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CDC Group plc

PRI reporting framework 2020

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You are in Indirect – Manager Selection, Appointment and Monitoring » Outputs and outcomes

Outputs and outcomes

SAM 08. Percentage of externally managed assets managed by PRI signatories

08.1. Describe how you ensure that best RI practice is applied to managing your assets

Measures

          In addition to CDC’s ESG training programme and regular monitoring, we encourage fund managers to update their ESG management systems on a regular basis. Indeed, a requirement to review a fund’s ESG management systems is typically included in legal agreements. When a GP is raising a new fund, the ESG management system for older funds is also often updated. CDC’s ESG Toolkit for Fund Managers and quarterly ESG newsletter also helps to keep fund managers up to date with the latest trends.
        

Measures

          It is very unusual for one of CDC’s fund managers to be replaced. In the rare occasions when this happens, ESG is a key consideration in the appointment of a new manager. In 2019, CDC worked closely with other LPs to transfer investments in funds managed by a GP  with deficient RI practices to other managers who committed to upholding our Code and standards in an improved manner.
        
          Improving quality of implementation through ESG workshops
        

Measures

          In 2019, CDC organized two multi-day ESG workshops for fund managers, hosting up to 150 people in Myanmar and London. Fund managers and portfolio companies were trained on how to integrate ESG, and more specific topics on job quality, climate and gender, amongst others.
        

08.2. Additional information. [Optional]


SAM 09. Examples of ESG issues in selection, appointment and monitoring processes

09.1. Provide examples of how ESG issues have been addressed in the manager selection, appointment and/or monitoring process for your organisation during the reporting year.

Topic or issue
          Broadening and deepening ESG capacity at an established GP
        
Conducted by
Asset class
Scope and process

During ESG due diligence, we identified that a fund manager had good awareness and implementation of ESG standards on the environmental side but could improve on social dimensions. We worked with the fund to develop a plan for addressing contextual and social risks, particularly in countries which were not previously part of the fund’s remit. The fund will be supported by local social specialists in such cases, enhancing commitment to better relationships.

Outcomes

The fund has a plan and governance mechanisms which cover a broader range of ESG issues more thoughtfully. We will continue to work with the manager as they deploy capital to test these mechanisms in practice. Despite taking on new challenges in underserved markets in sub-Saharan Africa, the more considered approach should help the manager reach greater understanding of local social perspectives.

Topic or issue
          Improving ESG outcomes through engaged monitoring
        
Conducted by
Asset class
Scope and process

Over the period of monitoring, we built a relationship with this fund. Working in tandem, we supported the GP to think more strategically about climate risks, and to consider social risks more carefully. In terms of climate resilience, the fund has made significant progress in assessing, planning for and managing climate risks- for example working on climate-resilient crops, irrigation solutions, infrastructure to better conserve and manage water and capacity building programmes. Our engagement with the fund on social issues also has led to improved community relations and an ability to demonstrate proactive management of social risks as they may arise (particularly around land use which is a key consideration for the primary agribusiness sector).  These together have made the fund’s investments stronger and more resilient across ESG factors.

Outcomes

An independent research report reviewing agribusiness practices in the country and region compared the companies of this fund to have more proactive social risk management systems in place than surrounding neighbours, which has assisted with protecting both the Fund and company’s reputation, as well as enable the Fund to engage more proactively with external stakeholder groups. Practically, the companies have improved resilience to the impacts of climate change, while implementing adaptation measures to support future-proofing agricultural areas especially. This active engagement has also led to the fund improving reporting and transparency measures.

Topic or issue
          Setting an ESG precedent in a new market
        
Conducted by
Asset class
Scope and process

One of the GPs we work closely with is an African country’s first domestic, single-country-focused fund. This is against the backdrop of a country that has presented several contextual risks making the implementation of international ESG requirements considerably challenging, and where the private sector is relatively nascent. We worked with this first-time fund manager to build their ESG practice, supporting the development of their Environmental and Social Management System and to hire in adequate capacity for managing ESG. We continue to work closely with the manager as they deploy.

Outcomes

Working with this manager has allowed us to anchor an active approach to ESG in the development of the country’s PE market. Though a first-time fund, the GP has a framework for approaching ESG and internal capacity to do so. We have also continued to support the fund through initial deployment which has included provided expertise and support on addressing risks around and labour and working conditions, which has been flagged as a systemic and key challenge for private sector actors in the country. We will also continue to engage actively in monitoring ESG implementation within the fund’s forthcoming investments.

09.2. Additional information.


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