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CDC Group plc

PRI reporting framework 2019

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Asset class implementation not reported in other modules

SG 16. ESG issues for internally managed assets not reported in framework

Describe how you address ESG issues for internally managed assets for which a specific PRI asset class module has yet to be developed or for which you are not required to report because your assets are below the minimum threshold.

Asset Class

Describe what processes are in place and the outputs or outcomes achieved

Listed equities – ESG incorporation

CDC incorporates ESG considerations into its directly managed listed equity in a similar way to its internally managed private equity investments. In general, higher-risk investments (as determined by industry sector, location and / or scale and nature of operations) will receive a higher level of pre-investment oversight and post-investment support as set out in the engagement section below.

CDC's E&S, investment and legal teams work together to structure listed investments to ensure effective oversight of ESG issues.

Inclusive finance

CDC has a Financial Institutions team whose portfolio includes microfinance and inclusive SME investments. CDC requests a different set of data to be reported from its microfinance portfolio to the standardised data set in its template ESG report. This additional data includes number of borrowers, number of women and number of rural borrowers. 

16.2. Additional information [Optional].

 

 


SG 17. ESG issues for externally managed assets not reported in framework

17.1. Describe how you address ESG issues for externally managed assets for which a specific PRI asset class module has yet to be developed or for which you are not required to report because your assets are below the minimum threshold.

Asset Class

Describe what processes are in place and the outputs or outcomes achieved

Listed equities - ESG incorporation

CDC performs due diligence on the ESG capacity and management systems of those who manage its capital externally to ensure that ESG factors are incorporated into the managers' investment decision making in a way that is comparable to CDC itself. Correspondingly, CDC would expect its external managers to approach listed equity in a manner broadly comparable to CDC's own approach.

CDC would therefore expect diligence to be performed on listed equities by the fund manager to verify adherence to the ESG requirements of CDC's Code of Responsible Investing. Where gaps are identified, CDC would expect the manager to put in place an action plan to bring the investment into compliance over a reasonable period.

CDC would also encourage the manager to add value on ESG grounds where it identifies opportunities that might result in the opening of new markets for the business, cost efficiencies, improved community relations, greener production and better supply chain management, amongst others.

Listed equities - engagement

CDC would expect those who manage its capital externally to be an active owner and to engage with listed assets post investment through a variety of channels including the following:

  • Review of annual monitoring report (AMR) and review of risk prioritisation to ensure the nature of the investment has not changed;
  • Calls and informal engagement at board and operational level;
  • Site visits to transactions, especially those of a higher level of ESG risk;
  • Monitor deliverables under the manager's action plan (where applicable) and report upon major delays and / or incidents;
  • Management and oversight of third-party consultants as needed;
  • Annual review (or more frequently as needed) of "E&S value add" expectations;
  • Respond as appropriate to non-routine events (serious incidents, fatalities, grievances);
  • Collate information requests from stakeholders and work with other investors and CDC on responses, as necessary. 

Inclusive finance

CDC has an existing portfolio of microfinance funds that back microfinance institutions (MFIs) in order to improve access to financial services for people excluded from the traditional banking system in CDC's markets.

CDC expects its microfinance fund managers to be at the forefront of client protection initiatives. This includes membership of organisations including Principles for Investors in Inclusive Finance (PIIF) and the application of the Smart Campaign's Client Protection Principles (CPPs) to due diligence and monitor portfolio companies. All of CDC's microfinance fund managers are aligned with the CPPs as part of their legal agreements with CDC.

In addition, in 2018, CDC developed a set of tools for Consumer Protection to assist during due diligence by indicating which areas to assess, what questions could be asked, and how to develop actions plans to improve practice as needed. These are aligned with the SMART CPPs.

17.2. Additional information.


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