Recommendation 14

HM Government · verbatim extract Deferred

The Government agrees with the importance of ensuring BII’s investments are genuinely additional. When evaluating investments BII’s Impact Framework incorporates an assessment of BII’s contribution to the development outcomes of each proposed investment across three key aspects: (1) Financial additionality: would BII be providing capital to an investee that is not otherwise available in sufficient quantity or on suitable terms? (2) Value additionality: would BII be offering specialist expertise to investees in areas such as gender or climate? (3) Mobilisation of additional capital: would BII be mobilising capital from others that would not otherwise be available to the investee? The strength of BII’s impact contribution in each proposed transaction is rated on a 4-point scale and investments are rejected if the threshold for additionality is not reached. This approach is aligned to the industry best practice Operating Principles for Impact Management, and BII has been rated as ‘advanced’ for its approach to contribution through independent verification. Having set its expectations for the development impact it is seeking to achieve as part of its investment case, BII assesses the performance of its investments on a quarterly basis across different dimensions including development impact; environmental, social, governance (ESG) and business integrity; and commercial. Those investments that are Session 2023–24 potentially off-track against their investment thesis are escalated for discussion with the relevant Managing Director and the Offices of Chief Impact Officer, Chief Risk Officer and Chief Investment Officer. Specific actions are identified that BII should be taking in response. Those classified as higher risk or underperforming will be reported to Managing Directors and the CEO, with Board oversight. For investments where BII has discretion over the timing of divestment, BII seeks a responsible exit once its presence as an investor is no longer contributing to impact, or where risks have materialised which may prevent impact being realised. BII undertakes a formal process for exiting investments which includes detailing the rationale for exit, its efforts to ensure the ongoing impact of the asset (i.e. selling to the right investor), and delivering value for money for the UK taxpayer (i.e. seeking to earn a fair return on its investments). The Government believe this is the responsible way to handle these matters.