Our investment strategy

This investment strategy 2024-2028 will guide BIO’s investment work along the main priorities in terms of impact, operational scope and principles, and risk and return expectations set by the new Management Contract. 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 02/01/2024.

During this 5-year investment period, BIO is expected to invest EUR 1.2 billion in Capital and Capital Subsidies in about 150 projects. Under the Management Contract, BIO will not receive new non-earmarked Capital and hence will recycle its own capital for its mainstream investments. The Belgian State will however allocate an additional EUR 85 M of Capital Subsidies to BIO for investments with a higher risk / impact profile as per the new Management Contract.

This Investment Strategy, in line with the Management Contract orientations, sets ambitious development goals including

• intensifying our impact and additionality: BIO will extend its work in Africa (aiming at 45% of new volume of investments in Africa), and in fragile and poorer countries (aiming at 30% of new volume of investments in Least Developed Countries (LDC) and Fragile and Conflict-Affected States (FCAS); BIO will expand its use of Capital Subsidies to support riskier enterprises active in the agri-value chain directly & indirectly supporting smallholders as well as in climate finance and to a lesser extent in microfinance in LDCs;
• improving our transformative work: BIO will guide the gradual transformation of clients regarding environmental and social standards, gender equality, decent work and, if relevant, adaptation to climate change, and the development of a human rights approach;
• reaching clear and measurable impact targets: For the first time, BIO has set up an impact framework around key Sustainable Development Goals by defining precise and measurable Strategic Impact Targets (SIT) that orient our prospection work and support our decision-making. The impact framework is built around indicators of economic development, support of micro, small and medium enterprises (MSMEs), reducing inequality between countries and in countries, gender equality, climate mitigation and adaptation, preservation of biodiversity, and technical assistance support of BIO clients.

As the Management Contract orients BIO towards riskier areas (in terms of geography and sectors), BIO will strengthen its risk-return approach to maintain a return on equity above 1% over the next 5 years and support its long-term sustainability:

• Sharpen capital allocation: BIO will invest its own capital (Code 8) mostly in sectors that have historically proved stabler and more profitable, i.e. loan and equity in financial institutions and debt funds but also generalist private equity funds, and infrastructure projects. BIO will use Capital Subsidies (Code 5) for riskier investments, i.e. most direct enterprise financing, innovative climate projects, and investments in smaller LDCs and FCAS, while not excluding the use of Code 8 for such investments when appropriate.
• Supervise geographic allocation: BIO will concentrate its portfolio (85% in 30 countries expected) in regions / countries with higher market potential and lower-perceived risks (including Middle Income Countries (MICs)) and diversify exposures in small African LDCs, and Fragile and Conflict-Affected States (FCAS).
• Improve risk framework: in the next 12 months, BIO will define a risk policy with adequate tools for risk monitoring. A temporary risk framework is presented in this note including concentration limits, target portfolio, maximum investment amount per sector and instruments to support the investment process in the meantime.
• Develop Risk mitigation strategies: BIO will actively look for instruments (including European Guarantees, country insurance) to enhance risk management, participate in DFI syndication to access lower risk transactions in an efficient manner and develop lessons learnt.

BIO will focus on sectors with sufficient market depth in which it has built expertise and a track record, and will, in limited sub-sectors, either strengthen its practice or explore new opportunities.

• Financial sector:
  • Focus- BIO will deliver MSMEs financing through banks, leasing and microfinance institutions.
  • Strengthen- BIO will integrate fintechs in its practice as they allow multiplying financing outreach and the range of financial services at a lower cost, as well as insurance companies that create economic resilience, including to the effects of climate change.
• Private equity:
  • Focus- BIO will provide capital indirectly (through aligned and carefully selected private equity funds) to hundreds of SMEs, develop climate projects and support the financial sector.
  • Strengthen- BIO will expand its direct equity practice and investments in debt funds.
• Enterprise:
  • Focus- BIO will provide direct loans to the agri-value chain actors with a strong orientation towards small-holder farmers and food security.
  • Strengthen- It will also expand its consideration of industrial projects and basic goods and services, and Explore climate positive projects.
• Infrastructure:
  • Focus- BIO will prioritize renewable energy projects globally.
  • Strengthen- BIO will develop its expertise in Information and Communication Technology in Africa (including data centers, telecommunication towers and network development) and Explore e-mobility, logistics and waste management.

There are also projects that BIO will not invest in: (i) enterprises excluded as per article 5 of the Management Contract as well as (ii) direct investments in venture capital, forestry and non-African based infrastructure projects not related to climate mitigation or adaptation.

This investment strategy will be complemented with policy papers relative to (i) Human rights, (ii) BIO’s Strategic positioning, and (iii) a comprehensive Risk Policy by December 2024. In addition, by mid-2025, BIO will further reflect on (i) its ambition and approach towards private capital mobilization (especially Belgian impact investors) based on a mid-life evaluation of the recently deployed SDG Frontier Fund, (ii) its position towards European level objectives like Global Gateway, (iii) its focus and priorities goals for agriculture and agribusiness value chain development.