Recommendation 4

HM Government Rejected

The Government agrees that it is important to monitor effectively the thematic and geographic split of BII’s investments. The FCDO does so through the agreed reporting framework with BII, which includes information on BII’s investment commitments and portfolio net asset value by geography, sector, and investment product, amongst other metrics. This information is provided on a quarterly basis to Ministers and discussed as part of the Quarterly Shareholder Meeting. BII also makes much of this data publicly available on its website and through its annual report. The Government also agrees that it should guide BII’s thematic and geographic investment activity. This is already done through the Investment Policy, which sets BII’s geographic Session 2023–24 mandate, and the Impact Score which guides BII’s portfolio construction to align with delivery of BII’s three corporate objectives – to support productive, sustainable, and inclusive development. The Impact Score includes a prioritisation of countries, with more weight given to lower-income geographies, and incentivises investments in key priority themes. Ministers have set a target for BII investment in the Indo-Pacific region over the five-year strategy period of $500m of climate finance and will ensure the vast majority of BII’s investment commitments over the current five-year strategy period will be in Africa and South Asia - FCDO priority regions. In addition, Ministers have set BII thematic targets for 30% of all new investments to qualify as climate finance, and for 25% of all new investments to qualify under the 2X Challenge as ‘gender lens’ finance. As per the response to Recommendation Seven, Ministers have set BII a new ambition for over 50% of its annual investment commitments to be in the poorest and most fragile countries by 2030. The FCDO will consider setting further guidance on the proportion of BII’s investments in particular sectors, regions, or categories of countries where relevant as part of discussions on BII’s next five-year strategy. The FCDO and BII report in line with internationally agreed ODA rules, set by the OECD. It is important to note that BII is distinct from grant ODA programmes. BII recycles capital and profits from existing investments into new investments, allowing BII to deliver greater investment volumes than the capital injections it receives from the taxpayer. BII annual investments are therefore not the same as the Government’s provision of ODA to BII for a given year. Specific ODA allocations are therefore not directly attributable to investments made. Providing a thematic and geographic breakdown of BII investments alongside FCDO’s annual programme expenditure for BII would confuse FCDO ODA and BII investments. Given these are not directly comparable, the FCDO will not provide this data together in the FCDO’s ODA reporting. The FCDO will instead highlight where this data can be found on BII’s website.