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CDC Group plc

PRI reporting framework 2020

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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 the same way as 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 ESG-I, BI, VCS, investment and legal teams work together to structure listed investments to ensure effective oversight of ESG issues.

Listed equities -  engagement 

CDC engages post investment with its directly-managed listed equity in the same way as its private equity investments.

CDC's engagement is tailored and prioritised by the level of ESG risk and opportunities for value addition. Engagement may include the following:

  • Review of annual monitoring reports (AMRs) and review of risk prioritisation to ensure the nature of the investment has not changed;
  • Calls and informal engagement at board and operational level;
  • Support in the delivery of non-financial 'value add' (ESG capacity, procedures, energy audits etc);
  • Site visits to transactions, especially those associated with higher ESG risk;
  • Monitor deliverables under CDC'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 ‘ESG value add’ expectations;
  • Reporting and root cause analysis on non-routine events (serious incidents, fatalities, grievances);
  • Collation of information requests from CDC's stakeholders and work with others in CDC on responses as necessary;
  • Training and capacity building, where appropriate, to help companies understand CDC's ESG requirements.

Listed equity - (proxy) voting

CDC typically only invests directly in listed equities if we are confident of high-level influence. Monitoring would typically involve regular, direct engagement at a senior level. CDC votes directly in its capacity as a shareholder for reserved matters that require shareholder approval.

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. ​CDC considers "inclusive finance" to be loans to banks and institutions reaching underserved segments and/or offering inclusive products (for example, SME loans, affordable housing loans, or microfinance loans), as well as direct equity investments in companies or institutions that have products that cater to underserved segments (e.g. SME, microfinance, affordable housing loan books). This section is not including any indirect investment into a fund specialising in these categories. Where only part of a bank or institution's book is considered inclusive, it has not been included in our count of "inclusive finance", which means the overall totals are undercounting the full extent of CDC's investments in this space.

Further information can be found in the section on Inclusive Finance.

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 incorporates ESG considerations into its directly managed listed equity in the same way as its internally managed private equity investments. Correspondingly, CDC would expect its external managers to approach listed equity in a manner broadly comparable to CDC's own approach.

CDC expects 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 expects the manager to put in place an action plan to bring the investment into compliance over a reasonable period.

CDC also encourages 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 engages post investment with its directly-managed listed equity in the same way as its private equity investments. Similarly, CDC expects 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 "ESG 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. 

Listed equities - (proxy) voting

CDC expects the fund managers through which it invests to exercise an equity-style degree of influence over investments to address the ESG requirements placed upon the fund. Hence CDC would expect the manager to exercise its voting options, where applicable, in addition to verifying that the investment is operating in line with CDC's Code of Responsible Investing.

Fixed income - Corporate (financial)

CDC takes the same active approach across its product lines. Fixed income through external managers would be treated the same as private equity and listed equity. CDC would expect its external managers to follow the same due diligence, integration and monitoring of ESG matters for fixed income as outlined for other asset classes in this section and throughout the report.

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 the application of the Smart Campaign's Client Protection Principles (CPPs) where applicable to due diligence and monitor portfolio companies. All of CDC's microfinance fund managers are aligned with the principles on customer protection 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 global standards around customer protection including SMART CPPs, IFC Investor Guidelines for Responsible Investing in Digital Services, and GOGLA's Code of Conduct.

17.2. Additional information.


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