ESG is integrated into CDC's investment process with the Environmental and Social Responsibility (ESR), Business Integrity (BI) and Development Impact (DI) teams, which provide specialist input into all stages of CDC's investment process (from screening and due diligence to legal agreements and monitoring) and present risks and 'value add' opportunities at Investment Committee meetings to inform investment decisions. Where gaps in compliance with CDC's Code or value add opportunities are identified, CDC will negotiate an action plan with the company to meet CDC's requirements within a reasonable timeframe and this is formally documented in the legal agreements through which CDC's capital is committed.
Beyond this standard approach during the pre-investment stage, there were instances in 2018 when specific ESG issues were considered in more detail due to higher risk or opportunity, for example:
-Risk assessment screening on potential water quality impacts into Ramsar Site by potential investee
-Specific screening for child labour in sectors and regions where this is endemic
-Additional consideration of gender opportunities in companies where women are underrepresented or have a high potential to take on leadership roles
-Conducted workshop on business integrity issues to ensure alignment and raise awareness following some BI concerns raised in due diligence
-Quality of education assessment including safeguarding to understand specific company policies and practices
As a DFI, all of CDC's investments are in emerging markets, but regulatory regimes in different countries and sectors can impact the way that ESG issues are considered. Strong environmental and social regulatory requirements better facilitate alignment with the IFC Performance Standards and the requirements of the CDC Code, but in countries and sectors where these are less robust, ESG issues are likely to have greater scrutiny in the investment selection process.