Devex Invested: Will CDC Group’s mission change along with its name?

What’s in a name? In the case of the United Kingdom’s development finance institution, perhaps a lot. Last week, Foreign Secretary Liz Truss unveiled a major overhaul of CDC Group.

The agency is set to rebrand as British International Investment and will have a broader mandate.

• But observers interpreted the announcement by Truss — who talked about “building a network of liberty across the world” and “reliable and honest sources of finance” — as suggesting the move was made to compete with Chinese finance and influence, my colleague Will Worley writes.

• The overhaul intends to see £8 billion ($10.67 billion) mobilized by 2025, including through capital markets and sovereign wealth funds. It came as a surprise to many and drew some criticism from development experts.

• The changes to CDC Group are an “acceleration” of a wider, ongoing shift in U.K. development policy, according to Dario Kenner, lead analyst for sustainable economic development at the Catholic Agency for Overseas Development. A “deliberate link” is being made between official development assistance and “opening up opportunities for business and investors from the U.K.” he says, adding that CAFOD has questioned whether this is the best use of ODA amid the country’s recent aid cuts.

• But Nick O’Donohoe, the chief executive at CDC Group, says, “I don’t think it signals a huge shift in U.K. development policy.” CDC’s new investment policy, which states that the organization’s mission is to “help solve the biggest global development challenges by investing patient, flexible capital to support private sector growth and innovation,” goes into effect in 2022.

Devex Pro: Does CDC Group's rebrand signal a shift in UK development strategy?

Up next: Keep your eyes out for Will’s interview with O’Donohoe for more details on what this means for CDC Group.

+ Do the changes to U.K. aid over the past year signal the end of its position as a development leader? Devex Pro subscribers can join Will and a panel of experts tomorrow at 9:00 a.m. ET (3:00 p.m. CET) to find out more.

In the hot seat

Scott Nathan, the nominee to lead the U.S. DFC, is set to appear before the Senate Foreign Relations Committee this week for his nomination hearing. Nathan served in the State Department during former President Barack Obama’s administration as special representative for commercial and business affairs. He also worked for nearly two decades at The Baupost Group, a private investment company.

I’ll be listening for how he talks about balancing DFC’s development mandate against foreign policy objectives, what the agency’s focus on climate finance might look like under his tenure, its expansion plans, and how he thinks DFC should approach investing in upper-middle-income countries. Watch this space.

ICYMI: What is DFC’s mandate? Debate over a bill turns up many answers.

Whose responsibility?

Some of the world’s biggest asset owners are pushing for a blended finance approach to tackle climate challenges in low-income countries. A new paper by the Net-Zero Asset Owner Alliance calls on multilateral development banks and DFIs to play a pivotal role.

“Leveraging their capacities, strong experience and track records to facilitate investments is a priority for scaling the deployment of blended finance and attracting long term capital towards a low carbon future, as well driving a just transition,” according to the report.

One issue highlighted is that blended finance funds — a mix of private and public investments — can be uniquely “complex to structure.” However, the report says regulation around securitization could help ease the process and build confidence. De-risking, along with better data sharing by donors and DFIs, could also be a magnet for institutional investors.

Lessons learned

Last month, the British Asian Trust launched a $14.4 million development impact bond to upskill 50,000 young people in India, with a particular emphasis on helping women. This is not its first bond in the region, and the trust has found that its work in development impact bonds has influenced its grant giving. DIBs often encourage innovation, demonstrate the importance of long-term funding, and don’t have the same undesirable power dynamics as traditional income streams, British Asian Trust tells my colleague David Ainsworth.

Devex Pro: How impact bonds improved British Asian Trust’s grant giving

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Need a refresher on development impact bonds? Watch this video explainer.

What we’re reading

• USAID announced a big push (again) for localization. Here’s a look at how much of its acquisition spending went to local partners in fiscal year 2020. [Devex Pro]

• Can Nobel prize-winning economic theory help save coral reefs? The answer might be yes. [The Guardian]

• A United Nations working group has published a road map on business and human rights for the next decade. [Business & Human Rights Resource Centre]

• In an op-ed, African Development Bank chief Akinwumi Adesina calls on Germany to stay committed to Africa after Chancellor Angela Merkel’s exit. [Devex]

Shabtai Gold contributed to this edition.