Source · Select Committees · International Development Committee
Recommendation 18
18
Accepted
FCDO must audit BII’s investment portfolio against ESG and development impact standards.
Recommendation
The FCDO must hold BII accountable for its due diligence and ongoing monitoring of its direct and indirect investments. To that end, FCDO must audit BII’s investment portfolio over a rolling five-year period against a set of environmental, social and governance (ESG) and development impact standards to validate BII’s internal assessments. (Paragraph 95) Accountability and Transparency
Government Response Summary
The government partially accepts, agreeing it should hold BII accountable for due diligence and monitoring. It asserts that existing corporate governance arrangements, FCA regulation, and independent verification by bodies like BlueMark, ICAI, and NAO already ensure best practice and validate BII's internal assessments.
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).