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CDC Group plc

PRI reporting framework 2019

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Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

Other description (1) Our Investment policy is laid out in Investment Policy 2017-2021 (https://assets.cdcgroup.com/wp-content/uploads/2017/06/25150847/Investment-Policy-2017-2021.pdf). Our Code of Responsible Investing, which is part of the Policy, outlines our specific RI requirements for portfolio companies and funds.
Other description (2) In addition to the Code of Responsible Investing, we have the following statements and policies on specific RI topics: Modern Slavery Act statement Climate Change Policy Gender Position statement Policy on Coal-Fired Power Generation https://www.cdcgroup.com/en/publications-library/

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

As a development finance institution, CDC has a public commitment to responsible investment. We seek to support the growth of businesses throughout Africa and South Asia, create jobs, and make a lasting difference to people's lives in some of the world's poorest places. CDC believes that operating to high business integrity, environmental, and social standards is a key part of long-term business success. Our strategic priorities are to be developmental, responsible, innovative, and enduring; and include a commitment to set high ESG standards and provide practical assistance.

CDC has invested through direct equity and debt since 2012, offering a high degree of engagement and support to companies. In addition, we have developed a strong reputation for helping fund managers in geographies underserved by private equity and their underlying investee companies improve their ESG performance. The fund-of-funds model allows CDC to indirectly support a large number of companies, including in difficult-to-reach regions and with smaller ticket sizes than might otherwise be possible. Our presence and strong ESG standards cascade down and impact a wider market. 

Investments across all business lines are selected based on alignment with our responsible investment strategy and potential to motivate positive developmental impact.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

All businesses that receive CDC capital must adhere to its Code of Responsible Investing ("Code"), which stipulates CDC's ESG requirements. The Code was updated in 2017 to reflect lessons learned in the previous 5 years, as well as emerging legislation and informal norms / good practice in relation to ESG performance in CDC's markets (for example UNGP on Human Rights and Modern Slavery Act). These requirements are at least equal to, if not above, those required by local law. The Code is publicly available on CDC's website and is structured to reflect our ESG requirements, recommended good practices and the components of management systems that CDC legally requires in all its investments. The Code sets out a hierarchy of ESG requirements, including an 'exclusion list' of industry sectors and / or activities where CDC's capital cannot be invested, specifying minimum ESG requirements of all businesses, and additional requirements for industries where the levels of ESG risk requires it (e.g. complex health and safety issues). Based on its Code, CDC works over time with intermediaries and companies in an approach that builds from compliance with certain basic standards and works towards the adoption of internationally recognised standards of good industry practice and areas of ESG value add to the business.

The Code consists of six schedules. Schedule 1 outlines the responsible investment management system that CDC will itself maintain. Schedule 2 specifies the management systems required of financial institutions and fund managers to manage portfolios which potentially contain complex assets from an ESG perspective. Schedule 3 of the Code sets out minimum ESG requirements for all businesses where CDC's capital is deployed. Meanwhile, Schedule 4 outlines additional requirements triggered by specific activities of the business. Schedule 5 lists the recommended ESG practices endorsed and promoted by CDC. Finally, Schedule 6 lists all industry sectors and activities where CDC's capital may not be deployed (the 'exclusion list').

CDC regularly reviews its Code of Responsible Investing to ensure that its investment standards reflect emerging good practices.

CDC is also committed to developing and promoting good practice guides and materials for investors, also reported here. In 2016, CDC published its first Modern Slavery Act Statement, which sets out policies within CDC's own operations and through investment activities. In 2015, CDC developed a Climate Change Policy which seeks to assess climate change risks and opportunities in its investments. The policy has a specific focus on energy use efficiency, carbon intensity and on-site renewable; water-use efficiency and water-conservation measures; adaptation and resilience, and disaster risk management, especially in large infrastructure projects vulnerable to climate-related impacts. CDC also launched its first web-based ESG Toolkit for Fund Managers in June 2015, which was updated in 2018. The freely available Toolkit provides a wide range of guidance to fund managers on developing their own management systems and assessing risks and opportunities in their portfolio, among other advice.

CDC recognises that many businesses in Africa and Asia will not be in full compliance with its Code at the date of investment. In such cases, CDC, or those managing its capital, work with the business during due diligence to develop an action plan that seeks to achieve compliance within a reasonable timeframe, with clear deliverables and responsibilities. An action plan will take into consideration the risks and opportunities specific to the business and its current size and resources, and will typically be included in legal agreements.

An additional part of CDC's role as a DFI is to support companies as they develop policies and systems and actively engage with them to manage the ESG risks associated with their operations, and to identify and realise ESG opportunities that may be evident. In this way CDC actively looks to add value to its GPs' underlying businesses and its direct investments through ESG improvements that go beyond compliance.

01.6. Additional information [Optional].

          
        
I confirm I have read and understood the Accountability tab for SG 01 I confirm I have read and understood the Accountability tab for SG 01

SG 01 CC. Climate risk (Private)


SG 02. Publicly available RI policy or guidance documents

New selection options have been added to this indicator. Please review your prefilled responses carefully.

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

Other description (1) In addition to the Code of Responsible Investing, we have the following statements and policies on specific RI topics: Modern Slavery Act statement
Other description (2) In addition to the Code of Responsible Investing, we have the following statements and policies on specific RI topics: Climate Change Policy Gender Position statement Policy on Coal-Fired Power Generation

URL/Attachment

02.3. Additional information [Optional].

The CDC Document library lists company policies and codes: https://www.cdcgroup.com/en/publications-library/


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

CDC is regulated by the Financial Conduct Authority (FCA) in the UK. As such, CDC is required to have measures in place to identify, prevent, manage, monitor and – where relevant – disclose any conflicts of interest which arise. The proper management of conflicts is important not only from a regulatory perspective but also to protect our reputation and employees. Our approach to identifying and managing conflicts has been informed by the nature of our business and its structure. It is CDC’s policy to identify, prevent, manage, monitor and – where relevant – disclose actual and potential conflicts of interest that arise in the course of carrying out its investment activities. Where a conflict is identified, it will be dealt with in accordance with the policies and procedures set out in our internal compliance manual. 

03.3. Additional information. [Optional]

An overview of CDC’s procedures in place to counter potential conflicts of interest, both on the staff and corporate levels, are outlined below:

  • Staff are required to disclose all current and past directorships and interests held to include any potentially conflicting outside interests at the outset of their employment and on an annual basis thereafter. Further, staff are not permitted to hold any stake or investment in any pipeline or portfolio company or fund where they are directly involved in the development or monitoring of that investment.
  • Staff members appointed to advisory board, advisory committee or boards of portfolio companies or funds must comply with CDC’s confidentiality procedures and any individual who is personally conflicted is to abstain from any decision making during the investment committee meeting. The Company Secretary keeps a register of those recused from such discussions.
  • CDC’s staff members are prohibited from receiving gifts, hospitality and entertainment which could be construed as an illegal facilitation payment, bribe or conflict of interest. Restrictions on the giving and providing of gifts, hospitality and entertainment and the monetary limits for each, are set out in the compliance manual.
  • CDC’s staff members are subject to detailed personal account dealing rules requiring prior approval from the Compliance Officer before conducting personal trades. Further, CDC maintains a restricted list containing companies and funds in which CDC holds or is contemplating holding investments, and other entities which CDC holds inside information. Staff are not permitted to deal in securities related to any entities on this list.
  • CDC operates strict controls over confidential information which are set out in the compliance manual. Any such information received by a CDC employee can only be used for the purpose for which it was intended and not for the personal benefit of the staff member.
  • A conflict of interest register is maintained by the Compliance team which records activities where a conflict of interest has arisen or may arise, and outlines the procedures established to manage and mitigate any such conflicts.

SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within portfolio companies.

04.2. Describe your process on managing incidents

CDC legally requires immediate reporting of all serious incidents in its direct equity and debt portfolio, as well as in the portfolios of our fund managers. A serious incident is defined by CDC as any incident that results in loss of life, severe permanent injury or severe permanent damage to health, a material adverse environmental, social or business integrity matter. CDC takes each incident very seriously and follows up with each investee to ensure that the root causes of an accident are identified and that corrective actions are put in place to prevent a recurrence. CDC also provides training to its portfolio on occupational health and safety, and encourages investees to track lost-time incidents as a key performance indicator. CDC reports internally and externally on serious incidents. In 2014, CDC produced a good practice guidance document with lessons learnt from its perspective across a wide portfolio. Further guidance is also offered on CDC’s ESG Toolkit for Fund Managers.


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