‘We have an exposure of $2.5 billion in India’: Leslie Maasdorp, chief executive at BII

Can you tell me how India fits in your 2026-31 strategic plan?

India is our most important strategic market. About 25% of our portfolio as a business is in India. Our investment size in India is about $2.5 billion. Over the next five years, we will continue to deepen our commitment to climate finance and in India’s energy sector. Energy transition is, of course, one of the key drivers of what we as a development finance institution should look forward to in the future, because the fastest-growing economies in the world are here in Asia, and secondly, the coal-based energy companies exist in India and in many parts of Southeast Asia, Philippines, Indonesia, and Vietnam.

Currently, 25% of your portfolio comes from India. In the next five years, where do you see it? 

For the next five years, the first major priority is the launch of a new initiative called British Climate Partners (BCP). We have allocated £1.1 billion to this endeavour. The key points is that BII is now strategically moving away from our old model of investment, wherein we used to deploy capital and invest in companies. Our aim now is to invest in such a manner that we are able to multiply our impact by bringing in other institutional investors.

We started Ayana ourselves and then brought in the NIIF (National Infrastructure Investment Fund). We then brought in Eversource around 2019, mobilised more than a billion dollars in the project and later sold it for about $2.3 billion. We will now try and replicate that model in India, where we will do more investments in climate finance, whether it be in electric vehicle manufacturing or renewable energy platforms. 

Typically, what kind of internal rate of return (IRR) do you look at? How are they different in India vis-a-vis other Asian markets?

You can look at IRR in an aggregate sense, but it varies. So there’s no set target return that we identify. We do, however, see it as a score on impact. Over the next five years, we’re aiming to have a 4.5% minimum return. Going forward, we need to recycle our capital. Firstly, we don’t just focus on returns as the core metric, we look at impact.

Going forward, with every investment we make, we’ll set ourselves an exit event or liquidity event where we choose to invest. By the fifth, sixth or seventh year, we want to be able to exit. Either the company goes for an IPO or for a sale, a partial sale or a total sale. So we can then use the proceeds from there and recycle it into new investments. For example, in Ayana, we made a very good return from that investment. It doesn’t mean we’re exiting the renewable energy sector. Renewable energy will grow.

Coal-based thermal energy is currently meeting 75% of the country’s energy demand. And analysts are saying that going forward, it will take an extra load of this power demand. Will it impact the growth of renewable energy?

I think it’s important to highlight that Indian Government, together with many other governments, took a fresh look at the energy transition around 2015, when the Paris agreement was signed. So India set a net zero target of 2070, which is very, very ambitious growth. This is a huge economy, with a massive coal-based energy system. And the key point to focus on here is the fact that this transition is a multi-decade transition. You can’t look at this thing for the length of one year, two years, or five years. It’s a multi-decade transition.

The important aspect is that the commitment of the government to continue on the path of renewable sources. So there’s more investment in coal for sure, because the government needs stability and security of supply. At the same time, there’s massive investments in renewable sources. One doesn’t cancel out the other. One is about reliability and stability, and to meet and manage the demand.

The other one is about cleaning up the environment. It’s about reducing pollution. It’s about improving quality of living. Because India is something like the sixth most polluted country in the world. So the levels of pollution and air quality that we experience in India will become a massive crisis, which is why the government policy is exactly correct. That is to put policies in place to stimulate decarbonisation and transport, which is why hundreds of EV manufacturers exist out there who are all meant to contribute to that agenda. The short answer to your question is no, I do not see a moving back from that commitment to renewable energy.

India needs around $150 billion annually to meet its climate goals, and the inflows are around one third of that. So what needs to be done by the government and private sector to bridge this gap? 

The starting point there is that, government and public sources of finance is too limited to fill that gap. There’s a massive financing gap, and that gap can only be filled by the private sector. However, the private sector  want commercial returns. And often in some of these areas, you need to demonstrate commercial viability, right? Exactly like electric vehicles. No one initially wanted to make the upfront investments You need developing finance institutions like BII. So BII is just one of a number of developing finance actors. The World Bank and the International Finance Corporation is another. There’s several other European developing finance institutions like FMO, DEG, Proparco.

There are also Asia multilateral banks like the Asia Infrastructure Investment Bank, Asia Development Bank, and so on. Together with ourselves, all of us have a role to play in filling that financing gap.The role of the developing finance institutions is to do what we call sort of de-risking to ensure that we create the conditions. Once that risk mitigation measures are in place, to create and to improve the risk return profiles of the project, so that it becomes more commercially viable for your big commercial players to step in. So the overall point that I mentioned is that we need more vehicles like British Climate Partners, where it is being set up specifically to mobilize others.