More than two-thirds of the investments made by the private sector arm of the UK’s aid programme last year were channelled through “notoriously secretive” tax havens, according to a report that calls on European development agencies to be more transparent and accountable in their business dealings.

The study, by the European Network on Debt and Development (Eurodad), found that billions of euros intended for projects in developing countries are being routed through some of the world’s most secretive financial centres, allowing businesses to avoid taxes and the attendant regulations.

Eurodad notes that the UK’s CDC – formerly the Commonwealth Development Corporation, which is wholly owned by the Department for International Development (DfID) – makes frequent use of such jurisdictions.

In 2013, CDC invested in nine funds, six of which used tax havens in Mauritius, Singapore, Guernsey and Luxembourg. Between them, the six funds received $553m (£441m).

“CDC’s portfolio as of 31 December 2013 shows that both its direct and its indirect investment model rely heavily on secrecy jurisdictions,” says the report. “A massive 118 out of a total of 157 fund investments go through secrecy jurisdictions. Between 2000 and 2013, these funds received a total of $3.8bn in CDC commitments.”

Sixty-nine of the funds are registered in Mauritius ($1.8bn), while 26 are registered in the Cayman Islands ($909m). CDC is designed to be a “pioneering investor” in developing countries. Its net investments count as official aid, and towards meeting the UK commitment to spend 0.7% of gross national income as aid. Almost all of CDC’s money goes through investment funds, which then invest in businesses in developing countries.

The Eurodad report – Going Offshore – discerned a similar pattern of tax haven usage in other European national development finance institutions (DFIs).

As of June this year, the Belgian Investment Company for Developing Countries (BIO) was involved in a total of 42 investment funds, including 30 domiciled in jurisdictions that feature in the top 20 of the Tax Justice Network’s financial secrecy index (FSI). The investments amounted to $207m.

At the end of last year, 46 of the Norwegian Norfund’s 165 active investments were channelled through jurisdictions that appear in the FSI’s top 20. The investments totalled $339m.

At least seven of the 46 projects involving the German DFI Deutsche Investitions und Entwicklungsgesellschaft (DEG) were structured through major tax havens such as the Cayman Islands and Mauritius.

The report’s author, Eurodad policy analyst Mathieu Vervynckt, said: “Developing countries lose hundreds of billions of euros every year through tax avoidance and evasion by companies. It therefore seems very contradictory for DFIs, whose mandate is to promote development and end poverty, to route so much support through notoriously secretive financial centres that maintain these practices.”

By doing so, he added, bilateral and multilateral DFIs were essentially funding and legitimising the offshore industry.

The report suggests ways in which DFIs can improve their transparency, including: investing only in companies and funds that are willing to “publicly disclose beneficial ownership information and report back to the DFI their financial accounts on a country-by-country basis”; ensuring the funds in which they invest are – where possible – registered in the country of operation, and being fully accountable for their own operations and those of their clients.

Eurodad is also calling for an intergovernmental tax body to be set up under the auspices of the UN to allow developing countries an equal role in the global reform of tax rules.

“We are urging these institutions to stop supporting companies that use tax havens and make sure that details of all operations are open to the public,” said Vervynckt. “After all, DFIs are public institutions with a development mandate, so it’s only right to demand that they should be accountable to the taxpayers that pay for them and the people in the developing countries that they are supposed to help.”

A spokesperson for CDC said: “CDC investments are helping create the jobs and growth needed to lift people out of poverty. Businesses we support employ over 1 million people in developing countries and last year paid over £2.3bn in local taxes.

“CDC requires the businesses we invest in to pay all taxes that are due of them and avoids making investments in jurisdictions that are not compliant with the OECD’s internationally agreed standards on tax transparency.”

Speaking before the G8 summit in June last year, David Cameron said financial fairness was central to development and promised to clamp down on secrecy.

“It is about proper companies, proper taxes and proper global rules ensuring that openness delivers the benefits it should for rich and poor countries alike,” he said. “Aid is important but these things matter just as much. Now is the time. This is the agenda. The world should get behind it.”

In May, the Guardian revealed that CDC has invested more than $260m of aid money in builders of gated communities, shopping centres and luxury property in poor countries in Latin America, Africa and Asia.