list 
and describe them.

    Answer. To date, DFC has not received any applications from Israeli 
individuals located in, or Israeli entities located in, territories 
that came under Israeli administration after June 1967. However, DFC 
has received applications from other applicants that satisfy DFC's 
threshold eligibility requirements under MEPPA. For reasons of business 
confidentiality, DFC does not publicly share information on applicants 
it has not yet committed to support. Applicants' businesses span 
sectors and market segments that include, but are not limited to, small 
businesses, agriculture, information and communications technology, 
energy, and tourism. DFC evaluates each application for support in 
accordance with our threshold eligibility requirements and our other 
underwriting standards. This evaluation includes an analysis of the 
project's financial viability as well as the project's developmental 
impact, compliance with DFC's investment policies, and alignment with 
foreign policy priorities. Please see the DFC partner guide on DFC's 
website for more information, including especially pages 6-8.

    Question. Are there viable applicants that meet the baseline 
standards under DFC's goals for JIPI? If so, please list and describe 
them.

    Answer. The Initiative is the only DFC program under MEPPA. To 
date, DFC has not received any applications from Israeli individuals 
located in, or Israeli entities located in, territories that came under 
Israeli administration after June 1967. However, DFC has received 
applications from other applicants that satisfy DFC's threshold 
eligibility requirements under MEPPA. For reasons of business 
confidentiality, DFC does not publicly share information on applicants 
it has not yet committed to support. Applicants' businesses span 
sectors and market segments that include, but are not limited to, small 
businesses, agriculture, information and communications technology, 
energy, and tourism. DFC evaluates each application for support in 
accordance with our threshold eligibility requirements and our other 
underwriting standards. This evaluation includes an analysis of the 
project's financial viability as well as the project's developmental 
impact, compliance with DFC's investment policies, and alignment with 
foreign policy priorities. Please see the DFC partner guide on DFC's 
website for more information, including especially pages 6-8.

    Question. How are DFC's investment regulations affected by the 
State Department guidance prohibiting U.S.-Israel binational 
foundations from funding joint scientific and technological cooperation 
with Israeli entities in territories that came under Israeli 
administration in June 1967?

    Answer. To date, DFC has not received any applications from Israeli 
individuals located in, or Israeli entities located in, territories 
that came under Israeli administration after June 1967. DFC operates 
under the foreign policy guidance of the State Department. Regarding 
the binational foundations guidance that the State Department issued 
earlier this year with respect to areas within such territories that 
remain subject to final status negotiations, the underlying rationale 
that supports that policy would be considered by DFC when determining 
whether applications it receives for projects in such areas are aligned 
with U.S. foreign policy.

    Question. Are there any geographic restrictions on where DFC 
invests its funds under MEPPA parameters?

    Answer. Yes. As noted in the response to the first question, prior, 
the Initiative's geographic scope is limited to the West Bank and Gaza. 
Note, however, that DFC's statutory authority under the BUILD Act to 
support projects located in the West Bank and Gaza does not extend to 
areas that remain subject to final status negotiations. See response 
for geographical restrictions under the West Bank and Gaza IIAs (as 
defined below).

    Question. Are there any agreements between DFC and relevant Israeli 
authorities regarding geographic distinctions for funding Israeli 
entities under MEPPA parameters?

    Answer. The BUILD Act requires a bilateral agreement (or 
``Investment Incentive Agreement'' or ``IIA'') to be in place between 
the United States and a host government as a prerequisite for DFC 
supporting projects in the government's jurisdiction (BUILD Act, 
Section 9631(a)). In 1994, the U.S. Government concluded an IIA with 
the Government of Israel and a separate IIA with the Palestinian 
Liberation Organization (for the benefit of the Palestinian Authority), 
each with respect to OPIC (now DFC) projects in specified areas as set 
forth under the Oslo Accords. These IIAs are available on DFC's 
website. It is DFC's understanding (based on its consultations with the 
State Department about the scope of the Oslo Accords as applied to the 
provision of DFC investment support) that geographic areas that remain 
subject to final status negotiations are not included in the areas for 
which DFC may provide support under these IIAs. These IIAs do not 
differentiate between Israeli and non-Israeli entities. Therefore, DFC 
lacks legal authorization to support projects in geographic areas that 
remain subject to final status negotiations, regardless of the 
nationality or jurisdiction of organization of the party seeking 
support.

    Question. Please list and describe all existing U.S. foreign policy 
considerations that DFC uses in evaluating projects pursuant that 
involve Israeli individuals and entities in territories that came under 
Israeli administration after June 1967 for financing under MEPPA.

    Answer. To date, DFC has not received any applications from Israeli 
individuals located in, or Israeli entities located in, territories 
that came under Israeli administration after June 1967. DFC is not a 
policy-making institution. We consult with the State Department on all 
matters that constitute U.S. foreign policy, as contemplated by the 
BUILD Act, and would refer you to the State Department for such 
matters.
    To date, DFC has not received any applications from Israeli 
individuals located in, or Israeli entities located in, territories 
that came under Israeli administration after June 1967. DFC operates 
under the foreign policy guidance of the State Department. Regarding 
the binational foundations guidance that the State Department issued 
earlier this year with respect to areas within such territories that 
remain subject to final status negotiations, the underlying rationale 
that supports that policy would be considered by DFC when determining 
whether applications it receives for projects in such areas are aligned 
with U.S. foreign policy.

    Question. Please list and describe all existing U.S. foreign policy 
considerations that DFC uses in evaluating projects pursuant that 
involve Israeli individuals and entities in territories that came under 
Israeli administration after June 1967 for financing specifically under 
JIPI.

    Answer. The Initiative is the only DFC program under MEPPA. Please 
see response above.

    Question. Please list and describe all agreements with host and 
counterpart governments that DFC uses in evaluating projects that 
involve Israeli individuals and entities in territories that came under 
Israeli administration after June 1967 for financing under MEPPA.

    Answer. The BUILD Act requires a bilateral agreement (or 
``Investment Incentive Agreement'' or ``IIA'') to be in place between 
the United States and a host government as a prerequisite for DFC 
supporting projects in the government's jurisdiction (BUILD Act, 
Section 9631(a)). In 1994, the U.S. Government concluded an IIA with 
the Government of Israel and a separate IIA with the Palestinian 
Liberation Organization (for the benefit of the Palestinian Authority), 
each with respect to OPIC (now DFC) projects in specified areas as set 
forth under the Oslo Accords. These IIAs are available on DFC's 
website. It is DFC's understanding (based on its consultations with the 
State Department about the scope of the Oslo Accords as applied to the 
provision of DFC investment support) that geographic areas that remain 
subject to final status negotiations are not included in the areas for 
which DFC may provide support under these IIAs. These IIAs do not 
differentiate between Israeli and non-Israeli entities. Therefore, DFC 
lacks legal authorization to support projects in geographic areas that 
remain subject to final status negotiations, regardless of the 
nationality or jurisdiction of organization of the party seeking 
support.

    Question. Please list and describe all agreements with host and 
counterpart governments that DFC uses in evaluating projects that 
involve Israeli individuals and entities in territories that came under 
Israeli administration after June 1967 for financing specifically under 
JIPI.

    Answer. The Initiative is the only DFC program under MEPPA. The 
BUILD Act requires a bilateral agreement (or ``Investment Incentive 
Agreement'' or ``IIA'') to be in place between the United States and a 
host government as a prerequisite for DFC supporting projects in the 
government's jurisdiction (BUILD Act, Section 9631(a)). In 1994, the 
U.S. Government concluded an IIA with the Government of Israel and a 
separate IIA with the Palestinian Liberation Organization (for the 
benefit of the Palestinian Authority), each with respect to OPIC (now 
DFC) projects in specified areas as set forth under the Oslo Accords. 
These IIAs are available on DFC's website. It is DFC's understanding 
(based on its consultations with the State Department about the scope 
of the Oslo Accords as applied to the provision of DFC investment 
support) that geographic areas that remain subject to final status 
negotiations are not included in the areas for which DFC may provide 
support under these IIAs. These IIAs do not differentiate between 
Israeli and non-Israeli entities. Therefore, DFC lacks legal 
authorization to support projects in geographic areas that remain 
subject to final status negotiations, regardless of the nationality or 
jurisdiction of organization of the party seeking support.

    Question. Is DFC precluded from supporting projects that involve 
Israeli individuals and entities in territories that came under Israeli 
administration after June 1967, even if those projects meet all other 
DFC statutory mandates, including advancing the development of the 
Palestinian private sector economy?
    Response: To date, DFC has not received any applications from 
Israeli individuals located in, or Israeli entities located in, 
territories that came under Israeli administration after June 1967. 
Please see response above, for a description of the geographic 
restrictions that apply to DFC support, which relate to the location of 
the project. These restrictions do not relate to the nationality or 
jurisdiction of organization of the party seeking support.
    To date, DFC has not received any applications from Israeli 
individuals located in, or Israeli entities located in, territories 
that came under Israeli administration after June 1967. DFC operates 
under the foreign policy guidance of the State Department. Regarding 
the binational foundations guidance that the State Department issued 
earlier this year with respect to areas within such territories that 
remain subject to final status negotiations, the underlying rationale 
that supports that policy would be considered by DFC when determining 
whether applications it receives for projects in such areas are aligned 
with U.S. foreign policy.

    Question. Three Seas. The Three Seas Initiative Investment Fund 
(3SIIF) is an investment vehicle to finance key infrastructure projects 
in the Three Seas region in support of the Three Seas Initiative (3SI), 
and specifically to invest in transport, energy, and digital 
infrastructure on the north-south axis in the Three Seas countries. In 
February 2020 the United States announced a commitment of up to $1 
billion for 3SI, and the State Department subsequently approved a $300 
million investment into 3SIIF, first in December 2020 and then in June 
2022.
    Meanwhile, U.S.-origin liquefied natural gas (LNG) emerged as a 
critical energy source in the 3SI region to insulate American allies 
from Russian energy blackmail. In 2020 DFC changed its Environmental 
and Social Policy and Procedures to allow the funding of projects 
involving nuclear power, a decision that also has significant potential 
implications for the 3SI region.
    How much of money has been disbursed to the 3SIIF?

    Answer. DFC has a financial agreement with the Three Seas 
Initiative Investment Fund (3SIIF) to provide up to $300 million in 
debt financing. Under the terms of the agreement, the 3SIIF can draw on 
the financing to support eligible projects. It has not done so yet. We 
look forward to supporting 3SIIF projects that meet DFC eligibility 
criteria, including as laid out in the European Energy Security and 
Diversification Act.

    Question. When does DFC anticipate delivering the full $300 million 
investment in 3SIIF?

    Answer. Under the terms of its agreement, the Three Seas Initiative 
Investment Fund is responsible for sourcing and reviewing potential 
projects that may be eligible for DFC financing. It must then draw on 
the financing. It has not done so yet. DFC remains dedicated to working 
with the Three Seas Initiative Investment Fund to finance potential 
projects while also looking for opportunities to make direct 
investments within the Three Seas region.

    Question. Please describe more generally how DFC is working with 
3SIIF and its member states?

    Answer. In addition to its support for the Three Seas Initiative 
Investment Fund (3SIIF), DFC is supportive of the goals of the Three 
Seas Initiative and its member states, especially in light of Russia's 
continued war of aggression in Ukraine. DFC's $300 million in financing 
for 3SIIF has a particular focus on energy security and diversification 
projects, which are vital to the region's future. This focus is in line 
with DFC's authorities in the region, as laid out in the European 
Energy Security and Diversification Act. In addition, DFC looks for 
opportunities to make direct investments in the region, as with our 
recent $125 million loan to support the ONEX Elefsis Shipyards port 
project in Greece.

    Question. What 3SI projects is DFC currently funding?

    Answer. Under the terms of DFC's agreement to provide $300 million 
in financing to the Three Seas Initiative Investment Fund (3SIIF), the 
Fund can draw on the financing to support specific projects. 3SIIF has 
not yet drawn on the financing. We look forward to supporting 3SIIF 
projects that meet DFC eligibility criteria, including as laid out in 
the European Energy Security and Diversification Act.

    Question. What 3SI projects is DFC considering for funding?

    Answer. DFC is working with the Three Seas Initiative Investment 
Fund to review potential projects for support, per the terms of its 
agreement and in line with DFC's authorities.

    Question. What has DFC done since 2020 to support the development 
of LNG infrastructure in the 3SI region? What are/is DFC currently 
doing?

    Answer. In 2023, DFC approved a $125 million loan to support the 
acquisition, rehabilitation, and upgrade of Elefsis Shipyards in 
Greece, providing a major expansion of Greek ship repair and 
maintenance capacity at a time of high traffic from vessels 
transporting Liquefied Natural Gas (LNG). Over half of the shipyard's 
capacity will be used for repair and maintenance of LNG vessels, which 
help replace Russian-supplied natural gas in Southeastern Europe. The 
Project will also ensure that the shipyard remains controlled by an 
investor aligned with U.S. interests and counters a potential 
acquisition by entities affiliated with the Government of the People's 
Republic of China. DFC also provided a guaranty to support Polish 
energy company, PKN ORLEN, to manage price risks associated with LNG 
trading, which allowed the company to increase its access to non-
Russian gas sources, including U.S. LNG. DFC also provided $400 million 
in insurance to ERU, a natural gas trading company, to support the 
diversification of Moldova's energy supply by enabling ERU to 
participate in gas tenders offered by local state-owned entities. 
(Note--these investments are not part of the 3SIIF.)

    Question. What has DFC done since 2020 to support the development 
of civilian nuclear infrastructure in the 3SI region? What is DFC they 
currently doing?

    Answer. DFC has been closely tracking developments in nuclear 
energy in the 3SI region, including through direct discussions with 
private sector and government stakeholders working in this sector. DFC 
has issued two letters of interest (LOIs) for small modular reactor 
(SMR) nuclear power plants in the region--one with RoPower in Romania 
(using NuScale technology) and one with ORLEN Green Synthos in Poland 
(using GE/Hitachi technology). DFC is a participant in regular U.S. 
Government interagency working groups and engages regularly with 
sponsors of the projects listed above and with other parties interested 
in the development of nuclear energy in the region. (Note--these 
investments are not part of the 3SIIF.)
                                 ______
                                 

         Responses of Mr. Scott Nathan to Additional Questions 
                     Submitted by Senator Ted Cruz

    Question. Israel and Territories Administered by Israel: In a 
previous round of QFRs, I asked you if there are if there are ``any 
geographic restrictions on where DFC invests its funds under MEPPA 
parameters?'' You answered that ``DFC's statutory authority under the 
BUILD Act to support projects located in the West Bank and Gaza does 
not extend to areas that remain subject to final status negotiations.''
    I also asked you if there are ``any agreements between DFC and 
relevant Israeli authorities regarding geographic distinctions for 
funding Israeli entities under MEPPA parameters?'' You noted that ``In 
1994, the U.S. Government concluded an [Investment Incentive Agreement 
(IIA)] with the Government of Israel and a separate IIA with the 
Palestinian Liberation Organization (for the benefit of the Palestinian 
Authority), each with respect to OPIC (now DFC) projects in specified 
areas as set forth under the Oslo Accords.'' The Oslo Accords divided 
the West Bank into three administrative divisions, Areas A, B, and C. 
You further answered that ``geographic areas that remain subject to 
final status negotiations are not included in the areas for which DFC 
may provide support under these IIAs'' and that ``DFC lacks legal 
authorization to support projects in geographic areas that remain 
subject to final status negotiations, regardless of the nationality or 
jurisdiction of organization of the party seeking support.''
    What are the areas in Israel, the West Bank, or the Gaza Strip that 
DFC considers subject to final status negotiations for the purposes of 
providing support under relevant IIAs?

    Answer. The areas that are subject to permanent status 
negotiations, as referenced in the applicable Investment Incentive 
Agreements, are enumerated in Article V, ``TRANSITIONAL PERIOD AND 
PERMANENT STATUS NEGOTIATIONS'' of Oslo I. These specifically include 
``Jerusalem'' and ``settlements.'' DFC is able to invest in Areas A, B 
and C, except to the extent that a project is located within an area 
subject to permanent status negotiations as described above. DFC 
operates under the foreign policy guidance of the State Department. For 
additional clarification with respect to specific areas delineated in 
U.S. treaties such as the Oslo Accords, we refer you to the State 
Department.

    Question. Does DFC consider any part of Jerusalem to be subject to 
final status negotiations for the purposes of providing support under 
relevant IIAs?

    Answer. The areas that are subject to permanent status 
negotiations, as referenced in the applicable Investment Incentive 
Agreements, are enumerated in Article V, ``TRANSITIONAL PERIOD AND 
PERMANENT STATUS NEGOTIATIONS'' of Oslo I. These specifically include 
``Jerusalem'' and ``settlements.'' DFC is able to invest in Areas A, B 
and C, except to the extent that a project is located within an area 
subject to permanent status negotiations as described above. DFC 
operates under the foreign policy guidance of the State Department. For 
additional clarification with respect to specific areas delineated in 
U.S. treaties such as the Oslo Accords, we refer you to the State 
Department.

    Question. Does DFC consider Area A to be subject to final status 
negotiations for the purposes of providing support under relevant IIAs?

    Answer. The areas that are subject to permanent status 
negotiations, as referenced in the applicable Investment Incentive 
Agreements, are enumerated in Article V, ``TRANSITIONAL PERIOD AND 
PERMANENT STATUS NEGOTIATIONS'' of Oslo I. These specifically include 
``Jerusalem'' and ``settlements.'' DFC is able to invest in Areas A, B 
and C, except to the extent that a project is located within an area 
subject to permanent status negotiations as described above. DFC 
operates under the foreign policy guidance of the State Department. For 
additional clarification with respect to specific areas delineated in 
U.S. treaties such as the Oslo Accords, we refer you to the State 
Department.

    Question. Does DFC consider Area B to be subject to final status 
negotiations for the purposes of providing support under relevant IIAs?

    Answer. The areas that are subject to permanent status 
negotiations, as referenced in the applicable Investment Incentive 
Agreements, are enumerated in Article V, ``TRANSITIONAL PERIOD AND 
PERMANENT STATUS NEGOTIATIONS'' of Oslo I. These specifically include 
``Jerusalem'' and ``settlements.'' DFC is able to invest in Areas A, B 
and C, except to the extent that a project is located within an area 
subject to permanent status negotiations as described above. DFC 
operates under the foreign policy guidance of the State Department. For 
additional clarification with respect to specific areas delineated in 
U.S. treaties such as the Oslo Accords, we refer you to the State 
Department.

    Question. Does DFC consider Area C to be subject to final status 
negotiations for the purposes of providing support under relevant IIAs?

    Answer. The areas that are subject to permanent status 
negotiations, as referenced in the applicable Investment Incentive 
Agreements, are enumerated in Article V, ``TRANSITIONAL PERIOD AND 
PERMANENT STATUS NEGOTIATIONS'' of Oslo I. These specifically include 
``Jerusalem'' and ``settlements.'' DFC is able to invest in Areas A, B 
and C, except to the extent that a project is located within an area 
subject to permanent status negotiations as described above. DFC 
operates under the foreign policy guidance of the State Department. For 
additional clarification with respect to specific areas delineated in 
U.S. treaties such as the Oslo Accords, we refer you to the State 
Department.

    Question. Three Seas: In a previous round of QFRs, I asked you 
several questions about the Three Seas Initiative Investment Fund 
(3SIIF). The Fund is an investment vehicle to finance key 
infrastructure projects in the Three Seas region in support of the 
Three Seas Initiative (3SI), and specifically to invest in transport, 
energy, and digital infrastructure on the north-south axis in the Three 
Seas countries. In February 2020 the United States announced a 
commitment of up to $1 billion for 3SI, and the State Department 
subsequently approved a $300 million investment into 3SIIF, first in 
December 2020 and then in June 2022.
    You responded several times that DFC has an agreement to provide 
3SIIF with $300 million and that no project has been approved to draw 
on the financing. You also described potentially relevant projects 
related to energy infrastructure, though not to transportation or 
digital infrastructure, which are also deeply relevant to economic 
development in the region.
    In your understanding, is it still the policy of the United States 
that the U.S. is committed to providing up to $1 billion for 3SI?

    Answer. On December 20, 2020, DFC's board of directors approved 
$300 million in financing for the Three Seas Initiative Investment Fund 
(3SIIF). DFC understands that 3SIIF is no longer raising additional 
capital. As is standard practice when DFC makes an investment in a 
fund, the fund manager, not DFC, is responsible for sourcing and 
pursuing projects. In addition to its $300 million commitment, DFC has 
also supported projects in countries that are part of the Three Seas 
Initiative. For example, DFC announced last year that it would provide 
a $500 million guarantee to enable the Polish energy company, PKN 
ORLEN, to effectively limit its commodity price risk and reduce 
liquidity constraints associated with sourcing natural gas from 
alternative suppliers, in line with the goal of diversifying the 
European energy supply. DFC also announced last year that it would 
provide a loan guaranty for Citi's 208 million Euro loan to 
Bulgartransgaz EAD. DFC's support will help countries diversify away 
from Russian gas supplies through the expansion of an underground gas 
storage capacity serving Bulgaria and southeastern Europe. DFC also 
continues to discuss additional opportunities to further energy 
security and diversification in Central and Eastern Europe, in line 
with its authorities under the 2019 European Energy Security and 
Diversification Act.

    Question. What do you understand to be the obstacles or challenges 
which have prevented any of the U.S. commitment from being made 
available for 3SIIF projects?

    Answer. Per the terms of the financing agreement between DFC and 
the Three Seas Initiative Investment Fund, the fund must meet certain 
conditions before it can draw on DFC's $300 million in financing. These 
commitments are standard practice as part of any DFC investment and 
ensure U.S. Government funds are being used to support projects that 
meet DFC's due diligence standards. DFC looks forward to supporting 
3SIIF projects that meet DFC eligibility criteria and are permitted 
under its statutory authorities.

    Question. What efforts or projects are being pursued by DFC related 
to 3SI transportation infrastructure?

    Answer. DFC's mandate is to invest in less developed countries, 
with the exception of projects that qualify under the 2019 European 
Energy Security and Diversification Act. All 3SI Member States are 
currently classified by the World Bank as high-income, except Bulgaria, 
which is classified as an upper middle-income country. In Bulgaria, DFC 
funding for 3SIIF could also support transportation and other types of 
critical infrastructure.
    For this reason, DFC's commitment to the 3SIIF is expected to 
primarily support energy-related projects. As is standard practice when 
DFC makes an investment in a fund, the fund manager, not DFC, is 
responsible for sourcing and pursuing projects.

    Question. What efforts or projects are being pursued by DFC related 
to 3SI digital infrastructure?

    Answer. DFC's mandate is to invest in less developed countries, 
with the exception of projects that qualify under the 2019 European 
Energy Security and Diversification Act. All 3SI Member States are 
currently classified by the World Bank as high-income, except Bulgaria, 
which is classified as an upper middle-income country. In Bulgaria, DFC 
funding could also be used to support digital and other types of 
critical infrastructure.
    For this reason, DFC's commitment to the 3SIIF is expected to 
primarily support energy-related projects. As is standard practice when 
DFC makes an investment in a fund, the fund manager, not DFC, is 
responsible for sourcing and pursuing projects.
                                 ______
                                 

              Responses of Mr. Scott Nathan to Questions 
                 Submitted by Senator Chris Van Hollen

    Question. Increasing the Speed and Efficiency of DFC's Operations. 
In order to provide a viable alternative to our strategic competitors, 
DFC needs to increase the speed with which projects are approved and 
financing is disbursed. We understand that, due to both internal and 
external processes, DFC projects can take 6 months to 2 years to be 
approved. Other Development Finance Institutions can move faster. We 
have heard from companies and governments that China's ability to 
quickly approve, disburse, and deploy resources and financing, 
particularly for infrastructure projects, is a significant advantage 
over DFC.
    What recommendations can you provide that would streamline the 
external processes required to take a project from the initial business 
development phase to financial close and disbursement of funds. Are 
there specific policies and procedures that would improve project 
vetting, Know Your Customer due diligence, and compliance with DFC's 
Environmental and Social Policies and Procedures?

    Answer. While competitor states may move faster, this tends to 
result in projects that are of lower quality. Diligence and speed are 
both important. We continually evaluate our processes to optimize 
efficiency and are looking to streamline processes to shorten the 
length of our investment process. DFC closely assesses potential 
projects to ensure they are commercially viable, and in the case of a 
loan, that the entity has the capacity to repay it under its terms. DFC 
projects are further screened and monitored for environmental and 
social risks and positive development impact and undergo Know Your 
Customer integrity due diligence. This thorough underwriting is vital 
to ensuring the long-term viability and value of the projects DFC 
supports, which is fundamental for sustainable development and for the 
success of the alternative model we are putting forward. However, as we 
continue to increase our staffing and capacity, we anticipate a 
reduction in the amount of time required to diligence each project. We 
continue to prioritize staffing and technical capacity in our budget 
requests.

    Question. DFC's Prohibition on Working with State-Owned Enterprises 
(SOEs). DFC's policy of supporting market-based private sector 
development sets it apart from China. However, a 2019 World Bank report 
noted the important role state-owned enterprises (SOEs) play in 
infrastructure investments in the developing world. The report further 
indicated that 74 percent of infrastructure investments in East Asia 
and the Pacific were via SOEs. DFC's current policy does not allow 
financing for SOEs. Recognizing that SOEs are generally problematic due 
to governance challenges, market distorting actions, and the prevalence 
of corruption, it would be inappropriate for DFC to invest in many, if 
not most, SOEs. However, there could be a limited number of instances, 
particularly infrastructure investments with key partners in the Indo-
Pacific, where DFC could consider a flexible approach to SOEs in order 
to advance our national interests.
    As DFC considers changes to its Environmental and Social Policies 
and Procedures, are there plans to change the prohibition on working 
with SOEs? Would DFC consider establishing a waiver process for 
instances where an SOE investment supports our national interest?

    Answer. Congress mandated DFC to be additional in its investments--
to crowd in private sector capital, rather than compete with it or 
crowd it out. Generally, the most effective way to do this is to work 
directly with private sector entities, which the majority of our 
projects do.
    However, state-owned enterprises (SOE) are dominant in many 
countries--including many of our allies and partners. Oftentimes, SOEs 
in allied countries operate as private companies in all but name. In 
other cases, a project involving a SOE mobilizes significant private 
sector capital, for example through a public-private partnership or on-
lending activity to private sector businesses. DFC participates in 
transactions with SOEs to the extent that they are consistent with 
DFC's mission and our authorities.

    Question. Replacing the World Bank Country Income Requirements. I 
strongly support efforts to provide greater flexibility to DFC to meet 
your dual development and national interest mandate. During your 
testimony, you recommended that DFC stop using the World Bank's income 
criteria to determine country eligibility. The BUILD Act requires a 
certification that projects located in upper-middle income countries 
(UMIC) further the national interest and produce developmental 
outcomes. The certification, delegated by the President to the 
Secretary of State, has both a blanket waiver for certain sectors and a 
certification process for projects not contained in the blanket waiver.
    What would you replace the World Bank country income categories 
with? How many countries would this add to the places where DFC can 
work? Also, how would this impact the agreement between DFC and the 
State Department, which included consultations with the staff of the 
Senate Foreign Relations Committee, on certifying upper-middle income 
country investments as being in the national interest?

    Answer. We believe the reliance on World Bank country income 
classifications to define DFC country eligibility is not the most 
effective way to achieve development impact. To our knowledge, other 
development finance institutions and even the World Bank itself do not 
exclusively use country income classifications to determine eligibility 
for support. There are several alternative options for establishing DFC 
country eligibility that would better achieve the Congressional intent 
of ensuring DFC's focus on advancing economic development.
    One option is to use the World Bank Lending Categories rather than 
World Bank Country Income Categories. Doing so would make 12 more 
countries understood to need development finance tools potentially 
eligible for DFC financing. The World Bank takes gross national income 
levels into consideration when deciding whether to graduate a country 
from lending support, but they also conduct a country-specific, 
holistic analysis that considers the extent of access to external 
capital markets on reasonable terms and progress in establishing key 
institutions for economic and social development.
                                 ______
                                 

              Responses of Mr. Scott Nathan to Questions 
                  Submitted by Senator Tammy Duckworth

    Question. Recognizing that we must do more to ensure that people 
with disabilities do not continue to be left behind in our development 
investing, in 2018 the World Bank Group made 10 commitments on 
disability inclusive development.
    Mr. Nathan, the United States is seen as a global leader when it 
comes to disability rights and inclusion. As such, will the DFC commit 
to disability inclusive development, including investing in accessible 
infrastructure, education, social protection (also known as social 
security) and even in helping disabled entrepreneurs?

    Answer. Yes, in fact DFC has recently been exploring further 
opportunities to finance companies that support people with 
disabilities or companies that are led by entrepreneurs with 
disabilities. DFC, in partnership with the Department of State, hosted 
a global business development event focused on engaging with businesses 
that are active in advocating for people with disabilities, or led by 
people with disabilities. From that event, DFC has been providing 
advice and guidance to businesses which surfaced during that event as 
possible eligible clients, thus working to create a pipeline of 
qualifying companies in which to invest. Furthermore, in September 2023 
DFC provided a technical assistance grant to provide needed pre-
investment technical assistance to assess the feasibility, and 
strategic and operational implications, of transitioning the Disability 
Impact Fund (DIF), a grant-supported entity, into a blended capital 
investment vehicle, and facilitate potential follow-on debt financing 
from DFC. DIF aims to improve the access, availability, and 
affordability of assistive technologies in low and middle-income 
countries by first incubating and then investing in new, simplified 
products and/or innovative distribution models. In addition, DFC 
approaches inclusion of underrepresented populations, such as people 
with disabilities, as a cross-cutting development priority for the 
agency to consider when conducting business. As a result, DFC continues 
to explore ways to invest in projects such as those that recognize and 
address the needs of people with disabilities, and we look forward to 
engaging with you more on this topic.

    Question. DFC has invested over $800 million in Ukraine for things 
like infrastructure, energy, small businesses and education. On top of 
that, the recently announced Ukraine Investment Platform (https://
www.dfc.gov/media/press-releases/joint-statement-establishment-ukraine-
investment-platform#::text=DFC%20has
%20been%20investing%20in,debt%20financing%2C%20and%20technical%
20assistance.), in which we will partner with other G7 nations and the 
European Bank for Reconstruction and Development, will help provide 
``humanitarian assistance, assistance to support the energy sector as 
well as assistance to help maintain Ukraine's economic and financial 
stability.'' It is a priority for me that any U.S. investment in 
Ukraine be disability-inclusive, meaning that buildings and facilities 
must be accessible and that people with disabilities are included in 
education, in getting healthcare and jobs and that they are allowed and 
encouraged to live in their homes and communities.
    Mr. Nathan, will you commit to working with our partners in the 
Ukraine Investment Platform to ensure that funding flowing into Ukraine 
meets these goals?

    Answer. DFC is aware that of the 15 percent of the global 
population that is disabled, the vast majority became disabled during 
their lifetime. In conflict or fragile contexts, the rise in 
disabilities is often the result of war, conflict and lack of access to 
food or adequate healthcare. DFC will continue to pursue investments 
that create opportunities for the marginalized members of Ukrainian 
society. For example, DFC recently approved a transaction to provide 
political risk insurance for the Superhumans Center, a not-for-profit 
healthcare facility that works in the field of prosthetics and 
rehabilitation of people injured during the war in Ukraine. DFC looks 
forward to working with partners, including as part of the Ukraine 
Investment Platform, to continue to advance this important agenda.
                                ------                                


 Prepared Statement of Anthony ``Tony'' Zakel, Inspector General, U.S. 
   International Development Finance Corporation Office of Inspector 
                                General

                            Submitted by Senator Benjamin L. Cardin
    Chairman Cardin and Ranking Member Risch, and members of 
the Committee, thank you for allowing me the opportunity to 
provide written testimony for the record to discuss the U.S. 
International Development Finance Corporation (DFC) Office of 
Inspector General's (OIG) oversight work related to DFC.

                             ABOUT DFC OIG

    DFC OIG's mission is to prevent, detect, and deter fraud, 
waste, and abuse by conducting and supervising audits and 
investigations of DFC's programs and operations worldwide. 
Congress established DFC OIG in the Better Utilization of 
Investments Leading to Development (BUILD) Act of 2018 (Public 
Law 115-254 (https://www.govinfo.gov/content/pkg/PLAW-
115publ254/pdf/PLAW-115publ254.pdf)). Like other Offices of 
Inspector General, DFC OIG gets its authority from the 
Inspector General Act of 1978, as amended (IG Act (https://
uscode.house.gov/browse/prelim@title5/part1/
chapter4&edition=prelim)). I was appointed as DFC's first 
Inspector General in August 2020 and report directly to the DFC 
Board of Directors and Congress. DFC OIG is a lean office with 
13 FTEs and a $5.5 million budget in FY 2023. However, we are 
tasked with overseeing a growing agency whose budget has 
increased to over $1 billion, staff has grown to 513 employees, 
and has increased the number of new projects by about 132 
percent between FY 2020 and FY 2022.
    DFC's development portfolio has reached almost $40 billion 
\1\ and is expected to grow in the coming years, especially in 
economies that may not have adequate safeguards to address 
fraud and corruption. DFC products include debt financing, 
equity investments, feasibility studies, investments funds, 
political risk insurance, and technical assistance.\2\ These 
products are essential to supporting key sectors, such as small 
business, energy, water, infrastructure, agriculture, and 
health, which improve the quality of life for millions and lay 
the groundwork for creating modern economies and providing 
financing for women or other borrowers who do not have 
sufficient access to commercial financing.
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    \1\ U.S. International Development Finance Corporation, Annual 
Management Report, FY 2022 (https://www.dfc.gov/sites/default/files/
media/documents/DFC%20AMR%20FY%2020
22_508%20Compliant%20Document.pdf)
    \2\ DFC Website: https://www.dfc.gov/what-we-offer/our-products
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    DFC needs an effective OIG to safeguard American taxpayer 
dollars as DFC fulfills its dual mission to partner with the 
private sector to finance solutions to the most critical 
challenges facing the developing world today, while also 
advancing U.S. foreign policy priorities.

                         OVERSIGHT WORK TO DATE

    In the last year, DFC OIG completed all four of its 
congressionally mandated audits, issued a draft report to 
management on one performance audit, and conducted eight 
investigations, four of which were referred to the Department 
of Justice for prosecution. Some of our audit and investigative 
work is highlighted below and additional details can be found 
in our Spring FY 2023 Semiannual Report to Congress (https://
www.dfc.gov/sites/default/files/media/documents/
DFC%20OIG%20Spring%202023%20SARC
%20FINAL.pdf) and Fall FY 2022 Semiannual Report to Congress 
(https://www.dfc.gov/sites/default/files/media/documents/
DFC%20OIG%20Fall%202022%20SARC%2011.15.pdf). Our semiannual 
reports to Congress, as well as our audit reports, Top 
Management Challenges Facing DFC,\3\ and other public documents 
and correspondence can be found on our external website, 
www.dfc.gov/oig.
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    \3\ DFC OIG website: https://www.dfc.gov/oig/reports/strategic-
plans-top-management-challenges
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                                 AUDITS

    The Office of Audits conducts a variety of independent, 
statutorily mandated, and discretionary performance audits 
assessing controls of DFC programs and operations to detect and 
deter waste and mismanagement. Mandatory audit work includes 
Financial Statements, Federal Information Security 
Modernization Act (FISMA), Risk Assessment of Government Charge 
Cards, and Payment Integrity Information Act (PIIA) audits. 
Performance audits determine if programs or functions are 
operating as intended to achieve stated goals. Two recent 
performance audits are highlighted below.

   DFC Made Significant Progress Implementing 
        Provisions of the BUILD Act (https://www.dfc.gov/sites/
        default/files/media/documents/
        dfc_made_significant_progress_
        implementing_the_build_act.pdf). This audit revealed 
        that DFC complied with and implemented 116 of the 118 
        subsections of the BUILD Act. The two subsections not 
        fully implemented were: (1) the roles, 
        responsibilities, and authorities of the Chief 
        Development Officer and Chief Risk Officer; and (2) DFC 
        publicly reporting performance metrics including 
        development impact on a country-by-country basis. In 
        addition, we noted two observations regarding: (1) the 
        methodology of calculating and tracking the progress of 
        investments in less developed countries; \4\ and (2) 
        the Annual Report timeliness.
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    \4\ Under the BUILD Act, DFC is required to prioritize support for 
less developed countries with a low-income economy or a lower-middle-
income economy. See 22 U.S.C. Sec.  9612(c)(1); see also 22 U.S.C. 
Sec.  9601(2).

   We are finalizing an audit of DFC-funded renewable 
        energy and finance projects in India. This was DFC 
        OIG's first audit where we had ``boots on the ground,'' 
        allowing us an opportunity to review projects and see 
        DFC's impact in developing countries firsthand. Our 
        audit team, along with DFC staff, traveled to India in 
        February and March 2023, where we visited eight DFC-
        financed projects. We issued a draft report to 
        management in September. Issues identified in the 
        report include records management, waiver of 
        environmental and social standards, project monitoring, 
        reporting fatalities and serious injuries, and 
        subordinate loans policies. The final report of our 
        audit findings and recommendations will be published 
        later this month.

                             INVESTIGATIONS

    The Office of Investigations conducts proactive 
investigations and responds to allegations of fraud, abuse, and 
misconduct, which may result in criminal, civil, or 
administrative sanctions. DFC OIG investigations protect 
whistleblowers and address critical and sensitive issues 
supporting not only DFC's mission, but also U.S. foreign policy 
objectives and national security interests more broadly. The 
Office of Investigations seeks to foster the integrity of DFC 
employees, partners, and contractors, and encourages them to 
report suspected wrongdoing through outreach and training. To 
inform and protect whistleblowers, DFC OIG provides training to 
new DFC employees and issues periodic newsletters to all DFC 
employees to inform on how OIG conducts investigations and 
protect those who report suspected fraud, illegal activity, or 
misconduct. OIG has investigated several complaints by 
whistleblowers, including whistleblower reprisal complaints 
against two senior officials, both of which were substantiated.
    The OIG Hotline is available 24 hours every day online 
(https://www.dfc.gov/oig/hotline#no-back) or by phone, +1 833-
OIG-4DFC. This permits information and complaints to be 
submitted to DFC OIG easily and confidentially from anywhere in 
the world. Since DFC OIG's inception, we have received 64 
allegations, which have resulted in 39 preliminary inquiries or 
investigations. During that time, we conducted 6 proactive 
initiatives to detect fraud and illegal conduct. In a recent 
investigation, we found that a loan applicant submitted false 
financial statements to DFC in support of a $41 million loan 
for a construction project in the Middle East. Fortunately, the 
loan commitment was cancelled before funds were dispersed. We 
sent a report to DFC management detailing our findings and have 
referred the subjects of the investigation to DFC for 
debarment. This will be the first suspension and debarment 
referral to DFC.
    As part of a proactive investigative initiative OIG 
traveled to India to verify that solar panels used in projects 
funded by DFC loans were not linked to forced labor programs as 
identified by a Federal interagency advisory.\5\ We examined 
the solar modules and inverters and confirmed that although 
they were manufactured by companies in the PRC, they were not 
linked to forced labor origins.
---------------------------------------------------------------------------
    \5\ U.S. Interagency: Xinjiang Supply Chain Business Advisory 
(https://www.state.gov/wp-content/uploads/2021/07/Xinjiang-Business-
Advisory-13July2021.pdf): Risks and Considerations for Businesses and 
Individuals with Exposure to Entities Engaged in Forced Labor and other 
Human Rights Abuses linked to Xinjiang, China, updated July 13, 2021.
---------------------------------------------------------------------------

                      UKRAINE MANAGEMENT ADVISORY

    DFC OIG intends to proactively protect DFC's investments in 
Ukraine. To raise awareness of potential areas for fraud and 
abuse, we issued a management advisory, Key Considerations to 
Inform DFC's Response in Ukraine (https://www.dfc.gov/sites/
default/files/media/documents/Key%20Considerations%20
for%20DFC%20Response%20to%20Ukraine.pdf), to DFC management in 
June 2023. DFC plans to mobilize well over $1 billion in 
private sector capital to support the economy and people of 
Ukraine. While it has been reported that Ukraine has made 
significant improvements in its efforts to address corruption, 
it still faces challenges with implementing internal controls 
to ensure effective and efficient reconstruction efforts. DFC 
OIG is a member of the Ukraine Oversight Interagency Working 
Group; coordinating with other OIGs, international law 
enforcement entities, and various domestic and international 
stakeholders, and intends to commit resources to proactively 
monitor and evaluate DFC-funded projects in Ukraine.

                DFC TOP MANAGEMENT CHALLENGES IN FY 2023

    Last fall, in collaboration with DFC, OIG published Top 
Management Challenges (TMCs) facing DFC in FY 2023 and 
discussed four challenges: \6\ (1) improving monitoring and 
evaluating actual development impact; (2) improving performance 
management, transparency, accuracy and availability of project 
data as DFC's commitments grow; (3) balancing heightened 
expectations of Congress and stakeholders while managing risks; 
and (4) managing organizational transition while building 
internal controls of core management systems. Specifically, we 
identified that DFC needs to take action to make actual 
development impact achieved and promotion of our nation's 
foreign policy the primary metrics of its success. We are 
currently working with DFC to identify FY 2024 TMCs, which 
likely will be similar to those previously identified.
---------------------------------------------------------------------------
    \6\ Top Management Challenges Facing DFC in FY 2023 (https://
www.dfc.gov/sites/default/files/media/documents/
Top%20Management%20Challenges%20Facing%20DFC%20in%20FY
%202023.pdf), DFC OIG website: www.dfc.gov/oig
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                        MEMORANDUM OF AGREEMENTS

    DFC OIG has been actively establishing international 
partnerships to support anti-fraud and anti-corruption 
initiatives that will enrich our audit and investigative 
efforts. We recently executed Memoranda of Agreement (MOA) with 
the United Nations Office of Project Services (UNOPS) Internal 
Audit and Investigations Group, the European Anti-Fraud Office 
(known by the acronym OLAF), and the World Bank Group Internal 
Audit (GIA). These MOAs are based on a common interest to 
enhance relationships that support sharing information and 
other resources with these international partners, which is 
critical given the international nature of our work.

                             LOOKING AHEAD

    The BUILD Act authorizes DFC to grow its portfolio to $60 
billion. To reach this goal, DFC plans to increase its staff 
level to 700 by September 2024. As DFC's portfolio and staff 
levels grow, the OIG also must grow. To audit program and 
operational effectiveness, as well as investigate allegations 
of fraud, in a portfolio of DFC's size and complexity, the OIG 
must attract and retain skilled, experienced auditors, 
evaluators, investigators, attorneys, and other professionals. 
We also want to effectively monitor and evaluate DFC-funded 
projects worldwide, which includes site visits, as a critical 
aspect of evaluating progress, assessing development impact, 
developing relationships, and identifying potentially 
fraudulent activity.

                         FUTURE PLANNED AUDITS

    The OIG currently has two future audits planned for FY 
2024. The first is an audit of DFC's goods and services 
contracts. We issued an audit announcement letter to management 
this week. The objective of this audit is to determine whether 
DFC complied with applicable goods and services contract 
regulations, policies, and. In the second audit, because of 
DFC's dramatic growth \7\ and the recent organization 
realignment announcement, we plan to audit DFC's workforce 
planning efforts. We will assess if DFC is hiring the right 
people in the right places, how decisions were made, and 
explore current employee retention efforts. We will also review 
DFC's strategic human capital management as it positions the 
organization to be more effective and results-oriented by 
managing DFC's most valued resource--its people.
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    \7\ DFC plans to have 700+ employees by 2025.
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                 DFC'S SUSPENSION AND DEBARMENT PROGRAM

    The OIG referred its first suspension and debarment 
referral to DFC in September 2023. This involved a loan 
applicant who submitted false financial statements to DFC in 
support of a $41 million loan for a construction project in the 
Middle East. Fortunately, the loan commitment was cancelled 
before funds were dispersed. OIG sent a report to DFC 
management detailing our findings and requesting that the 
involved parties be debarred from doing future business with 
the U.S. Government.

          INSPECTIONS & EVALUATIONS OF DFC PROJECTS WORLDWIDE

    DFC has a global reach and currently has development 
initiatives in four regions: Africa and the Middle East; Latin 
America and the Caribbean; Indo-Pacific; and Eastern Europe and 
Eurasia. DFC has also stated that it plans to open several 
offices in strategic global locations. In addition, DFC has 
also made investment commitments in Ukraine, which will likely 
increase in the future. To enhance our oversight efforts, DFC 
OIG intends to establish and mobilize an inspections and 
evaluations (I&E) program in FY 2024 to assess 8-10 DFC-funded 
projects around the world. An I&E program is needed to improve 
transparency and provide timely status of project progress and 
development impact as DFC's portfolio continues to grow. The 
I&E program will provide ``boots on the ground,'' giving DFC 
OIG the ability to provide real-time input regarding project 
status and effectiveness to help make timely recommendations 
for improvement and identify where administrative action might 
be necessary. The OIG's I&E program will incorporate lessons 
learned from our recent audit of DFC investments in India and 
we will also collaborate with DFC's Office of Accountability 
and DFC's Impact Management and Monitoring Division.

                     REAUTHORIZATION CONSIDERATIONS

    While DFC OIG is in the process of evaluating meaningful 
recommendations for Congress to consider as it deliberates 
policy options to ensure DFC is equipped to accomplish its dual 
mandate, so far, we have identified the following items for DFC 
OIG to continue to provide efficient and effective oversight.

1. Need for Law Enforcement Authority

    DFC OIG is hampered in its ability to independently conduct 
certain law enforcement activities because we do not have law 
enforcement authority. Our request for such authority has been 
pending with the U.S. Attorney General's Office for close to 3 
years. Prior to the BUILD Act, DFC's predecessor, the Overseas 
Private Investment Corporation (OPIC), was overseen by USAID 
OIG, which has law enforcement authority. Compared to OPIC, DFC 
has a significantly larger portfolio, a larger staff, expanded 
investment authority (including equity), and increased focus on 
development impact and promoting U.S. national interests. DFC 
OIG cannot properly oversee DFC without the same law 
enforcement authority that its predecessor OIG--and almost all 
other OIGs--have. Our lack of law enforcement authority has 
also hampered our ability to recruit and hire experienced 
investigators, who naturally want to continue their law 
enforcement careers.
    Should a legislative authorization be introduced by 
Congress, it can include the following language.

        Add at the end of subtitle G of division E the 
        following:

        SEC._. LAW ENFORCEMENT AUTHORITY OF THE INSPECTOR 
        GENERAL OF THE UNITED STATES INTERNATIONAL DEVELOPMENT 
        FINANCE CORPORATION.

        Section 6(f)(3) of the Inspector General Act of 1978 (5 
        U.S.C. App.) is amended by inserting ``International 
        Development Finance Corporation,'' before 
        ``Environmental.''

2. Access to Contractor, Partner, and End Beneficiary Information

    As DFC OIG conducts audits of DFC's programs and operations 
as well as investigates allegations of fraud and corruption, 
access to information from all entities involved is imperative 
to evaluate program and operational effectiveness and to 
confirm if allegations have merit.

                               CONCLUSION

    DFC OIG is dedicated to safeguarding the critical resources 
entrusted to DFC to carryout U.S. development initiatives and 
foreign policy priorities. As we complete our work, we will 
continue to address new vulnerabilities and challenges, and 
will consult with Congress, our Board of Directors, OMB, and 
other stakeholders to provide the most impactful and responsive 
oversight possible.
    I appreciate the opportunity to provide you with this 
overview of our work and our needs. My staff and I are always 
available to brief you and your staff and look forward to 
working with you on prioritizing future oversight efforts.

Five Letters to the Development Finance Corporation on Solar, Mission, 
             Purpose, Zimbabwe, Brazil, and Climate Matters

                                Submitted by Senator James E. Risch