The United Kingdom’s development finance institution, long known as CDC Group, officially became British International Investment on Monday.
Just as it was preparing for the name change, the institution came under fire by British lawmakers over an investment — the largest in its history — in a company whose subsidiary recently admitted to violating U.K. law.
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• The name change is accompanied by a new strategy. BII is set to be a major tool for U.K. international policy that will provide Asian and African countries with an alternative to “working with authoritarian regimes,” says Foreign Secretary Liz Truss.
• BII will mobilize up to £8 billion ($10.5 billion) of investment a year by 2025 and serve as “the heart” of Britain’s financing for low- and middle-income countries, while also creating jobs and export opportunities for the U.K., Truss has said. The new BII strategy, which we detailed in December, focuses on achieving development that is productive, sustainable, and inclusive.
• BII plans to expand into new countries in the Caribbean and Southeast Asia, expecting to focus on climate finance in those places. At a strategy launch event last year, Chief Executive Nick O’Donohoe said BII will “retain our historic focus on Africa.” On Monday, O’Donohoe said the institution would “continue to solve the biggest global development challenges by investing patient, flexible capital to support private sector growth and innovation.”
• Not everyone is convinced about the changes to the institution. “This new name gives the concerning suggestion that BII is now all about promoting British business interests abroad. In the background of huge swathes of cuts to ODA, with many vital programmes in the world’s poorest countries losing funding, it’s extremely worrying to see that BII has not seen any reductions themselves,” Dario Kenner, lead analyst on sustainable economic development at the Catholic Agency for Overseas Development, told Will.
Read more about BII’s controversial investment in DP World — the owner of P&O Ferries, which admitted to illegally firing 800 staff members without notice and replacing them with workers earning less than the U.K. minimum wage.
$4.6 trillion
—That’s the approximate value of fossil fuel financing from the world’s 60 largest banks since the adoption of the Paris Agreement, according to a new report from a group of environmental and campaigning organizations.
Those banks invested about $742 billion in fossil fuels in 2021 alone, even as many of them — including JPMorgan Chase, one of the largest funders of fossil fuels — made public commitments to align with the Paris Agreement.
Last week the U.S. Senate passed the America COMPETES Act, aimed at countering Chinese influence. Buried in the 2,000-plus page bill is a section about DFC that proposes two key changes to the agency.
If it becomes law, the bill would expand DFC’s spending cap from $60 billion to $100 billion.
The bill also includes nonbinding language stating that equity investments made by the agency must be considered part of a federal credit program. If implemented, that could mean a long-awaited fix for how equity investments are scored for accounting purposes. The scoring issue has severely limited the amount of investments that the agency could make and put pressure on limited funding for the foreign affairs budget.
The Senate and House must now reconcile their versions of the bill. But a congressional aide tells Adva that the DFC provision is a top priority for the administration and that senior officials, including USAID Administrator Samantha Power, were pushing congressional leadership to include it.
Related: The U.S. isn’t alone in making policy moves to counter China. For Pro subscribers, our colleague Vince Chadwick reports on the EU’s new Belt-and-Road-beating “Global Gateway” investment plan.
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The European Bank for Reconstruction and Development’s board of governors has decided to suspend funding for Russia and Belarus following the invasion of Ukraine. The move follows EBRD’s previous announcement that it would close offices in those countries. The bank will not provide new financing for projects or technical cooperation in either country, and it can also suspend or cancel disbursements of funding for existing projects.
Our colleague Vince reports that the move was partly symbolic, given that bank management had already stopped bringing projects to the board for approval, and both countries remain shareholders. The whole thing could have backfired had there not been a strong response from the 73 shareholders to formally suspend lending. In the end, Vince heard, 57 voted in favor, 2 against, 4 filed abstentions, and the remaining 10 did not respond at all.
An EBRD spokesperson did not comment other than to say the decision was backed by a “strong majority.”
The European Commission’s representative to the bank, Valdis Dombrovskis, welcomed the move, tweeting that “others should follow suit.” Vince asked the commission who Dombrovskis had in mind, and a spokesperson said he meant “other institutions” generally.
• The World Bank and the Global Environment Facility are launching the Wildlife Conservation Bond — a five-year, $150 million sustainable development bond aimed at protecting endangered species in South Africa, with a potential performance payment from GEF if targets are met. Also known as the “Rhino Bond,” it marks the first time this type of outcome-based financial instrument has been used for conservation.
• Women’s World Banking Asset Management has closed its second fund to help narrow the gender gap in financial inclusion, raising $103 million. The fund aims to demonstrate “the business case for gender lens investing by achieving attractive returns for its investors.”
• DFC has announced an $18 million loan to Axxis Hospital in Quito, Ecuador. “Axxis is the only private healthcare facility in the country focused on providing state-of-the-art maternal and pediatric services,” DFC says. The investment will help it expand capacity and increase its staff.
Behind AfDB’s $3 billion plan for African health manufacturing. [Devex Pro]
An inconvenient truth about ESG investing. [Harvard Business Review]
An overview of the IRIS+ impact performance benchmarks. [Global Impact Investing Network]
Interactive: Explore the World Bank’s funding pipeline from 2019-2021. [Devex Pro]