Investment for development: The UK’s strategy towards Development Finance Institutions

International Development Committee Closed Inquiry
Opened: 9 Nov 2022 Closed: 7 Dec 2023 Parliament page
The International Development Committee launched an inquiry on Investment for Development: the UK’s strategy towards development finance institutions and the effectiveness of aid spending through British International Investment (BII). This inquiry assessed whether BII is best placed to deliver impact and value for the UK taxpayer, given that a greater … Read more
8 Recommendations
15 Conclusions
1 Report
4 Oral sessions
3 Letters
4 Events
Activity timeline 13 events
10 Jan
2024
Correspondence
10 Jan
2024
Correspondence
7 Dec
2023
Report published
15 Sep
2023
Report published
5 Jul
2023
Correspondence
6 Jun
2023
Oral evidence
6 Jun
2023
Formal meeting (oral evidence session) · Room 8, Palace of Westminster
25 Apr
2023
Oral evidence
25 Apr
2023
Formal meeting (oral evidence session) · The Thatcher Room, Portcullis House
7 Mar
2023
Oral evidence
7 Mar
2023
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
24 Jan
2023
Oral evidence
Oral evidence sessions 4 sessions
6 Jun 2023
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Investment for development: The UK’s strategy towards Development Finance Institutions
Rt Hon Andrew Mitchell · Foreign, Commonwealth & Development Office
25 Apr 2023
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Investment for development: The UK’s strategy towards Development Finance Institutions
Diana Layfield · British International Investment Nick O’Donohoe CMG · British International Investment
7 Mar 2023
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Investment for development: The UK’s strategy towards Development Finance Institutions
David Kuijper · FMO Joe Dharampal-Hornby · Impact Investing Institute Mr Stuart Bradley · Phatisa Group Limited Samantha Attridge · Overseas Development Institute
24 Jan 2023
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Investment for development: The UK’s strategy towards Development Finance Institutions
Anna Marriot · Oxfam Daniel Willis · Global Justice Now Graham Gordon · Catholic International Development Charity (CAFOD) Paul James · Publish What You Fund
Title HC No. Published Items Response
Ninth Report - Investment for development: The UK’s strategy tow… HC 884 15 Sep 2023 23 Responded
Recommendations & Conclusions
12 results
Clear
5 Conclusion Accepted
Ninth Report - Investment for deve…
BII's tracking of gender lens achievements and other key metrics remains inadequate.
We do not find BII’s approach to tracking gender lens achievements to be dynamic or suitably stretching to achieve greater development impact. Performance monitoring of key metrics to track other key indicators is also absent from BII’s strategy and public … Read more
Government Response
The Government agrees BII should promote gender equality and target under-represented groups, noting BII’s existing 2022-26 Strategy, 2X Criteria, and BOLD framework for diversity finance. It commits to ensuring gender, development impact, and environmental and social outcomes are a specified feature of future portfolio and investment evaluations.
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7 Conclusion Accepted
Ninth Report - Investment for deve…
Increase FCDO oversight of BII's thematic and geographic investment split in annual reporting.
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 … Read more
Government Response
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.
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8 Recommendation Accepted
Ninth Report - Investment for deve…
Articulate BII's work promoting gender equality and targeting under-represented groups with clear impact proposals.
BII should articulate the work it strives to do to promote gender equality and target under-represented groups through its investee businesses by setting its own proposal for impact. This should set out the categories of people that are being targeted, … Read more
Government Response
The Government agrees that BII investments must support inclusive economic growth, stating that BII’s current 2022-26 strategy already includes objectives for inclusive development, integrated through its Impact Framework and Impact Score. The FCDO continues to monitor BII’s performance against this, including an analysis requested in 2023.
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10 Conclusion Accepted
Ninth Report - Investment for deve…
BII investments in middle-income countries are poorly targeted, risking lost development focus.
Some of BII’s investments in middle-income countries have been poorly targeted and do not appear to be reaching the poorest and most marginalised people. In some cases, BII investments have tenuous links to development impact. By concentrating its investments in … Read more
Government Response
The Government agrees that poverty reduction must be central to BII's investments, stating that BII's existing strategic objectives and Impact Score already integrate productive, sustainable, and inclusive development. It confirms BII's oversight of investments, including through intermediaries, and is satisfied with BII’s existing procedures and safeguards, arguing that altering them could reduce foreign direct investment.
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12 Conclusion Accepted
Ninth Report - Investment for deve…
Pursue BII investments with a clearer focus on inclusive growth and reducing inequality.
To ensure that poverty reduction is central to BII’s investment decisions, BII must pursue investments that demonstrate a clearer focus on driving inclusive economic growth and reducing financial and social inequality.
Government Response
The government describes existing mechanisms for ministerial scrutiny of BII's budget and activities, and highlights independent evaluations that show BII's investments are on track to meet development impact goals, arguing that poverty reduction is already central.
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13 Conclusion Accepted
Ninth Report - Investment for deve…
BII fails to demonstrate investment additionality, crowding out commercial investors.
In some instances BII has not demonstrated the additionality of its investments and is consequently competing with and crowding out commercial investors.
Government Response
The government agrees with the importance of transparency and states that BII will publish a Transparency Roadmap before the end of 2023, outlining its ambition to be the most transparent bilateral development finance institution and detailing specific short-term actions.
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15 Conclusion Accepted
Ninth Report - Investment for deve…
Financial intermediaries channel UK funds to low-tax jurisdictions and questionable development investments.
Financial intermediaries can deliver market expertise, but such investment vehicles can result in UK taxpayers’ money being used to reward intermediary agents in low- tax jurisdictions. In some cases, the onward investments made by intermediaries have rewarded businesses with weak … Read more
Government Response
The government partially accepts, agreeing on the importance of poverty reduction but states they are satisfied with BII's existing processes and oversight of investments made through intermediaries, which comply with key policies and support development.
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16 Recommendation Accepted
Ninth Report - Investment for deve…
Exert greater BII oversight of intermediaries, ensuring investments reduce inequality and generate local tax receipts.
To ensure that poverty reduction is central to BII’s investment decisions and to prioritise investments that are critical to recipient countries’ development needs, BII must: (a) take responsibility for where its money is invested by exerting greater oversight and control … Read more
Government Response
The government partially accepts the recommendation, stating that BII already has appropriate oversight and monitoring processes in place, which Ministers are satisfied with. The response highlights existing mechanisms for ensuring compliance with BII's policies and promoting poverty reduction through its strategic objectives, but does not commit to new actions for greater oversight, specifically targeting tax receipts, or intervening on misaligned values beyond current legal requirements.
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17 Conclusion Accepted
Ninth Report - Investment for deve…
BII's internal controls failed to prevent harmful investments and were slow to respond.
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 … Read more
Government Response
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.
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18 Recommendation Accepted
Ninth Report - Investment for deve…
FCDO must audit BII’s investment portfolio against ESG and development impact standards.
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 … Read more
Government Response
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.
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21 Recommendation Accepted
Ninth Report - Investment for deve…
Mandate BII to annually publish comprehensive investment performance data for greater transparency.
BII needs to work towards greater transparency of its investment data. As BII has stewardship over taxpayers’ money, there is greater responsibility to ensure propriety over its investments by annually publishing performance data. We welcome BII’s steps towards improving its … Read more
Government Response
The government accepts the recommendation, setting a goal for BII to rank as the most transparent bilateral DFI. BII will publish a Transparency Roadmap outlining its ambition and specific short-term milestones.
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23 Recommendation Accepted
Ninth Report - Investment for deve…
Require BII to use the DFI Transparency Index as a roadmap for operational transparency.
BII should use Publish What You Fund’s DFI Transparency Index as a roadmap to increase the transparency of its operations and public disclosures. (Paragraph 117) Investment for development: The UK’s strategy towards Development Finance Institutions 59 Read more
Government Response
The government accepts the recommendation, setting a goal for BII to rank as the most transparent bilateral DFI in the next Publish What You Fund index. BII will publish a Transparency Roadmap with specific short-term milestones to achieve this.
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Government Response AI assessment · 23 of 8 classified
Accepted 12
Accepted in Part 3
Deferred 6
Rejected 2
Total 8 recs + 15 conclusions
Correspondence 3 letters
10 Jan 2024 Correspondence from the Minister for Development & Africa relating to Clarification on BII Funding Eligibility for Overseas Territories - 20 December 2023
Parliament page
10 Jan 2024 Correspondence to the Minister for Development & Africa relating to Clarification on BII Funding Eligibility for Overseas Territories - 5 December 2023
Parliament page
5 Jul 2023 Correspondence from the Minister for Development and Africa regarding British International Investment (BII) Statutory Instrument - 20 June 2023
Parliament page