Source · Select Committees · International Development Committee
Recommendation 7
7
Accepted
Paragraph: 42
Increase FCDO oversight of BII's thematic and geographic investment split in annual reporting.
Conclusion
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 be guided by the FCDO setting geographic and thematic handrails. The geographic and thematic areas of BII expenditure should be reported alongside the FCDO’s annual programme expenditure so the UK taxpayer has true sight of how UK ODA has been spent regionally and across thematic areas.
Government Response Summary
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 poorest and most fragile countries by 2030.
Paragraph Reference:
42
Government Response
Accepted
HM Government
Accepted
The Government agrees that BII should have a balanced portfolio of productive, sustainable, and inclusive investments across a range of countries with different development needs. Ministers have already set BII a more concentrated and challenging geographic remit than any other bilateral Development Finance Institution, focusing BII on low-income and lower-middle income countries to deliver development impact. BII’s Impact Scoring system prioritises investment towards the poorer countries within BII’s geographic remit. FCDO monitors BII’s investment commitments and portfolio net asset value by geography through Quarterly Shareholder Meetings to provide effective shareholder oversight of BII’s geographic focus. BII makes much of this data publicly available on an annual basis on its website and through its annual report. Session 2023–24 This approach has led to BII becoming the leader amongst DFIs for investing in low income and fragile countries. The majority of BII’s portfolio is invested in Africa (57% at end of 2022) with BII being the largest investor of all European DFIs in fragile and conflict affected states (WB FCS) – having 30% more invested in fragile countries than the second placed DFI, and double that of the third placed DFI. BII has also led a number of cross- DFI initiatives looking at reducing the barriers to investing in fragile countries including establishing the DFI Fragility Forum and incubating the African Resilience Investment Accelerator (ARIA), which seeks to increase the number of investible opportunities for DFIs. The Government also recognises that significant development challenges remain in middle income countries which development finance is an effective tool for addressing. These countries include 60 percent of the world’s poor, are heavily reliant on fossil fuels for energy provision, and have limited sources of financing from under-developed capital markets. In countries such as South Africa and India BII takes a much narrower approach, limiting new investments to focus on climate finance and inclusivity, and placing a stronger emphasis on mobilising private capital alongside its own investment. A similar approach has been adopted in the Indo-Pacific where BII is solely targeting climate investments, including in Vietnam, Indonesia, and the Philippines. To ensure BII continues to maximise impact, the Minister for Development has set BII a new ambition for over 50% of its annual investment commitments to be in the poorest and most fragile countries by 2030. As per the response to Recommendation Three, the Government has set this ambition as part of BII’s next strategy period to ensure compliance with good governance practices. As a long-term patient investor of capital, BII requires 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. Were it to do so, it would not be in the interests of the shareholder, taxpayers, or those we seek to help.