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

The Government does not agree with appointing a non-voting government official to BII’s Board, arguing it would disrupt dynamics and duplicate existing oversight. It committed to maintaining best practice governance and periodically reviewing procedures.

The Government agrees on the need for effective collaboration between FCDO and BII, noting existing guidance and close work. Ministers will explore opportunities to strengthen this, including integrating collaboration into country business plans, but the response does not address the specific recommendation for a non-voting FCDO seat on the BII board.

The Government acknowledges the importance of monitoring BII's impact, detailing existing oversight arrangements and annual reviews. It commits to review the log frame for additional indicators and to review SMART targets for the next strategy period (2027), but rejects introducing new SMART targets in the current period. The response does not directly address greater collaboration at country/regional levels.

The Government already monitors the thematic and geographic split of BII investments through existing policies and reporting frameworks. However, it will not provide BII investment data alongside FCDO's annual ODA expenditure due to potential confusion, instead highlighting where this information can be found on BII's website. The response does not explicitly address the deadline or the mandate for building collaboration into country plans by March 2024.

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.

The Government agrees on the importance of measuring BIP impact and commits to publishing its British Investment Partnerships strategy by summer 2024, following consultation. However, it does not specifically commit to incorporating new stretching SMART targets for BII into FCDO strategy documents by March 2024, as recommended.

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.

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.

The Government's response addresses BII's internal processes for assessing additionality in its investments and its exit strategy, explaining how these ensure development outcomes. However, it does not address the urgent need for a broader British Investment Partnerships strategy or the specified deadline and reporting requirements for such a strategy.

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.

The government largely deflects the recommendation, describing existing oversight mechanisms and rejecting a 'full rolling audit'. It commits only to reviewing in 2024 whether additional spot checks of BII investments are required, rather than capping investments in middle-income countries.

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.

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.

The government deflects the recommendation regarding additionality and market focus, focusing instead on BII's transparency and stating that BII will publish a Transparency Roadmap with milestones to become the most transparent bilateral DFI.

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.

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.

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.

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.

The government partially accepts, agreeing ministers should maintain scrutiny over ODA and BII allocations. While stating BII annually monitors development impact for active investments since 2012 and current monitoring is appropriate, the FCDO will review in 2024 whether additional external spot checks are needed to verify BII's internal assessments.

The government partially accepts, agreeing ministers should scrutinize the ODA budget and BII allocations. While stating BII already annually monitors impact for active investments since 2012 and that current monitoring is considered appropriate, the FCDO will review in 2024 whether additional external spot checks are needed to verify BII's internal assessments.

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.

The government partially accepts, agreeing on the importance of monitoring and reporting. BII will publish a Transparency Roadmap and begin disclosing qualifying criteria for new 2X investments, while already reporting on some impact data. However, it does not explicitly commit to publishing a full annual listing of fossil fuel investments or plans for recourse for shortcomings.

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.