Recommendations & Conclusions
23 items
1
Conclusion
Ninth Report - Investment for developme…
Rejected
Development finance institutions can make a substantive contribution to developing private markets in low- and middle-income countries by pioneering new and emerging industries, promoting positive change through investment activities and stimulating private-sector investment to develop markets. (Paragraph 11) Governance
Government response. The Government does not agree with appointing a non-voting government official to BII’s Board, arguing it would disrupt dynamics and duplicate existing oversight. It committed to maintaining best practice governance and periodically reviewing procedures.
2
Conclusion
Ninth Report - Investment for developme…
Deferred
Under the current arm’s-length relationship, BII holds some investments that conflict with the UK Government’s policies, such as those relating to fossil fuels and there have been few attempts by BII to adapt its legacy investment portfolio to align with UK interests. The recent UK Government decision to expand BII’s …
Government response. The Government agrees on the need for effective collaboration between FCDO and BII, noting existing guidance and close work. Ministers will explore opportunities to strengthen this, including integrating collaboration into country business plans, but the response does not address the …
3
Conclusion
Ninth Report - Investment for developme…
Deferred
The FCDO and BII can both benefit from greater collaboration at the country office and regional levels.
Government response. The Government acknowledges the importance of monitoring BII's impact, detailing existing oversight arrangements and annual reviews. It commits to review the log frame for additional indicators and to review SMART targets for the next strategy period (2027), but rejects introducing …
4
Conclusion
Ninth Report - Investment for developme…
Rejected
The FCDO must work collaboratively with BII throughout its operations to deliver the International Development Strategy’s objective of supporting countries to grow thriving economies by 31 March 2024. It should do this at both country office and regional levels by sharing institutional knowledge and ensuring that BII’s investments complement the …
Government response. The Government already monitors the thematic and geographic split of BII investments through existing policies and reporting frameworks. However, it will not provide BII investment data alongside FCDO's annual ODA expenditure due to potential confusion, instead highlighting where this information …
5
Conclusion
Ninth Report - Investment for developme…
Accepted
We do not find BII’s approach to tracking gender lens achievements to be dynamic or suitably stretching to achieve greater development impact. Performance monitoring of key metrics to track other key indicators is also absent from BII’s strategy and public reporting.
Government response. The Government agrees BII should promote gender equality and target under-represented groups, noting BII’s existing 2022-26 Strategy, 2X Criteria, and BOLD framework for diversity finance. It commits to ensuring gender, development impact, and environmental and social outcomes are a specified …
6
Conclusion
Ninth Report - Investment for developme…
Deferred
The FCDO must incorporate SMART targets into its strategy documents that stretch the development impact that BII achieves, such as the number of quality jobs created through its gender lens investments. This must be done by March 2024 to achieve active governance over BII and to ensure that BII’s investments …
Government response. The Government agrees on the importance of measuring BIP impact and commits to publishing its British Investment Partnerships strategy by summer 2024, following consultation. However, it does not specifically commit to incorporating new stretching SMART targets for BII into FCDO …
7
Conclusion
Ninth Report - Investment for developme…
Accepted
The FCDO should have more oversight of the regional split of BII’s funds. It should actively monitor the thematic and geographic split of BII investments and include this within its annual reporting of ODA expenditure. The profiling of BII investment activity should also reflect the FCDO’s priorities, and this should …
Government response. The Government agrees on monitoring BII’s geographic split, noting existing monitoring through Quarterly Shareholder Meetings and publicly available data. The Minister for Development has set a new ambition for BII to commit over 50% of its annual investments to the …
8
Recommendation
Ninth Report - Investment for developme…
Accepted
BII should articulate the work it strives to do to promote gender equality and target under-represented groups through its investee businesses by setting its own proposal for impact. This should set out the categories of people that are being targeted, the impact that the investments are targeting and the target …
Government response. The Government agrees that BII investments must support inclusive economic growth, stating that BII’s current 2022-26 strategy already includes objectives for inclusive development, integrated through its Impact Framework and Impact Score. The FCDO continues to monitor BII’s performance against this, …
9
Conclusion
Ninth Report - Investment for developme…
Deferred
A British Investment Partnerships strategy is urgently needed to drive effective co- ordination of actors within the BIPs and to ensure the International Development Strategy’s objective of delivering development in partnership achieves maximum impact. The FCDO must create this strategy, outlining its expectations of all parties involved in those partnerships, …
Government response. The Government's response addresses BII's internal processes for assessing additionality in its investments and its exit strategy, explaining how these ensure development outcomes. However, it does not address the urgent need for a broader British Investment Partnerships strategy or the …
10
Conclusion
Ninth Report - Investment for developme…
Accepted
Some of BII’s investments in middle-income countries have been poorly targeted and do not appear to be reaching the poorest and most marginalised people. In some cases, BII investments have tenuous links to development impact. By concentrating its investments in middle-income countries, there is a risk that BII will lose …
Government response. The Government agrees that poverty reduction must be central to BII's investments, stating that BII's existing strategic objectives and Impact Score already integrate productive, sustainable, and inclusive development. It confirms BII's oversight of investments, including through intermediaries, and is satisfied …
11
Conclusion
Ninth Report - Investment for developme…
Deferred
BII must better distribute its investment across countries with different development needs and income status by capping the proportion of investments that it holds in middle-income countries, at a percentage determined by the Minister for Development, by 31 March 2025. The rate should be defined within BII’s investment policy and …
Government response. The government largely deflects the recommendation, describing existing oversight mechanisms and rejecting a 'full rolling audit'. It commits only to reviewing in 2024 whether additional spot checks of BII investments are required, rather than capping investments in middle-income countries.
12
Conclusion
Ninth Report - Investment for developme…
Accepted
To ensure that poverty reduction is central to BII’s investment decisions, BII must pursue investments that demonstrate a clearer focus on driving inclusive economic growth and reducing financial and social inequality.
Government response. The government describes existing mechanisms for ministerial scrutiny of BII's budget and activities, and highlights independent evaluations that show BII's investments are on track to meet development impact goals, arguing that poverty reduction is already central.
13
Conclusion
Ninth Report - Investment for developme…
Accepted
In some instances BII has not demonstrated the additionality of its investments and is consequently competing with and crowding out commercial investors.
Government response. The government agrees with the importance of transparency and states that BII will publish a Transparency Roadmap before the end of 2023, outlining its ambition to be the most transparent bilateral development finance institution and detailing specific short-term actions.
14
Conclusion
Ninth Report - Investment for developme…
Deferred
BII must target nascent markets that struggle to stimulate investment from the private sector. BII must annually assess the value it adds to investee companies. Where BII has not proven its additionality to an investment or its case for additionality is no longer valid, BII should exit that investment. (Paragraph …
Government response. The government deflects the recommendation regarding additionality and market focus, focusing instead on BII's transparency and stating that BII will publish a Transparency Roadmap with milestones to become the most transparent bilateral DFI.
15
Conclusion
Ninth Report - Investment for developme…
Accepted
Financial intermediaries can deliver market expertise, but such investment vehicles can result in UK taxpayers’ money being used to reward intermediary agents in low- tax jurisdictions. In some cases, the onward investments made by intermediaries have rewarded businesses with weak or questionable links to development.
Government response. The government partially accepts, agreeing on the importance of poverty reduction but states they are satisfied with BII's existing processes and oversight of investments made through intermediaries, which comply with key policies and support development.
16
Recommendation
Ninth Report - Investment for developme…
Accepted
To ensure that poverty reduction is central to BII’s investment decisions and to prioritise investments that are critical to recipient countries’ development needs, BII must: (a) take responsibility for where its money is invested by exerting greater oversight and control over the activities of financial intermediaries who invest UK taxpayers’ …
Government response. The government partially accepts the recommendation, stating that BII already has appropriate oversight and monitoring processes in place, which Ministers are satisfied with. The response highlights existing mechanisms for ensuring compliance with BII's policies and promoting poverty reduction through its …
17
Conclusion
Ninth Report - Investment for developme…
Accepted
While the Abraaj example suggests that BII’s internal control flagged suspected fraudulent activity, in light of other reports we are forced to conclude that BII’s internal control failed to identify and prevent some investments that appear to have harmed society and the environment in low-income countries. In those cases, BII …
Government response. The government partially accepts, agreeing to hold BII accountable, but details existing mechanisms like corporate governance, FCA regulation, and independent verification by BlueMark, ICAI, and NAO, which it claims already ensure BII's due diligence and monitoring meet best practice standards.
18
Recommendation
Ninth Report - Investment for developme…
Accepted
The FCDO must hold BII accountable for its due diligence and ongoing monitoring of its direct and indirect investments. To that end, FCDO must audit BII’s investment portfolio over a rolling five-year period against a set of environmental, social and governance (ESG) and development impact standards to validate BII’s internal …
Government response. The government partially accepts, agreeing it should hold BII accountable for due diligence and monitoring. It asserts that existing corporate governance arrangements, FCA regulation, and independent verification by bodies like BlueMark, ICAI, and NAO already ensure best practice and validate …
19
Recommendation
Ninth Report - Investment for developme…
Accepted in Part
BII must ensure that its entire portfolio is aligned with the UK Government’s development agenda. With a diminished ODA budget there is more pressure to target development assistance towards the poorest and most marginalised groups: consequently, there is a greater responsibility for BII to actively manage its portfolio. It should …
Government response. The government partially accepts, agreeing ministers should maintain scrutiny over ODA and BII allocations. While stating BII annually monitors development impact for active investments since 2012 and current monitoring is appropriate, the FCDO will review in 2024 whether additional external …
20
Recommendation
Ninth Report - Investment for developme…
Accepted in Part
To deliver accountability and transparency and to operate in lockstep with the International Development Strategy, BII must assess the impact of its portfolio under previous strategy periods and actively manage its portfolio. BII must perform annual assessments of the impact delivered by all of its portfolio investments, including those businesses …
Government response. The government partially accepts, agreeing ministers should scrutinize the ODA budget and BII allocations. While stating BII already annually monitors impact for active investments since 2012 and that current monitoring is considered appropriate, the FCDO will review in 2024 whether …
21
Recommendation
Ninth Report - Investment for developme…
Accepted
BII needs to work towards greater transparency of its investment data. As BII has stewardship over taxpayers’ money, there is greater responsibility to ensure propriety over its investments by annually publishing performance data. We welcome BII’s steps towards improving its transparency by creating a new role for a Transparency and …
Government response. The government accepts the recommendation, setting a goal for BII to rank as the most transparent bilateral DFI. BII will publish a Transparency Roadmap outlining its ambition and specific short-term milestones.
22
Recommendation
Ninth Report - Investment for developme…
Accepted in Part
BII must prioritise the monitoring and reporting of investment activity and transparently report its financial and impact data. This should include, but not be limited to: (a) the number and type of jobs created, (b) types and value of capital mobilised, (c) the 2X Challenge assessment of its portfolio according …
Government response. The government partially accepts, agreeing on the importance of monitoring and reporting. BII will publish a Transparency Roadmap and begin disclosing qualifying criteria for new 2X investments, while already reporting on some impact data. However, it does not explicitly commit …
23
Recommendation
Ninth Report - Investment for developme…
Accepted
BII should use Publish What You Fund’s DFI Transparency Index as a roadmap to increase the transparency of its operations and public disclosures. (Paragraph 117) Investment for development: The UK’s strategy towards Development Finance Institutions 59
Government response. The government accepts the recommendation, setting a goal for BII to rank as the most transparent bilateral DFI in the next Publish What You Fund index. BII will publish a Transparency Roadmap with specific short-term milestones to achieve this.