Luxury carmakers owned by billionaires, telecom giants, and a company constructing new gas-fired power plants might not seem like obvious beneficiaries of climate aid. However, UK taxpayers have essentially provided them with hundreds of millions of pounds in so-called "climate finance"—funds intended to help developing countries address the environmental crisis.
The company arranging these deals is British International Investment (BII), which is owned by UK taxpayers. Its remit is to invest money to benefit the “poor and marginalised sections of society”, and the company allocates a large chunk of the UK’s climate aid.
But the Bureau of Investigative Journalism (TBIJ) has found that a number of BII’s “climate finance” deals have boosted the profits of huge corporations while doing little to tackle the climate crisis.
Sarah Champion MP, chair of the International Development Committee, has previously challenged BII on the added value it brings to investments. She told TBIJ: “It is absolutely critical that beyond the headline figures, the UK’s investments in climate finance add up to real change on the ground.”
At last year’s Cop climate talks, wealthy nations agreed to provide $300bn (£220bn) a year for developing countries to deal with the climate crisis. This year, the focus will be on ensuring they meet that commitment by delivering their share.
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But our revelations suggest that even the money that is delivered can go to dubious causes – raising questions about the need for a tighter definition of what climate finance really is.
“These examples clearly undermine the UK’s self-proclaimed leadership in this area and risk opening the door to violations by other countries,” said Laurie van der Burg, co-manager of global public finance at the climate campaign group Oil Change International.
“It’s a big risk for the UK’s credibility and reputation.”
A spokesperson for BII said the organisation is “a global leader in tackling the climate emergency in emerging economies” and that it made 130 climate finance investments totalling nearly £2bn between 2022 and 2024. doing for the climate.”
‘Shockingly poor due diligence’
The government is increasingly counting on BII to deliver its climate finance. Last year, the company accounted for one fifth of the UK’s total – almost half a billion pounds – according to documents obtained by climate news site Carbon Brief. Experts say it looks set to become the UK’s main vehicle to deliver foreign climate aid.
BII is backed by regular injections of UK aid money but it also seeks a return on investments to support itself financially.
One of BII’s largest investments is its majority ownership of Globeleq, a power company that generates electricity primarily by burning fossil fuels in seven countries across Africa. BII said the $46m it has invested in Globeleq since 2020 qualifies as climate finance because the money is helping the company’s strategy to increase renewable sources of electricity.
But renewables play a tiny part in Globeleq’s future plans. Over 90% of its projects currently under construction will burn fossil fuels. The largest of these is the Temane gas-fired power station in Mozambique. Globeleq claims this project is aligned with the Paris Agreement to limit global heating to 1.5 degrees, despite the fact that scientists say to reach that goal there should be no investment in new gas-fired power.
BII said the investments in Globeleq that it calls climate finance have funded its renewables projects, not Temane. And it said past investments in Globeleq that supported Temane weren’t called climate finance.
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Graham Gordon, head of global advocacy and policy at Christian Aid, an international development charity, said: “[The investigation shows] some of the investments that are still getting through show shockingly poor due diligence and a contradiction with the rest of our international policy.”
Propping up profits
The money the government puts into BII is recognised as foreign aid. To justify that, BII said it has to make deals that other investors would not. It must offer better terms and contribute to social or economic development.
“We cannot have an impact on the lives of people in the countries where we invest if we are merely substituting for other investors, adding nothing,” explains a strategy document.
Yet some investments BII calls climate finance appear to fall remarkably short of those criteria. One of BII’s largest deals in 2022 was a $250m investment in a subsidiary of Mahindra & Mahindra, a vast conglomerate run by one of India’s richest men.
It is hard to argue that Mahindra – which has businesses in cars, property, tech and financial services – needed the funds. The company boasted that it finished that financial year with a “very, very healthy cash position” of £1.2bn in the bank and it has paid out £651m in dividends to shareholders in the years since BII’s investment.
BII called its investment in Mahindra “climate finance” and the company said it would use the funds primarily to build its business in luxury electric SUVs. Mahindra has since released two new models with a promo video in which Bollywood star John Abraham tells would-be buyers: “If you want your car to be chauffeur-driven, this car is fantastic. Very, very comfortable, very cool.”
The cars cost more than £26,000 – about 18 times the average yearly income in India. BII said the investment in Mahindra accelerated the availability and adoption of electric vehicles in India, which it said are critical for the country’s green transition.
“I think the public would not expect that our [foreign aid budget] is used to support the company’s profits and luxury market,” said Christian Aid’s Gordon.
“The worst possible use of climate finance is where it actually displaces other readily available private capital. It’s a complete waste of international finance, and is actually taking that away from much more needy places.”
BII said it acted as an anchor investor for Mahindra, mobilising other climate-focused investors.
BII has invested in other Indian companies with apparently easy access to other sources of finance. In 2020, BII invested $37m in an Indian warehouse developer, TVS Industrial & Logistics Parks (TVS ILP). At the time, it was 50% owned by TVS Supply Chain Solutions, which is worth nearly half a billion pounds and counts the UK’s Ministry of Defence among its customers.
BII said its investment fully qualified as climate finance. It stated that it made a difference to TVS because “capital is not offered on the same terms” by other investors and the money was used to make warehouses across India compliant with green building standards. However, one of its competitors was building warehouses to the same standards years before, suggesting TVS was merely keeping up with its peers.
TVS ILP said sustainability has always been integral to its operations and growth, and that it is recognised by green building certifications.
‘A huge gap for transparency’
The Independent Commission for Aid Impact (ICAI) reviews the effectiveness and value for money of UK aid. It previously criticised BII for crowding out private investors and failing to tackle poverty.
Its commissioner Harold Freeman told us: “While BII can provide much-needed investment for green projects in developing countries, ICAI has found this method of delivering aid is less suited to the needs of the poorest countries at greatest risk from climate change.
“The UK must ensure that every pound of aid reported as climate finance genuinely helps developing countries mitigate or adapt to climate change, and we will keep holding the government to account for this.”
TBIJ found a number of other BII “climate finance” deals that seem to be making little difference to the climate crisis. They include a $27m investment in Sonatel, the West African subsidiary of the telecoms giant Orange; and $30m in pan-African group Axian Telecom, which BII states on its website “partially qualified” as climate finance.
After being approached for comment, BII told TBIJ that only 8% of its investment in Sonatel and 20% of its investment in Axian qualified as climate finance. It said these amounts were used to fund solar systems to power telecoms towers, which would otherwise be powered by diesel generators. However, it provides no justification for why these deals partially qualify as climate finance on its website.
“This is a huge gap for transparency and accountability, which is why we advocate for clear justifications for why climate finance has been counted for projects,” said Ryan Anderton, senior research officer at campaign group Publish What you Fund.
Gordon said it was a waste to use climate finance “just to marginally improve [a large company’s] environmental impact compared to a very strategic investment to shift the sources of energy in a particular community or a country”.
There is little evidence that BII was providing Sonatel with funds that other investors could not. The same year BII invested, the company paid out £320m in dividends to its shareholders, suggesting it did not need to raise money. Axian Telecom paid a $56m dividend to its owner the year it received its BII investment.
Neither Axian nor Sonatel responded to TBIJ’s requests for comment.
A spokesperson said BII’s definition of climate finance is based on a set of common principles developed at an international level. “To qualify as climate finance, our investments must support the goals of the Paris Agreement,” they added. From this year, BII is publicly disclosing how much of each investment qualifies as climate finance.
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