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CDC Group plc

PRI reporting framework 2020

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Post-investment (monitoring)

PE 09. Proportion of companies monitored on their ESG performance

09.1. Indicate whether your organisation incorporates ESG issues in investment monitoring of portfolio companies.

09.2. Indicate the proportion of portfolio companies where your organisation included ESG performance in investment monitoring during the reporting year.

 (in terms of total number of portfolio companies)

09.3. Indicate ESG issues for which your organisation typically sets and monitors targets (KPIs or similar) and provide examples per issue.

ESG issues

List up to three example targets of environmental issues

Example 1

          Total water consumption, reuse, treatment and savings
        

Example 2 (optional)

          Total energy consumption by type, generation from renewable sources, and energy savings
        

Example 3 (optional)

          Waste generated and recycled by type
        

List up to three example targets of social issues

Example 1

          Serious health and safety incidents, lost time injury frequency rate
        

Example 2 (optional)

          Number of employee and community grievances and average time to resolution
        

Example 3 (optional)

          Number of safeguarding incidents
        

List up to three example targets of governance issues

Example 1

          Existence of a fit-for-purpose anti-bribery and corruption policy
        

Example 2 (optional)

          Dedicated senior staff member to oversee, monitor and report on anti-bribery and corruption policy
        

Example 3 (optional)

          Existence of fit-for-purpose whistle-blower policy
        

09.4. Additional information. [Optional]

KPIs such as the above are generally agreed in an action plan at the time of investment, which is formally documented in the legal agreements through which CDC's capital is committed. CDC monitors progress towards achieving these ESG targets on an ongoing basis through the following channels:

  • Formal channels such as observer rights on an ESG sub-committee to the Board to ensure senior support for ESG strategy and to monitor KPIs and issues on ongoing basis
  • Site visits
  • Follow up to serious incidents and fatalities (follow up via a concrete action plan and root-cause analysis)
  • Commissioning consultant reports and audits (e.g. supply chain reviews)

PE 10. Proportion of portfolio companies with sustainability policy

10.1. Indicate if your organisation tracks the proportion of your portfolio companies that have an ESG/sustainability-related policy (or similar guidelines).

10.2. Indicate what percentage of your portfolio companies has an ESG/sustainability policy (or similar guidelines).

(in terms of total number of portfolio companies)

10.3. Additional information. [Optional]

As part of the IFC Performance Standards, which is the primary ESG reference framework, an overarching policy defining ESG objectives and principles is a requirement. This policy provides a framework for a system to manage ESG risks, which is a requirement under CDC's Schedule 3 of its Code of Responsible Investing. In addition, companies are required to have a governance and business integrity management system (BIMS) commensurate with the level of BI risk. As part of this, anti-corruption policies, whistle-blower policies, and other compliance policies and practices are required as a framework for the whole management system.

Sometimes, pre-existing systems may fall short of CDC's expectations as compared with the ESG risks and impacts faced by the business. In these instances, a legally binding action plan would specify the improvements required, and CDC ESG staff would proactively monitor progress towards action plan requirements.


PE 11. Actions taken by portfolio companies to incorporate ESG issues into operations

11.1. Indicate the types of actions taken by your portfolio companies to incorporate ESG issues into operations and what proportion of your portfolio companies have implemented these actions.

Types of actions taken by portfolio companies

Implemented by percentage of portfolio companies

(in terms of total number of portfolio companies)

Implemented by percentage of portfolio companies

(in terms of total number of portfolio companies)

Implemented by percentage of portfolio companies

(in terms of total number of portfolio companies)

Implemented by percentage of portfolio companies

(in terms of total number of portfolio companies)

Implemented by percentage of portfolio companies
Implemented by percentage of portfolio companies

11.2. Describe how your organisation contributes to the portfolio companies’ resourcing and management of ESG issues.

The above categories differ from the headings under which CDC monitors in the post-investment phase but constitute a similar approach. In line with IFC Performance Standard 1, CDC monitors its investments based on the following parameters: Environmental and Social Assessment and Management system, E&S Policy, identification of risks and impacts, management programmes, organisational capacity and competency, emergency preparedness and response, monitoring and review, stakeholder engagement, external communications and grievance mechanisms, and ongoing reporting to affected communities.

With its private equity deals, CDC ensures responsibility for ESG performance is assigned to a member of staff at a level of seniority commensurate with the inherent E&S risks associated with the company's operations. The institutional capacity to manage ESG risks is assessed in CDC's due diligence and CDC provides training to companies in need of support in this area. Performance targets for applicable ESG issues in operations are defined via the action plan agreed between the company and CDC, with clear timescales, and responsibilities for completion. As appropriate (and as possible) CDC supports the establishing of ESG sub-committees to the Board (or similar vehicles) which increase the visibility of ESG practices and enhance impact through commitment and participation at the top.


PE 12. Type and frequency of reports received from portfolio companies

12.1. Indicate the type and frequency of reports you request and/or receive from portfolio companies covering ESG issues.

Type of reporting 

Typical reporting frequency 

Typical reporting frequency 

          Each quarter CDC ESG professionals report on company performance to investment teams, DevCo, and our shareholder. This may require obtaining updated ESG reporting from companies.
        

Typical reporting frequency 

12.2. Describe what level of reporting you require from portfolio companies, and indicate what percentage of your assets are covered by ESG reporting.[OPTIONAL]

ESG reporting applies to 100% of our direct assets. Formal written feedback is provided annually. However, the ESG-I and BI teams’ engagement with portfolio companies is typically more frequent during the initial post-investment period (and also during high-risk activities such as construction-) and in many cases remains frequent throughout the lifetime of our investment. Annual ESG reports formally provide updates on progress against ESG KPIs agreed in the action plan. In cases where we have requested the creation of an ESG sub-committee to the Board, ESG issues will be reported on and KPIs tracked on a quarterly basis. Informal interaction between CDC and investee companies is frequent and CDC presents itself as a partner and resource to help support investee companies on ESG matters. CDC also requires investees to report on serious incidents within an agreed timeframe.​


PE 13. Disclosure of ESG issues in pre-exit

13.1. Indicate whether during the reporting year your organisation disclosed information on ESG issues to potential buyers prior to exit for private equity investments.

13.2. Apart from disclosure, describe how your organisation considers ESG issues at exit.

It is important to consider the likely holding period and type of exit from the earliest stages of an investment. Strong ESG practices should be implemented and maintained throughout the life of an investment to ensure the best return on investment. Furthermore, CDC is a signatory of the Operating Principles for Impact Management, which describe essential features of managing investments with the intent to contribute to measurable positive social or environmental impact, alongside financial returns. As a signatory, CDC publicly discloses alignment with these principles, conducting exits considering the effect on sustained impact, and review, document and improve decisions and processes based on the achievement of impact and lessons learned. Hereby, CDC aims to clearly demonstrate to potential buyers the ESG value that has been added to a business during the holding period. For example, effective and regular reporting on key performance indicators related to ESG should provide valuable data for exit documents and investment memorandums. CDC's exit materials might aim to show that lost time incidents or employee churn rates have fallen year-on-year, while resource efficiency efforts have cut costs. We also aim, where relevant and based on risk and sector, de-risk company operations from a climate change perspective in reducing emissions (absolute or intensity) and planning for adaptation, as relevant. It can also be valuable to outline the ESG challenges associated with a company and how they have been dealt with to highlight the sustainability of the business and the depth of engagement. CDC might also help portfolio companies to prepare specific ESG materials or answer questions from prospective responsible investors. CDC aims for robust ESG management systems and internal company capacity to be self-sustaining post-investment to continue managing ESG risks and identifying opportunities after exit.

13.3. Additional information.


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