BII has grown — but is it delivering for the poorest?

A decade after the United Kingdom’s development institution, British International Investment, or BII, overhauled its strategy to sharpen its development focus, a new report from Bond, the U.K. network for development NGOs, said it is increasingly concentrating its funds in a small group of middle-income countries and falling behind on some of its commitments on climate and gender. The report, funded by Oxfam, said that while BII has expanded in size and reach — tripling its annual commitments since 2015 and boosting its investment in Africa — an increasing proportion of investments are concentrated in a handful of middle-income economies such as India, Egypt, Nigeria, South Africa, and Kenya. Together, those five countries account for 53% of BII’s portfolio. In a comment to Devex, a BII spokesperson said that “over half of [our] investments in 2024 went to the poorer and most fragile countries we invest in,” but added that “at the same time, it is essential that we accelerate the reduction of emissions in Middle Income Countries to safeguard the development gains that have been made.” But BII has come under increasing scrutiny as the government leans on it to help square the circle between shrinking aid budgets and growing global commitments, particularly on climate. “BII appeals to the Treasury because its funding does not count as spending in the Government accounts and its capitalisation has continued despite steep cuts in the overall aid budget,” Ian Mitchell, senior policy fellow at the Center for Global Development, told Devex. “With only a fraction of its finance reaching the poorest countries it will do little for the Government’s poverty goal.” Bond’s analysis highlighted other persistent weaknesses. BII has committed to reaching net-zero by 2050, but still holds around 6% of its portfolio in fossil fuels. BII said this is part of a longer process. Over the last four years, the organization has halved its “exposure to fossil fuels” according to the spokesperson. The organization has also not made any new fossil fuel commitments in the last three years. “Forced divestment does not reduce emissions,” the spokesperson said. “It merely increases the likelihood that buyers of such assets would be less responsible owners. Being viewed as a forced seller would also reduce the value that BII could realise for the UK taxpayer.” But BII has the potential to be a big mover on climate. “[BII] will likely play a bigger role on climate finance where it can reinvest successful investments and ‘mobilise’ an additional fraction, which the UK can count towards the climate finance goal for 2035 agreed at the last COP,” said Mitchell. “With pressures on the aid budget; it would be helpful to see the Government and BII setting out options to access non-aid finance from new investors.” Its record on gender and inclusion also lags: Despite adopting the 2X Challenge framework, a global initiative to mobilize and track investments that promote women's economic empowerment in developing countries, the institution has not provided robust evidence that its investments are creating quality jobs for women or reaching low-income groups. The spokesperson said that between 2022 and 2024, 34% of its commitments qualified under the 2X Challenge framework, adding that “BII is committed to further strengthening 2X Global as the recognised standard for gender-lens investing by our fellow [development finance institutions] and private capital investors.” BII has taken steps to address long-standing critiques. It has shifted toward more direct investments, increased its exposure to Africa, and introduced a “catalyst” portfolio designed to absorb higher risk for greater development impact. But Bond argued the institution has yet to prove it is taking the kinds of risks needed to deliver transformational results for the poorest. “BII has undertaken some notable reforms which have changed the focus and character of its investments in [low- and middle-income countries],” the report said. “Nevertheless … BII has a long way to go to fully address these challenges, as significant concerns remain about its approach.”