Source · Select Committees · International Development Committee
Recommendation 17
17
Accepted
Paragraph: 94
BII's internal controls failed to prevent harmful investments and were slow to respond.
Conclusion
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 was slow to investigate and to act in response to alleged wrongdoing by investee companies.
Government Response Summary
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.
Paragraph Reference:
94
Government Response
Accepted
HM Government
Accepted
Partially Accept The Government agrees that it should hold BII accountable for its due diligence and ongoing monitoring of its investments. Ministers achieve this through existing corporate governance arrangements, with BII’s Board being both responsible for overseeing BII’s activities and fully accountable to the Government. BII is also authorised and regulated by the Financial Conduct Authority (FCA) with the Board responsible for ensuring compliance with its regulatory obligations. To ensure BII is implementing best practice and to validate BII’s internal assessments, many of BII’s activities are independently verified. For example, BII’s approach to development impact management is verified by BlueMark (a leading provider of independent impact verification) for alignment to the industry best practice “Operating Principles for Impact Management”. BII is currently the only DFI on BlueMark’s Practice Leaderboard demonstrating best-in-class impact management practices. In addition, BII’s annual Aggregate Impact Score is externally assured by EY in line with ISAE 3000 international assurance standard. BII’s processes and investment decisions are also regularly scrutinised by independent reviewing bodies such as ICAI and the NAO. For example, BII worked with ICAI over a three-year period as it implemented a new Impact Framework. On ESG standards, ICAI found BII to be “a leader among DFIs in assessing and supporting environmental, social and governance (ESG) issues” (ICAI, 2019) and that BII “is recognised as a thought leader by other DFIs in some areas, particularly on ESG issues” (ICAI, 2019). In ICAI’s most recent follow-up review it concluded that “the extent of consideration of development impact in investment decisions is now much greater and that aspects of this consideration are often impressive” (ICAI, 2021). In assessing BII’s approach to active monitoring ICAI concluded that, “we also found good evidence that all investments in our sample have been subject to regular assessment of development impact and that there was active ongoing management to improve impact or manage related risks” (ICAI, 2021).