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CDC Group plc

PRI reporting framework 2020

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Objectives and strategies

SG 05. RI goals and objectives

05.1. Indicate if and how frequently your organisation sets and reviews objectives for its responsible investment activities.

05.2. Additional information. [Optional]

CDC has internal objectives to invest responsibly in relation to our direct investees (internally managed equity and debt) and our fund managers and their underlying portfolios. During the investment process, the ESG risks and opportunities associated with each potential deal are assessed at every stage of the cycle. The ESG performance of our portfolio is monitored on an ongoing basis by our Environmental, Social and Governance Impact (ESG-I) and Business Integrity (BI) teams, on a quarterly basis at operational and board-level meetings, such as the development impact committee (DevCo), and on a quarterly basis to our shareholder. CDC also keeps its own policies and standard operating procedures under review to remain at the forefront of good industry practice and in line with our peers.

Each year, CDC sets team objectives to produce good practice guidance on topical ESG-related issues, which are then incorporated into our processes. For example, in 2019 CDC worked with IFC and the European Bank for Reconstruction and Development (EBRD) in the joint Good Practice Note "Managing Risks Associated with Modern Slavery". This guidance forms part of our public commitment made in 2019 through our Modern Slavery Act Statement to identify and mitigate modern slavery in investments, operations and supply chain. The same partners are working together to provide private sector guidance on gender-based violence and harassment (GBVH) in the workplace, to be published in 2020. This is in line with CDC’s commitment at the Safeguarding Summit, held in London in 2018, where CDC re-affirmed our commitment to advance standards, share best practices and develop guidance on preventing GBVH within our organisation and through our operations.

As pragmatic investors in challenging markets, we tailor our approach to the nuances of each asset class. One example of this is CDC's recent Good Practice Note, "Responsible venture capital: Integrating environmental and social approaches into early-stage investing", produced with FMO in 2019. The report provides practical advice about managing ESG risks and identifying opportunities, while supporting the growth of innovative companies.​ CDC also continually seeks to increase its understanding of contextual risk to improve its responsible investment activities. In 2019, the ESG-I team published a country profile on Ethiopia to provide guidance for businesses and investors on addressing social and human rights risks within the country. This guidance will be complemented by additional country and regional profiles in 2020 and beyond.

The above guidance notes and reports help inform our internal objectives and approaches. In addition, we have responsible investment objectives that are externally-facing, which are updated on a regular basis to meet the needs of the market. In 2019, CDC provided additional and updated guidance via its ESG Toolkit on resource efficiency and the circular economy, cumulative impacts, stakeholder engagement and several industry sector guides, among other areas. CDC is also very active in providing training for fund managers and portfolio companies, and launched a new ESG training programme in 2019 that will be implemented over the next three years. This new programme now includes dedicated sessions on gender, impact management, climate, and job quality. Other workshops on e-waste, sustainable trade finance, accident investigation and renewable energy development were also hosted for CDC responsible investment staff as well as other DFIs and partner organisations. CDC also commits to contributing or speaking at external workshops, conferences and events such as World Water Week, the Global Off-Grid Lighting Association (GOGLA) e-waste festival and the UN Forum for Business and Human Rights, amongst others.

CDC continues to prioritise training, site visits and monitoring trips to its investments based on ESG risk and the quality of ESG management systems, and the commitments we make to deliver ESG value beyond compliance.


SG 06. Main goals/objectives this year

06.1. List the main responsible investment objectives that your organisation set for the reporting year.

Responsible investment processes

Key performance indicator

          In 2019, CDC supported over 150 individuals from funds and their portfolio companies to build ESG capacity through workshops across our geographies.
        

Progress achieved

CDC invites its fund managers and investees to regular ESG workshops that provide training on incorporating ESG into the investment cycle, as well as modules on specific ESG issues such as job quality, climate and gender. CDC also provides training on an ad-hoc basis to investees and partner institutions.

In 2019, CDC launched a three-year programme following a decade of hosting ESG trainings, which has been the largest ESG capacity-building programme for GPs anywhere in emerging markets. The programme was launched with a multi-day training in London to GPs of funds to improve their capacity to incorporate ESG into investment decision making and monitoring. The workshops in London were five days of training on ten different ESG issues and opportunities, and will be expanded to five other regions over the next years. Earlier in 2019, CDC also hosted this workshop in Myanmar. Norfund, who co-funded the programme, also used the events as an opportunity to train their own staff and direct portfolio.

Key performance indicator

          Workshops and training sessions given
        

Progress achieved

CDC invites all investees to regular ESG workshops to increase their engagement and understanding of various ESG practices. Over 2019, CDC launched a three-year programme hosting a five-day training event for fund managers and investee companies across both the debt and equity portfolio. Next to this ESG training programme, CDC hosts regular workshops and events, bringing investees together for specific training purposes. For example, CDC's ESG-I Team hosted an e-waste workshop in Kenya, bringing together more than 30 organisations to discuss potential solutions to the mounting problem of electronic waste in Kenya. The ESG-I Team also conducted trainings on renewable energy development and powering sustainability. CDC's Business Integrity team conducted a Business Integrity Training to fund managers in London, on bribery and corruption risk assessment, portfolio monitoring and compliance reporting.

Key performance indicator

          Increased variety and frequency of ESG activity communication
        

Progress achieved

An ESG newsletter for internal and external stakeholders is sent quarterly. Articles on ESG are also included on a monthly basis on CDC's intranet and weekly internal newsletter. Over 2019, case studies and podcasts highlighting ESG across CDC's investments were released, highlighting the work on responsible investing at CDC. We have also organised internal workshops on accident investigation, gender and sustainable trade finance, increasing awareness. CDC's ESG-I and BI teams also hosted an open house in which we invited colleagues and members of the impact investing public to learn more about our responsible investment activities with investees, including waste, gender, job quality, and climate.

Key performance indicator

          Engagement with investees on ESG
        

Progress achieved

CDC closely engages with its investees on the management of ESG risks and opportunities. The intensity of monitoring is based on the risk associated with each investee. ESG action plans are typically included in the legal documents with investees to ensure effective management systems are put in place. With higher-risk companies on our direct equity book, or those that require closer oversight, we will often institute an ESG Committee that meets on a quarterly basis to raise ESG issues and monitor ESG KPIs.

Key performance indicator

          Integration of ESG into each step of the investment process
        

Progress achieved

ESG is integrated into each step of the investment process. Members of the responsible investment teams contribute to all investment committee papers and provide verbal input to investment committees, as well as carrying out due diligence (often including site visits) and help negotiate legal agreements. 

          Improved ESG monitoring of portfolio companies
        

Key performance indicator

          Annual monitoring reports received from companies
        

Progress achieved

CDC's ESG-I, DI and BI teams receive annual monitoring reports (AMRs) from portfolio companies every year to facilitate year on year monitoring of key issues and indicators.

Financial performance of investments

Key performance indicator

          Consider ESG factors in value addition
        

Progress achieved

CDC considers and regularly implements ESG improvements with the goal of creating operational efficiencies, improving exits, and adding value (and requires its fund managers to do the same). This is achieved across the portfolio in areas including health and safety, anti-corruption activities, renewable energy, women's economic empowerment, and skills development.

ESG characteristics of investments

Key performance indicator

          Factor ESG risks and opportunities into investment decisions
        

Progress achieved

CDC factors ESG risks and opportunities into all investment decisions, and has rejected deals due to ESG factors. For example, in 2019 we rejected a deal due to the use of coal as it was not in alignment with our new Climate Change Strategy.

Other description (1)

          Improvement of portfolio resource efficiency
        

Key performance indicator

          Energy savings (associate carbon savings) and water efficiency
        

Progress achieved

When possible, CDC identifies opportunities for resource efficiency within potential investees and includes these in the ESG Action Plan. CDC has a financing facility to support resource efficiency measures - focusing on energy, water and waste - in portfolio companies and provides expert support and, when applicable, grant funding to achieve resource efficiency goals. Progress of each company and fund is monitored through AMRs and ongoing engagement. This is notably done through our work with healthcare investees to work toward green design principles and certification, for example Rainbow Hospitals, which has achieved 3 IFC EDGE certifications, indicating reductions of at least 20% in energy, water, and embodied energy in materials.

Other activities

Key performance indicator

          Actively engaging in responsible investment initiatives.
        

Progress achieved

As highlighted above, CDC is a member of, and participates in, a number of responsible investment initiatives, including engagement with PRI.

Key performance indicator

          Promoting PRI with CDC’s portfolio and pipeline.
        

Progress achieved

CDC's ESG-I team often discusses participation in responsible investment initiatives with its portfolio and pipeline. A number of the fund managers in CDC's portfolio have joined PRI.

Key performance indicator

          Production of case studies demonstrating good practice
        

Progress achieved

CDC collates case studies on good practice and makes them available internally and externally. Examples of good practice are regularly elicited from the team for inclusion in good practice notes and workshops. These are published on the CDC website and occasionally in print.

Key performance indicator

          Dissemination of case studies to CDC’s portfolio
        

Progress achieved

CDC disseminates good practice case studies on its ESG Toolkit for Fund Managers. CDC also highlights case studies via its quarterly ESG newsletter and through training workshops. There are further case study videos, blogs and articles available on the CDC website. During ESG workshops, case studies are also used to provide practical examples.

other description (1)

          Contributing to research on ESG topics
        

Key performance indicator

          Resources committed to ESG research and publications
        

Progress achieved

CDC regularly contributes financial and human resources to research on ESG topics that are under-explored. In 2019, this included engagements with other DFIs and financial associations to produce research and practical products for investors and companies to improve their integration of ESG issues, such as gender-based violence and harassment (GBVH), which will be published in Spring 2020.

06.2. Additional information.


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