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CDC Group plc

PRI reporting framework 2019

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (A) Implementation: Screening

(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
Corporate (financial)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

Environmental and social risks are generally identified through a specific screening and due diligence process. Potential investees are assessed against international best practice standards for E&S matters. In the due diligence phase, risks are identified through site visits by CDC ESG professionals, and often also by external specialist consultants. 

Exclusionary screening is done to ensure the target is not engaged in any activities on the CDC Exclusion List or barred by the IFC Performance Standards (e.g. the use of pesticides that are identified in the Stockholm Convention on Persistent Organic Pollutants). Norms-based and Positive screening is done against the framework of the IFC Performance Standards, World Bank EHS Guidelines, and good international industry practice to identify compliance gaps as well as opportunities to support a company's move toward international best practice. Any gaps between current and international best practice are included in an action plan, which is included in the legal agreement of the loan.

04.3. Additional information. [Optional]


FI 05. Examples of ESG factors in screening process

05.1. Provide examples of how ESG factors are included in your screening criteria.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

CDC's Exclusion List includes military equipment, for example. CDC and any funds CDC invests in cannot make investments in military equipment or trade in protected or endangered wildlife, for example. This exclusion appears also on a harmonised list which is common to most DFIs. In 2018, there was a potential investment into a company that manufactured chemicals, including four that were banned by the Rotterdam Convention; as a result, CDC did not invest.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Potential investments demonstrating strong commitment, capacity, and track record on ESG factors are favoured over equivalent similar investments. This is also an opportunity to identify areas to work with a company to add value, for example through women's economic empowerment, the introduction of resource efficiency measures, among others.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

ESG factors are considered in all investments through the CDC Code of Responsible Investing, which reflects the international standards and practice including the IFC Performance Standards and other norms that portfolio companies, fund managers and financial institutions are expected to meet. IC papers all include a section for ESG which highlight any gaps to international best practice, and steps to achieve better practice. ESG factors form part of the core investment decision; any potential investment can be rejected on ESG grounds.

05.2. Additional information.


FI 06. Screening - ensuring criteria are met

06.1. Indicate which systems your organisation has to ensure that fund screening criteria are not breached in fixed income investments.

Type of screening
Checks
Negative/exclusionary screening?

other description

          During due diligence, a RI staff member or expert consultant will visit to check compliance against our Code, including exclusion list.
        
Positive/best-in-class screening

other description

          We compare assets to international best practice and identify opportunities to move toward this over the course of our investment
        
Norms-based screening

other description

          During due diligence, a RI staff member or expert consultant will visit to check compliance with our reference framework
        

06.2. Additional information. [Optional]

ESG due diligence, encompassing each of the three listed types of screening, is conducted for every potential CDC direct investment. Code 6 of CDC's Code of Responsible Investing identifies excluded activities. Any compliance gaps to our norms and reference framework will be addressed through an Action Plan agreed with the Company in advance of disbursement; and opportunities to move toward best practice will also be identified and included in the Action Plan. Key findings to come out of ESG DD, including high-risk issues, will be included in Investment Committee papers and raised at the meetings to ensure CDC's screening criteria are not breached. Post-investment, regular monitoring meetings are held to discuss overall borrower performance.


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