ICAI review on UK aid as a lender and investor
Background
In 2025, the UK government committed to moving away from being seen as an aid donor and positioning the UK as an ‘investment partner’. This was one of the ‘four shifts’ in the UK’s development policy later outlined in the government policy paper, ‘The UK’s modern development approach’, in the context of significant reductions to the aid budget.
Historically, the UK has provided the majority of bilateral development aid as grants and technical assistance, with a modest role for bilateral investment through the UK’s development finance institution formerly known as the Commonwealth Development Corporation (CDC), and a more significant indirect role in supporting lending and investment through its shareholdings in the multilateral development banks (MDBs).
The UK’s approach to aid-funded investment began to evolve with the 2022 international development strategy, focusing on the use of the UK’s economic power and financial expertise to deliver “honest, responsible investment”, creating British Investment Partnerships to co-ordinate a set of existing organisations and instruments with an investment focus, and strengthening and renaming CDC as British International Investment (BII).
This approach was further developed in the 2023 white paper on international development, which focused on the potential to use public development finance to leverage and mobilise additional investment to meet the UN Sustainable Development Goals and tackle climate change.
Recent Independent Commission for Aid Impact (ICAI) reviews have also noted the increasing move away from grants towards investment (How UK aid is spent, 2025), the increasing use of guarantees (UK aid to Ukraine, 2024), and the importance of using a wide range of instruments to support climate investments (UK aid for energy transition, 2025).
Purpose and scope
The purpose of this information note is to track the development of the UK’s approach to aid-backed lending and investment since 2022, provide greater transparency on the size and scope of the UK’s aid-backed portfolio as a lender and investor, and identify the governance, management and systems in place to manage and monitor portfolio risk and impact.
The report will not be formally evaluative and will not make recommendations to the government, but it will identify the challenges the UK faces as it seeks to strengthen the role of UK aid as a lender and investor and identify lines of future inquiry, including for a planned ICAI review of BII.
In terms of scope, the note will cover the full range of investments funded or backed by UK ODA, including comparing and contrasting approaches to bilateral investments, and indirect investment through MDBs and other multilateral bodies.
Review questions
- What strategy is guiding the UK’s approach to lending and investment in its development aid programme?
- How does the UK use aid-backed financial instruments?
- How does the UK govern, manage and monitor the selection, prioritisation and use of financial instruments in its aid programme?
Governance and resourcing
Harold Freeman will be the Lead Commissioner for this information note, providing guidance and strategic oversight, with additional input from Liz Ditchburn.
The report will be undertaken by ICAI’s Service Provider and will be supported by ICAI’s Secretariat who will provide advice and support throughout the process.
Timetable and output
The report will progress to the following timetable:
- August – September 2026: Research and fieldwork
- October 2026: Emerging insights (update to government)
- November – December 2026: Report drafting and factual accuracy checks with government
- December 2026: Publication