Recommendation 3

HM Government Deferred

The Government recognises the importance of actively monitoring impact to ensure that BII continues to help solve the biggest global development challenges, and FCDO has a number of arrangements in place to ensure appropriate oversight of BII’s impact. As with all other areas of Government ODA spending, any approval for new funding for BII is subject to a comprehensive FCDO business case that aligns with FCDO’s priorities and is approved by Ministers. The business case process sets out the outputs and outcomes that FCDO aims to achieve from new capital injections, and the indicators FCDO will use to assess BII’s performance against such outputs and outcomes in the form of a log frame. The FCDO assesses BII’s performance against these indicators in annual reviews which are made publicly available (the most recent was published to Dev Tracker in September 2023). The FCDO’s agreed reporting framework with BII also provides wider data and analysis on a set of both quarterly and annual core metrics. This formalised reporting is the basis for key performance indicators and other data discussed as part of Quarterly Ministerial and Shareholder Meetings between the FCDO and BII, ensuring effective real-time oversight of BII’s impact. BII has clear operational procedures in place to maximise the impact of its investments. BII’s Impact Framework is designed to incentivise BII towards the most impactful investments aligned to its three strategic objectives. The framework has been reviewed and held up as an industry leader by BlueMark, a third-party assurance provider of impact Session 2023–24 claims and practices. All investments made under BII’s current strategy will receive an ex- post assessment of their impact score biennially to measure performance against initial impact expectations. In addition, FCDO and BII have agreed a longer-term Evaluation and Learning Programme which appoints independent evaluators to measure BII’s development impact and recommend further improvements to BII’s investment strategies based upon this learning. Independent evaluations have assessed BII’s Infrastructure and Financial Institutions portfolios (two of BII’s three sector groups), with a review of the remaining Industries, Technology and Services portfolio due for completion in early 2024. Building on these sector evaluations, further in-depth studies using bespoke primary research are being conducted to better inform FCDO and BII of the latter’s development impact and what lessons can be taken into consideration for investments in the future. To further strengthen oversight of BII’s impact, Ministers will undertake a review of the BII log frame underpinning the annual review process to consider whether additional indicators can be included to capture BII’s delivery of the 2022–2026 strategy in further detail. The FCDO will also review its SMART targets for BII as part of the next strategy period from 2027. It is not appropriate for the shareholder to introduce multiple additional SMART targets within this strategy period. As a long-term patient investor of capital, BII requires clarity and certainty about its objectives over the course of a whole strategy period and has limited ability to alter its portfolio to meet new objectives in the short-term. Moreover, additional SMART targets could incentivise BII to undertake activities which would potentially trade-off against other objectives Ministers have agreed with BII. For example, a specific target for the number of jobs created risks providing BII with an incentive towards investments in more mature markets and sectors where large-scale job creation is more feasible.