How does BII incorporate infrastructure impact investments into its portfolio?
We are investing in critical infrastructure such as power, ports or water. But we specifically look for investments that boost innovation and accelerate clean, inclusive growth.
For example, we backed pioneering battery storage power technology for the Cuamba solar project in northern Mozambique. We created a clean energy developer Ayana, which recently passed 1GW of operational renewable energy in India. Our investment in Moyi Power project in the DRC, developed by our subsidiary Gridworks, will promote inclusion by connecting 23,000 off-grid households in the first five years.
What are the key challenges involved?
Key challenges are risks associated with unproven business models, political and macroeconomic risks in frontier markets, uncertain project development timelines and the lack of investment-ready projects. Dealing with these requires long-term, patient capital, which BII will continue to provide across all stages of project development. We take early-stage risk and can lower risk through feasibility studies by bringing in concessional capital to take projects from concept to creation.
How has the pandemic changed the infrastructure impact landscape?
The pandemic again revealed how vulnerable developing countries are to unexpected economic shocks. Quality healthcare, water and sanitation are essential for productive and healthy citizens, and transport, power and telecommunications are needed for economic growth and there remain big development needs in many countries.
At the same time, the pandemic has further stretched the finances of governments and will make it even more difficult to fund key infrastructure priorities. We need a holistic approach to development that respects local priorities while mobilising international private investment, supporting technology transfer to support sustainable and inclusive economic growth.
How does BII assess impact?
The development impact of all our investments is assessed on how they support ‘productivity’, how they address a key bottleneck to economic growth in a country; ‘sustainability’, how they support the transition to a low-carbon and resilient economy; and ‘inclusivity’, how they reach low-income or disadvantaged populations or target the most fragile countries. In the case of infrastructure, we look for example at the share of renewable energy produced by our portfolio companies and the emissions our clean energy or resource efficiency investments will ultimately avoid. We also look at the jobs that our enabling infrastructure investments (eg in ports) can support in the wider economy. As a member of the 2X Challenge, we also track investments that support women’s economic empowerment.
Where does BII see opportunities for impact going forward?
Sustainable and climate-resilient infrastructure focusing on renewable energy, digitalisation, transport and water will drive development in Africa and Asia and create resilient and inclusive economies. Thirty percent of our overall investment – some £2.5 billion ($3.3 billion; €3 billion) over the next five years – will be dedicated to climate finance, of which over £2 billion will focus on infrastructure. British International Investment will strive to remain a beacon for how responsible investments can blend growth, ambition and targeted impact.
Holger Rothenbusch is managing director and head of the infra and climate group at BII, the UK’s development finance institution