CDC's active approach to responsible investment helps companies achieve strong ESG performance to manage risks and impacts by detailed due diligence and monitoring, regular training for fund managers and portfolio companies, and ad hoc support. Throughout the year, we identify emerging areas where support might be needed and value could be created; and work to produce or contribute to guidance on those topics.
CDC's ESG workshop programme highlights an innovative approach in terms of the practical advice and support provided to investees. In 2019, CDC supplemented these workshops with a variety of targeted programs to address specific country, sector, or company issues. CDC hosted multi-day ESG trainings in Myanmar and London on integrating ESG in the investment cycle, and addressed ESG risks and opportunities such as gender, climate and job quality.
In 2019 CDC convened the Gender Finance Collaborative (founded by CDC in 2018), a collaborative of 15 DFIs across Europe and North America that works together to share knowledge and best practices, facilitate institutional buy-in, and foster policy commitments on gender-smart investing across the markets we work in. As a part of GFC, CDC developed and co-chairs several working groups that focus on key gender themes, including one for Investment Officers to share ideas on investing with a gender-lens in the investment process, and one for gender impact measurement. A key outcome of this work has been the harmonisation of and adoption of gender impact metrics, based on the 2X Challenge Indicators and aligned with the IRIS+ gender metrics. CDC is a founding member of the 2X Challenge and played a fundamental role in building the 2X Challenge criteria and indicators in 2018.
CDC's Financial Institutions team developed an innovative Customer Protection toolkit in 2018 to be used internally by CDC, externally by CDC fund managers, and more broadly. The toolkit is aligned with CDC's Principles of Customer Protection. It helps companies and funds embed assessments of customer risks into the investment process and identifies opportunities to protect and create value.
In an effort to support the transition towards decarbonising our portfolio to net zero emission by 2050 in line with CDC’s recently approved Climate Change Strategy (2019), we have developed a streamlined approach towards rolling out loans for the specific use of supporting portfolio companies to increase their resource efficiency (i.e. water, energy). This entails conducting energy and water audits (as needed), identify the CAPEX needs and structuring a low-cost loan to help the company implement these changes that reduce their ecological footprint and operational costs. Where companies cannot take a direct loan, these are linked to one of our service-based providers who can undertake the changes against a monthly service fee.
One of the most innovative tools created by CDC is the ESG Toolkit for Fund Managers (a free, publicly available tool for integrating ESG into the investment process and sector-specific guidance). CDC is updating this Toolkit for financial institutions and business integrity, expected for re-launch in 2020. On this basis, CDC is a leading source of ESG insight and guidance to the private equity industry in emerging markets.
Another area where CDC differentiates itself from its peers is the role we play in delivering an integrated ESG risk/compliance and value-add proposition in our investments. CDC tailors the ESG value-add proposition to each business or fund, and finds practical opportunities that stretch the business to innovate beyond CDC's core compliance requirements, as set out in CDC's Code of Responsible Investing. Areas of focus from a value-add perspective include effective gender, water, and energy efficiency improvements, and green real estate building standards.
CDC is a thought leader in responsible investment by disseminating responsible business practices in line with the challenges faced by investments in our geographies. For instance, CDC became one of the first DFIs to launch a quarterly ESG newsletter for its fund managers in early 2017, which continued throughout 2018 and 2019. CDC has also published or contributed to the following reports and articles:
- Good Practice Note – Preventing Fatalities and Serious Accidents (CDC, 2014).
- Good practice for fund managers – Environmental and social due diligence: mitigating risks, identifying opportunities (CDC, 2015).
- Private Equity and Emerging Markets Agribusiness: Building Value Though Sustainability (Credit Suisse, CDC, EMPEA, IFC and WWF; 2015).
- Investments in the Agricultural Value Chain: Expanding the Scope of ESDD Improving risk management, creating value and achieving broader development outcomes (CDC, IFU, Obviam and Norfund; 2015).
- A guidance note on managing legacy land issues in agribusiness investments (CDC and DEG; 2016).
- Annual Sustainability Review 2015-2016 (CDC; 2016).
- Evaluating the impact of private providers on health and health systems. (Centre for Health Policy at the Institute of Global Health Innovation, Imperial College, funded by CDC, 2017)
- Growing Businesses of Scale in Sub-Saharan Africa (Chatham House, CDC, 2017)
- An Evidence Review: How affordable is off-grid energy access in Africa? (Acumen, CDC, 2017)
- What we've learnt about the affordability of food: Evidence from Zambia (CDC, 2018)
- Managing Risks Associated with Modern Slavery: A Good Practice Note for the Private Sector (CDC, EBRD, IFC, DfID, 2018)
- Good Practice Note - Waste Management (CDC, 2018)
- Private Equity's Role in Delivering the SDGs: Current Approaches and Good Practice (CDC, EMPEA, 2018)
- CDC Country Profile - Ethiopia (CDC, 2019)
- Good Practice Note - Venture Capital (CDC, 2019)
- What is the impact of investing in connectivity (CDC, 2019)
- Innovation and product development: why some products take off and others don’t (CDC, 2019)
- Supporting financial institutions to work for women (CDC, 2019)
- How does an online supermarket in India impact farmers (CDC, 2019)
- How can our investments make a difference to people living inpoverty (CDC, 2019)
- CDC developed new impact frameworks to define our approach to measuring and monitoring impact, including:
- Food & Agriculture Impact Framework and evidence review (CDC 2019)
- Financial Institutions Impact Framework and evidence review “Impact of investing in financial systems: reviewing the evidence” (CDC 2019)
- Health Impact Framework and evidence review
- Education impact framework and Guidance “Supporting investors to measure impact in education investments" (CDC, 2019)