In Focus Interview with British International Investment

By Lucy Haydon, Editor

In this interview, we speak with Srini Nagarajan, Managing Director and Head of Asia at British International Investment on their successes and priorities in development finance and impact investing in the region and beyond.

Can you share an introduction to BII for our readers - what is the primary goal of the organisation?

British International Investment (BII) is the UK Government’s development finance institution (DFI) and impact investor. We are the oldest DFI in the world with over 75 years’ experience investing in emerging economies. Our mission is to help solve the biggest global development challenges by investing patient, flexible capital to support private sector growth and innovation in parts of Asia, Africa and the Caribbean.

We are a sustainable investor, which means that not only do we support businesses to flourish in a way that is good for both local communities and the environment, we also help them to grow over the long term and to withstand tough economic cycles. Overall, our patient and flexible capital supports nearly 1,500 companies in 65 countries, which employ almost one million people.

We invested in Southeast Asia for many years supporting economic growth in key countries including Singapore, Indonesia, Philippines, Thailand, and Malaysia. Part of our history in the region is that we were one of the initial investors in DBS Bank, Southeast Asia’s largest bank.

I have been part of BII for many years and the organisation has seen a few changes including shifting our Asia focus to India and other developing countries such as Pakistan, Bangladesh and Nepal as part of our 2012 strategy.

In 2022, we re-entered the region as part of an Indo-Pacific tilt by the UK Government and allocated up to £500 million for climate-related investments in the region during our current strategy period (2022-2026).

Can you share some success stories?

We invest across a broad range of sectors that drive job creation, stimulate productivity, and advance sustainable development in complex and dynamic growth markets. We are particularly known for our innovative platforms that address market gaps such as providing climate finance in countries that are most vulnerable to the impacts of climate change.

For example, in India, Ayana Renewable Power, launched by BII in 2018, has grown to become one of the largest renewable energy developers with a 5GW project portfolio. It is supported by the country’s government-anchored National Investment and Infrastructure Fund and investment manager Eversource.

In 2019, we launched Gridworks, a transmission and distribution platform in Africa, with a goal to improve the quality and availability of power on the continent. It also demonstrates that African transmission and distribution can be an investible asset class through its ground-breaking investments such as Amari Power Transmission and Moyi Power.

With the strategy update last year from the FCDO to focus on the Indo-Pacific Tilt and open an office in Singapore, how has this resulted in progressing investment in the region?

Asia’s energy demand is increasing as one of the fastest-growing regions in the world. According to the International Energy Agency’s estimates, the region’s primary energy demand will grow by 1.8 times by 2050 and renewables in the power demand will grow by 4.4 times in the Stated Policies scenario.

Governments are keen to deliver alternative energy sources as they also move towards their sustainability goals. The development needed to deliver on this ambition is substantial, and BII can play an important role as a catalyst to mobilise private capital and develop the market with best practices.

In South-East Asia, we look at the emerging markets where development support is needed the most – Indonesia, Vietnam and the Philippines, with a focus on climate finance. These countries have been economically reliant on fossil fuels, with a strong need for decarbonisation and a just energy transition that supports people who are most vulnerable to climate change. These economies require long-term investment in this area which can withstand economic cycles.

Since our Singapore office opened in 2022, we have made several climate-related fund investments including SUSI Asia Energy Transition Fund, Circulate Capital Ocean Fund I-B, Wavemaker Impact and Southeast Asia Clean Energy Fund II. These investments aim to address the global challenges of climate change from a wider industry spectrum such as clean energy solutions, circular economy and climate tech start-ups. They are also expected to provide us with future co-investment opportunities.

Earlier this year, we signed a partnership with the Asian Development Bank to finance up to $100 million of green trade transactions in Asia. This aims to address the region’s market demand for longer-tenor finance needed to support climate-related projects, particularly within the renewable energy sector.

We have recently made our first direct investments in support of decarbonisation efforts in South-East Asia. Our equity investment in Skye Renewables with Japan’s Idemitsu Kosan and debt financing for BECIS alongside FMO are expected to support the development of the nascent Commercial and Industrial renewables sector in the region. This will help to reduce carbon emissions and displace on-grid power consumption.

Our mandate in South-East Asia is to look at climate-related opportunities where DFIs like us can play a key role to catalyse the market and mobilise private sector investments.

What are the priorities and challenges in the markets BII focuses on?

Southeast Asia presents enormous potential in its role in climate adaptation and mitigation. However, there have been limited bankable opportunities and a mixed regulatory and policy framework is a recognised issue.

Institutions like BII can be a catalyst for positive change by taking on more risk, co-investing with trusted partners in early and mid-stage businesses that create innovative solutions, and helping to build the necessary framework as countries develop.

We are keen to align with the local Governments to deliver development impacts and support continued positive change.

How do you source and select the projects and funds BII invests in?

As we invest across a full spectrum of capital solutions including indirectly through funds, or directly through equity, debt and debt instruments, partnerships are important for us in this region. We also work with fellow DFIs, multilateral development banks and institutional partners to explore collaborative deals to create greater impact.

We look for organisations with high ethical business integrity standards within developing economies. We also play a role in enhancing ESG practices within the companies we invest in, and providing an appropriate capital structure that reflects their growth ambitions and allows them to reach their full potential and bring about positive impacts.

BII’s support provides a stamp of good governance and credibility, so our diligence in choosing the projects we support, and finding people who are willing to go the extra mile to make lasting change, is critical.

As the UK’s DFI, BII invests responsibly. Our investment decisions are driven by how the prospective investment meets our criteria and supports our strategic development objectives.

British International Investment (BII) are the UK’s development finance institution and impact investor with a mission to help solve the biggest global development challenges by investing patient, flexible capital to support private sector growth and innovation. Visit www. bii.co.uk/en for more information.