Our investment strategy

The 2024-2028 Investment Strategy follows the main priorities of the 2024-2028 management contract in terms of impact, operational scope and principles, and risk and return expectations. It will be implemented alongside the framework of BIO’s law of 03/11/2001, lastly modified by the law of 25/10/2018, and of the third management contract dated 22/12/2023.

In this 5-year period, BIO will invest EUR 1.2 billion in capital and capital subsidies in about 150 projects. The Belgian State will allocate an additional EUR 85 M of capital subsidies to BIO for investments with a higher risk-impact profile.

This investment strategy sets ambitious development goals, including:

• Impact and additionality: BIO will extend its work in Africa (aiming to have 45% of its new investments in Africa), and in fragile and poorer countries (aiming to have 30% of its new investments in Least Developed Countries (LDCs) and Fragile and Conflict-Affected States (FCAS)). BIO will increasingly use capital subsidies for riskier investments in the agri-value chain (directly and indirectly supporting smallholders), in climate finance, and in microfinance in LDCs.
• Transformative work: BIO will help clients in improving their standards and procedures; ranging from environmental and social standards, adaptation to climate change, gender equality, and decent work, to the development of a human rights approach.
• Clear and measurable impact targets: For the first time, BIO has set up an impact framework based on key SDGs by defining ten precise and measurable Strategic Impact Targets (SITs) that guide our prospections and support our decisions. This framework is built around indicators of economic development, support of micro, small and medium enterprises (MSMEs), inequality reduction between and in countries, gender equality, climate mitigation and adaptation, preservation of biodiversity, and technical assistance support of BIO clients.

With BIO taking on riskier investments, both in terms of geography and sectors, we need to strengthen our risk-return approach and aim to maintain a return on equity above 1% over the next 5 years to support our long-term sustainability and investment capacity:

• Capital allocation: For the most part, BIO will invest its own capital in sectors that have historically proved to be more stable and profitable, i.e. loan and equity in financial institutions, debt funds, generalist private equity funds, and infrastructure projects. For riskier investments, i.e. most direct enterprise financing, innovative climate projects, and investments in smaller LDCs and FCAS, we will preferably use capital subsidies, while not excluding the use of our own capital for such investments if appropriate.
• Geographic allocation: BIO will concentrate 85% of its new investments in 30 countries with a higher market potential and lower-perceived risks (including Middle Income Countries (MICs)) and diversify exposure in small African LDCs and FCAS.
  BIO has also added Ukraine to its mandate, in line with the commitment of the Belgian State to support the country during and in the aftermath of the Russian aggression. Given the instability and economic insecurity in the country, any financing will be concessional, unless supported by third party guarantees, in which case using BIO’s capital is an option. In order not to deviate financing from the other regions in BIO’s mandate, investments in Ukraine would be made with specifically allocated financing from the Belgian State.
  
  The list of countries in which BIO will operate:

^{In bold, FCAS & LDCs,
In cursive, partner countries of the Federal, Wallonia-Brussels and / or Flanders Cooperation}

• Risk framework: in the next year, BIO will define a risk policy with adequate tools for monitoring. A temporary risk framework includes concentration limits, a target portfolio per region and sector, and a maximum investment amount per type of investment and instrument.
• Risk mitigation strategies: BIO will look for better risk management instruments (including European Guarantees or country insurance), will participate in syndication with other impact-minded investors to access lower risk transactions in an efficient manner, and will identify lessons learnt for training purposes.

BIO will focus on those sectors which have sufficient market depth, and in which BIO has expertise and a proven track record. We will, in limited sub-sectors, strengthen our practices or explore new opportunities.

There are also projects that BIO will not invest in, such as venture capital, forestry and non-African based infrastructure projects that are not related to climate mitigation or adaptation.

This investment strategy will be complemented with a policy paper on human rights, BIO’s strategic positioning, and a comprehensive Risk Policy by December 2024.

In addition, by mid-2025, BIO will reflect on

• its ambition and approach towards private capital mobilisation (especially from Belgian impact investors) based on a mid-life evaluation of the fully invested SDG Frontier Fund,
• its position towards European level objectives like Global Gateway,
• its focus, priorities, and goals for agriculture and agribusiness value chain development.