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CDC Group plc

PRI reporting framework 2019

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You are in Direct - Inclusive Finance » PIIF Principle 6: Balanced returns

PIIF Principle 6: Balanced returns

IFD 28. How social performance of investees affects decision making and portfolio management

Possible action:

Strive for a balanced long-term social and financial risk-adjusted return that recognises the interests of clients, retail providers and investors.

28.1. Indicate if the social performance of investees affects your:

Investment decision making

28.2. Explain how social performance of investees affects investment decision making.

CDC takes a broad view of social performance by looking at it as a part of development impact. When analysing an investment, we consider the social returns and impact that businesses deliver to underserved segments, assess potential to grow and improve performance, and monitor and manage delivery of impact. The potential for development impact and the way CDC will help the investment achieve this impact forms part of our investment thesis.

Throughout the decision-making process, development impact analysis is a fundamental part, contributing to each Investment Committee paper and discussion. Analysis is produced by impact professionals embedded within the investment teams in order to ensure the integration of investment and development considerations in the investment thesis at all stages of transaction processing.

Portfolio management

28.3. Explain how social performance of investees affects portfolio management.

Post-investment, responsible investment teams track the investee's development impact performance against metrics defined alongside the DI thesis. These indicators are tracked on a quarterly basis. The responsible investment teams engage closely with management on potential projects and initiatives to help achieve these goals and, if the investee is not performing against expectations or has financial or capacity constraints, technical assistance funding may be provided.

28.4. Additional information. [Optional]


IFD 29. Staff incentives linked to social performance measures (Private)


IFD 30. Collecting data regarding social outcomes of investees work

Possible action:

Strive for a balanced long-term social and financial risk-adjusted return that recognises the interests of clients, retail providers and investors.

30.1. Indicate if you collect data regarding the social outcomes of your investees’ work.

30.2. Additional information.

The DI team collects CDC portfolio-wide indicators aligned with HIPSO. employment, gender breakdown, wages, financial indicators of business growth/performance, and sector-specific metrics. For inclusive finance, sector-specific metrics would include number of underserved customers reached, volume of loans to different categories of investment including SME/microfinance/affordable housing, among others. The team also collects deal-specific metrics depending on the DI thesis. These are monitored through quarterly and annual reporting and on-going engagement with investees' senior management.

 

 


IFD 31. Incentivise investees to track social performance

Possible action:

Strive for a balanced long-term social and financial risk-adjusted return that recognises the interests of clients, retail providers and investors.

31.1. Indicate if you incentivise investees to track social performance.

31.2. Explain how you incentivise investees to track social performance.

As part of due diligence, we assess that businesses are incentivised to manage commercial returns, and the price of products they deliver, in balance with social/fair, transparent pricing. As part of this, we evaluate if staff is incentivised to manage that balance by looking at, for example, whether loan officer incentives are based on portfolio quality as opposed to loans disbursed.

CDC indicators, including on social and development impact, are written into the legal agreement and are reported on through Annual Monitoring Reports (AMRs). These are tracked on a quarterly and annual basis.

 

31.3. Additional information.


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