‘The world is cutting foreign aid – but there is a better way to tackle the climate crisis'

In 2023, some $52 million (£38 million) was invested in a groundbreaking solar power plant in Sierra Leone, which is set to increase the East African country's electricity supply by 30 per cent. In a separate project, a power utility called Weza Power was set up in the West African nation of Burundi, which aims to bring grid power to 70 per cent of the country's population, up from a current rate of 12 per cent.
Some £21.8m was also spent building warehouses across Nigeria, Kenya and Uganda, giving 200,000 small-scale farmers access to storage solutions that will help them bring their crops to market.
All of these projects are united by the fact that they have been funded by British International Investments (BII), the UK's development finance institute. Little known outside of global development policy circles, BII is a key driver of the UK government's foreign assistance and climate interests, and is committing to keep being so, even as much of the rest of the world retreats.
The quango was founded in 1948 with a mandate to 'do good without losing money' – and since then has created an estimated one million jobs around the world, and provided around 26 million people in Sub-Saharan Africa with access to clean energy.
Between 2014 and 2023, BII received about £4.5 billion from the UK overseas aid budget, which translates to around 4 per cent of the aid budget total over that period. The organisation is unlikely to receive any additional funds from the UK government over the next five years as Keir Starmer's government implements cuts to aid funding – although it is confident it can continue with its work successfully using existing resources.
The investment-focused model of BII allows for its impact to have a far larger ripple effect than such headline funding would suggest.
'There are two sides to the ODA [overseas development assistance] coin: traditional donor-based ODA, and the investment side. We fall squarely on the investment side,' says BII CEO Leslie Maasdorp, who met The Independent at the BII offices in Westminster.
In all, BII has investments in over 1,580 businesses across 65 countries, with total assets worth £8.5bn. In 2023 alone, BII invested £1.3 billion pounds in projects around the world, with 61 per cent of that total invested in projects in Africa.
Given that it is backed by the UK government, BII is happy to invest in projects for returns that are as low as 2 per cent, which is far lower than commercial banks will invest for. There is also a 'halo effect' around its investments, says Maasdorp, where the presence of BII encouraging more risk-averse financiers to think that a certain country is safe to invest in.
'A lot of countries in Sub-Saharan Africa are overlooked by investors. The big pension funds and asset managers don't have people on the ground in Nigeria, the DRC, or Sierra Leone, but we do' explains Maasdorp. 'There's also a lot more work that needs to be done to bring a project to a bankable stage, which we have a lot of experience in.'
A large part of BII's investment focus is in countries known in financial circles as 'frontier markets': 'These are largely under-developed, and where access to capital is scarce,' says Maasdorp. 'We have a high risk appetite for these markets.'
BII also invests in high-emitting, middle income countries in Southeast Asia and South Asia, where investments can make a 'major impact' on tackling emissions footprints, Maasdorp adds.
BII is now also the UK's primary vehicle for the delivery of climate finance to developing countries: In 2024, it gave some $900m to climate causes, Maasdorp exclusively revealed to The Independent, bringing the organisations total over the past three years to $2.2bn
A key focus for BII to that end is investing in energy access and renewables – and particularly so in Africa, where 600m people continue to lack electricity. Some 940m people also continue to lack access to clean-burning cooking solutions on the continent, which is a problem that raises environmental concerns over deforestation for firewood and health concerns over the risks related to polluting fuels, among other things.
'The one area that is the undisputed number one priority in the development agenda today is energy poverty,' says Maasdorp. 'In Africa, it is a number one priority. You cannot do anything without energy: factories, clinics, schools and hospitals all need power.'
Maasdorp joined BII in October last year following a career that has spanned the New Development Bank – which is the Shanghai-based development finance institute of the BRICs – the group formed by Brazil, Russia, India and China. Maasdorp also worked for Goldman Sachs, Barclays, and held government roles in his native South Africa.
He clearly has high ambition for BII: 'We are very proud to be the UK's leading vehicle for investment in climate, and we really see what we have invested so far as the floor, rather than the ceiling,' he says.
At the same time, external forces would appear to be working against Maasdorp's ambition to increase financing. Earlier this year Keir Starmer announced that the UK will cut the UK's aid budget from 0.5 to 0.3 per cent of Gross National Income (GNI), which is believed to represent a cut in real terms of around £6.2bn.
This is on top of significant cuts to aid budgets in other parts of the world, including from major donors like France and Germany, and a gutting of 87 per cent of programmes that had formerly been funded by USAID.
BII's financing from the aid budget is agreed every five years, and the next five-year strategy period is to begin next year. While Rachel Reeves' Spending Review earlier this month did not go into sufficient detail to mention BII, current signals suggests that the government will struggle to inject fresh capital into BII as aid budgets are cut.
Nick Dyer, director of global programmes in international development at FCDO, told the International Development Committee on 13 May that 'in a 0.3 per cent world I think that it will be difficult for us to provide any core funding to BII'.
But a BII spokesperson more recently told The Independent that even if there is no new injection of cash from FCDO, BII will be able to maintain its current levels of investment, given that the past seven years it has made average returns of 5.1 per cent.
'The company has a self-financing model that delivers development impact and a financial return for the UK taxpayer. BII will continue to invest at its current rate,' the BII spokesperson said.
Prior to 2016, there was a long period where BII was not topped up by the aid budget, so no new money is not unprecedented – though it will prevent BII from growing as much as it might have done.
Maasdorp is clear that, even if the US is retracting from its climate commitments, with President Trump declaring his intention to remove the US from the Paris Agreement, climate will remain a priority for BII.
'It is very clear that climate will remain central to the mandate of BII,' says Maasdorp. That mandate currently holds a target of 30 per cent of spending on climate – but BII currently spends at 40 per cent.
'We recognise that there is an inextricable and interconnected relationship between climate and development, and development gains will be completely eroded if we don't also invest in climate,' he adds.
Maasdorp nonetheless recognises that climate programmes face major funding challenges globally in the coming years.
At the COP29 climate conference in Baku, Azerbaijan, which took place at the end of last year, the world set itself the challenge of boosting climate finance to $300bn (£224bn) a year by 2035. This target was already widely decried at the time as inadequate given the sheer cost of tackling climate change – but even so is now under threat due to the global retreat from development spending, believes Maasdorp.
'The ability of the developed world to meet such targets is becoming even more challenging,' he says.
'Whether certain countries will now step forward and increase their funding remains to be seen though it seems unlikely that the UK will be able to do so, at least in the short term, given the cuts north of £6bn that have been announced.'
Where spending does come under pressure, Maasdorp believes that the investment-focused strategy of BII is a cost-efficient model to drive the UK's climate agenda as grant-based programmes come under pressure.
'A focus on investment helps encourage long-term sustainable growth in those countries, with governments able to use taxes that come in from companies to invest in education, healthcare, and clinics,' he says. 'That is a better legacy than what can be achieved with aid.'
Maasdorp is among those who argue that rethinking the manner in which aid is designed and distributed is not necessarily a bad thing in some cases. This is because are countries around the world that have been highly dependent on aid for many years, but continue to record weak economic growth and development outcomes, which is a dynamic many people in the development world would like to shift.
'When I speak to policymakers, heads of state, and ministers of finance, everybody agrees that it is a good thing to try and end aid dependency, and for countries to take ownership of their development trajectory,' says Maasdorp.
While Africa continues to face huge developmental challenges, it is also a continent of vast potential, with 70 per cent of its population under the age of 30, and seven of the ten fast-growing economies in the world in 2025.
Foreign investment flows into Africa continue to pale in comparison to other parts of the world - but Maasdorp believes with innovative new financing models driven by organisations like BII, these dynamics really can begin to shift.
'We work with the government to improve the investment environment, and then we encourage other financiers to invest alongside us,' he continues. 'We believe we are at a sweet spot now where we can be a vehicle through which larger institutions can begin investing in Africa.'

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