The News
Britain’s development finance body is working with London’s financial district to ramp up funding for sustainable energy projects in Africa as the impact of Washington’s withdrawal from global climate and humanitarian commitments intensifies.
Asked about the impact of the US stepping back from climate commitments, Leslie Maasdorp, who was appointed British International Investment’s CEO late last year, said the UK sought to play a “bigger global leadership role” on climate finance by mobilizing capital from institutional investors, pension funds, and insurance companies.
Maasdorp said that BII — which directed around 60% of its £1.3 billion ($1.7 billion) in investments in 2023 to projects in Africa — had begun “engaging” with the City of London, the part of the British capital that is home to the country’s banks and financial institutions, after receiving £100 million from the UK government in September to attract private capital. BII sought proposals from asset managers on how best to invest half of the sum, drawing around 30 proposals from large institutional investors.
“The opportunity for BIII is to now leverage off our climate finance capability,” said Maasdorp, stressing that the development finance institution, which has prioritized climate finance in recent years, played a key role by de-risking climate projects in frontier and emerging market countries across Africa. “There’s clearly a gap between what people perceive as the risk and what the real risks are.”
In this article:
Know More
BII, which is owned by the British government, has committed to ensuring at least 30% of its new commitments by value will be in climate finance until 2026, a pledge which stands in contrast to the approach adopted by the US in recent weeks.
Since Donald Trump returned to the White House in January, the US has withdrawn from both the Paris Climate Agreement and the multibillion-dollar Just Energy Transition Partnership (JETP) that aims to help a handful of emerging economies transition to clean energy.
The Trump administration has also dismantled Washington’s main foreign aid body, the US Agency for International Development (USAID), and the future of the Development Finance Corporation — created during Trump’s first term — is uncertain.
The UK has also implemented cuts, reducing Britain’s aid budget from 0.5% to 0.3% of GDP to help fund increased defence spending. BII is occasionally recapitalized from the overseas aid budget, drawing about 4% of the total aid budget over the last decade.
“We’re entering a world of more constraints, there’s no question about it,” said Maasdorp. “You need to do more with less. That is the overarching theme.”
Alexis’s view
The new BII CEO is following the development finance institution’s five-year strategic plan that will end next year. A new set of priorities, to be signed off by Maasdorp and the board, will come into effect in 2027.
It’s clear that BII will have to recalibrate its approach in the face of global shifts: The DFI’s priorities are likely to change. The last strategic roadmap was rolled out before the mainstream explosion of generative artificial intelligence. It would make sense to place a greater emphasis on developing much needed digital public infrastructure across Africa. And DFIs will have to adapt to dwindling pools of capital.
But the full extent and impact of those constraints is not yet clear. Maasdorp told me Britain’s finance institution will work closely with its European counterparts to maximize the impact of its investments. Yet a number of European countries have announced development finance cuts in recent months including the Netherlands, Belgium, France, and Germany.
It will take months — perhaps even years — to see how those changes, combined with Washington’s withdrawal from its climate commitments, play out. Against this backdrop of uncertainty, it makes sense for BII to focus on its ties with the UK’s financial hub.
Room for Disagreement
Ryan Anderton, a researcher at the nonprofit transparency campaign group Publish What You Fund, said details of some climate finance initiatives were opaque. “At the very least, DFIs should explain their methodologies and disclose which projects have climate finance, the amounts, and the reasons for counting them as such,” he wrote in a blog post last year.
“Without sufficient transparency, especially at the project level, it is hard to verify claims and to see the actual impacts of climate finance,” wrote Anderton.
Notable
- Trump may be able to slow the transition away from fossil fuels, but he will not be able to stop it completely, experts told The New York Times.