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Cordiant

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

Other description (1) Cordiant’s Internal Guiding Principles includes; a. Respect for Human Rights Policy: Including Fair Wages & Security b. Environmental Conservation & Sustainability c. Coal Mining and Coal-Based Energy Production Policy d. Respect for Gender Policy e. External Monitoring and Evaluation f. Risk Management: Reducing Business Risk g. Continuous Training Policy
Other description (2) Cordiant’s General Principles Business Integrity and Good Corporate Governance Cordiant endeavours to invest in companies that exhibit honesty, integrity and fairness in their business dealings. Cordiant works to promote, through its investments, international Best Practices in relation to corporate governance. Human Rights Cordiant seeks to ensure that human rights.

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

IMPACT MANAGEMENT

Cordiant has been very active to prevent “impact washing”.  We have been involved in the consultation phase of the IFC principles, in order to develop all-encompassing and well defined principles for impact. We are listed on the website, and are aligned with all of them.

  • Please refer to the IFC website the website for Cordiant’s name as we have been involved in the consultation phase during the development of the Consultation Draft of the Principles.

This is mainly due to the time we have spent on developing a detailed and granular Responsible Investment Policy Framework and due to our extensive engagement with similar initiatives (i.e. GIIN Impact Measurement and Management, new IRIS + Metrics, and other relevant working groups).

Cordiant’s commitment to integrating environmental, social and governance (ESG) indicators into impact evaluation and due diligence. More than that, Cordiant’s approach which identifies both social impact through alignment with the SDGs and environmental impact through Intended Nationally Determined Contributions (INDCs) under the Paris Climate Agreement is truly unique. A signatory of both the UN Principles for Responsible Investment (PRI) and the Global Impact Investors Network (GIIN), Cordiant truly “walks the talk”.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

ESG STRATEGY

Cordiant has a fiduciary obligation to generate an attractive risk-adjusted return for investors whilst managing financial and reputational risk. Included in these risks are the environmental and social impacts of investee companies. What is good for society also seems to be good for business. Data from McKinsey & Co, Boston Consulting Group and Merrill Lynch highlight the correlation between strong ESG performance and reduced earnings volatility and reduced incidence of default; Cordiant therefore believes that effective ESG analysis is an important contributor to effective risk management.

Analysis of environmental, social and governance considerations (“ESG”) is a tool to mitigate investing risks and ensure companies in which Cordiant invests comply with appropriate laws and policies. Impact Investing is a framework for driving positive societal outcomes through the investment process. Cordiant differentiates the two.

Cordiant explicitly integrates ESG considerations into the investment process. Focus here can highlight practices that need to be improved even as it reduces investment risk. Cordiant employs an effective and transparent evaluation methodology and risk analysis process to identify companies with a sustainable competitive advantage. We analyse ESG using internationally recognised environmental, social, and governance standards.

In addition, Cordiant has been developing sectoral policies for an in-depth due diligence framework that touches upon and aligns with the relevant certifications and principles of sustainable practices on the ground. That way, it is able to consistently and systematically apply best impact and risk management practices across sectors, industries and commodities. This is both time-effective and creates a lot of value for the borrowers, as through our investments, they become aligned with the applicable international standards that are relevant for their operations.

Cordiant’s Internal Guiding Principles includes;

  • Global Impact Investing Network (GIIN) Member
  • Application of IFC Performance Standards
  • Application of Equator Principles
  • Alignment with UN Global Compact
  • Respect for Human Rights Policy: Including Fair Wages & Security
  • Environmental Conservation & Sustainability
  • Coal Mining and Coal-Based Energy Production Policy
  • Respect for Gender Policy
  • External Monitoring and Evaluation
  • Risk Management: Reducing Business Risk
  • Continuous Training Policy

IMPACT MANAGEMENT & GENDER STRATEGY

It is important to look for out-of-the-box innovative strategies, so that it does attract investors and that it addresses practical issues that women are facing in already existing investments (mostly in EM), in supply chains, and thus to add corporations into the discussion (since they are the ones having global value chains).

Cordiant is deeply involved in the GIIN leading group for the development of a Gender-Lens Investing framework and ecosystem (i.e. listed as an expert contributor on the GIIN Navigating Impact Website). 

Cordiant’s investment mandate, the type of capital we provide, and markets it operates in, and the types of organizations we invest in- do require distinct gender lens engagement strategies and objectives.

As such, Cordiant is working towards researching innovative ways for investors to use gender as a value creation and long term opportunities creation- rather than as a constraint. 

This is in line with our (i) main responsible and impact investment policy- to create a technical decision-making process- by which we consider individual characteristics and context of companies; including scale, location, technology, management capacity and commitment and track record.

Our engagement with companies starts when potential financing opportunities are identified and meet broader client financing requirements and to maximize progress towards impact needs and financial goals of the company. Then, focus the alignment with the investment process- from pre-screening to investment due diligence, approval, monitoring and reporting.

Gender Principles

  • Increasing Equality in Agriculture
  • Improving Connectivity for Women & Children
  • Reducing Reliance on Kerosene and Solid Fuels
  • Improving Gender Equality in Governance Processes
  • Improving Gender Equality in Workplace Conditions
  • Improving Gender Equality in Supply Chains

01.6. Additional information [Optional].

          Cordiant proactively engages with relevant actors to garner insight into existing and potential business, environmental and political risks that might arise as part of its operations. Adequately addressing these factors will enhance Cordiant’s front-end risk management and ensure a more nuanced and thoughtful approach to risk scenario analysis, pricing, and repayment risk.
        

SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

Climate Policy

Cordiant’s investment thesis is drawn upon the argument that ESG has a role in investment portfolios that extends beyond ethical considerations, particularly for investors interested in tilting toward safer opportunities. This is a way, for Cordiant, to manage important inherent risks to position itself to take advantage of emerging opportunities. Accordingly, Cordiant’s investment strategy and frameworks are aligned with low-carbon transition objectives.

This strategy is consistent with Cordiant’s ESG integration process as it contributes to an energy transition curve, as well as social and environmental progressive outcomes and opportunities.

Oil & Gas Sectors: Active Management: Inclusionary vs exclusionary strategies

We do however only invest in businesses with high standards of business integrity.

The Systematic implementation of our ESG Risk Management System (ESMS) is also the key part of value creation, while protecting the interests of our shareholders. This implies that environmental, health and safety, and social compliance issues are not just a matter of fulfilling investors’ requirements but constitute an essential part of our investment philosophy which will enable us to achieve superior shareholder performance through environmentally and socially sustainable operations. For all investments, the team seek to understand how the borrowers address (i) general factors, such as climate change and energy, through long-term plans and current initiatives;  (ii) more technical factors such as how the company is managing the socio-economic impacts and environmental, health and safety risks of operating across the production line, and in different locations it operates.

The process, indicators and reporting elements detailed in the present guidance document allows for consistency and alignment with applicable international standards, including with the International Association of Oil & Gas Producers.

Coal Mining and Coal-Based Energy Production

Cordiant strongly believes that companies most exposed to coal-related activities should not be a part of our investment portfolio. This decreases environmental, social and reputational risks and generates positive impact though support of other forms of more sustainable and cleaner energy. 

 

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe the associated timescales linked to these risks and opportunities.

Climate change risk management approaches. In other words, Cordiant focuses on ''mitigation''—efforts to reduce greenhouse gas emissions, and to minimize the environmental risks. Additionally, Cordiant assess the potential investment's exposure to climate related risks such as drought, water scarcity, water uses and disposal, pollution, floods, and other important material risk factors, based on the industry in which the potential borrowers are operating.

As such, Cordiant agrees with the statement that risk is the combination of the likelihood of an event and its consequences.

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

Explain the rationale

We do not publicly support the taskforce, but we are supporting other relevant and important initiatives in the field,

Engagements and Commitments to Impact Investing

•      ​UNPRI-Ceres Sustainable Forest Initiative

•      Original signatory of United Nations’ Principles for Responsible Investing

•      Original Signatory of the IFC Operating Principles for Impact Management

•      Member of the Global Impact Investing Network (GIIN)

•      Contributor to the GIIN’s Gender Lens Framework

•      Contributor to the GIIN’s IRIS+ Framework & Impact Metrics

•      New Member of the Blended Finance Taskforce’s Sustainable Infrastructure Investor Club

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

Our strategy is integrated within our ESG risk management framework and preliminary risk-exposure assessment. 

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.


SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].

Cordiant has all the follwoing documents internally, but do not disclose the processes for ESG risk management publicly. 

  • Policy setting out your overall approach
  • Formalised guidelines on environmental factors
  • Formalised guidelines on social factors
  • Formalised guidelines on corporate governance factors
  • Fiduciary (or equivalent) duties
  • Asset class-specific RI guidelines
  • Sector specific RI guidelines
  • Screening / exclusions policy
  • Your organisation’s definition of ESG and/or responsible investment and it’s relation to investments
  • Your investment objectives that take ESG factors/real economy influence into account
  • Time horizon of your investment
  • Governance structure of organisational ESG responsibilities
  • ESG incorporation approaches
  • Active ownership approaches
  • Reporting
  • Climate change
  • Understanding and incorporating client / beneficiary sustainability preferences
     

SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Initial responsibility for managing potential conflicts of interest is with the Investment Officer. Depending on the nature of the conflict of interest investment decisions are reviewed either the Internal Credit Committee and/or the External Investment Committee of Cordiant.

Business Integrity and Good Corporate Governance

Cordiant only invest in companies that exhibit honesty, integrity and fairness in their business dealings.  Cordiant works to promote, through its investments, international Best Practices in relation to corporate governance. Good corporate governance practices minimize the exposure to reputational risks, while increasing profitability and returns on investment, as it maximizes opportunities for rising their quality. Based on the evidence that poor ESG exposures predict increased future statistical risks, new research indicates what Cordiant believes; that ESG is both a risk mitigant and a predictor of investing risk.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

E&S Safety Risk Evaluation: Preventive & Corrective Management Systems

Each sector in which Cordiant invests present its own set of Occupational Health and Safety (OHS) risks, which requires the team to systematically integrate health and safety prevention principles as part of the Due Diligence, Action Plans, as well as incorporating specific KPIs into Monitoring & Evaluation Reports.  

E&S Safety Risk Evaluation

Each sector in which Cordiant invests present its own set of Occupational Health and Safety (OHS) risks, which requires the team to systematically integrate health and safety prevention principles as part of the Due Diligence, Action Plans, as well as incorporating specific KPIs into Monitoring & Evaluation Reports.  

As a means to ensure that procedures for identifying hazards and assessing OHS risks in an accurate and timely manner are in place, Cordiant does assess each borrower`s  capacity, commitment and track record regarding OHS & EHS, as part of the preliminary and final due diligence. This is because it is the objective of Cordiant is to understand the main hazards and risks present within operations of each borrower and to be able to understand which standards are applicable in order to design an adequate OHS management plan and to prioritize management and corrective measures to mitigate, on a preemptive basis, such serious impacts.

After conducting an assessment of each borrower`s policies, management plans and practices Cordiant evaluates whether they are designed and implemented in order to ‘’eliminate and, where this is not possible, reduce, the level of risk to an acceptable level in accordance with Good International Industry Practices (GIIP)[1]’’. As such, both the World Bank Group General EHS Guidelines and the IFC OHS Guidelines are included in the process, on a systematic basis. Usually, the Safety Management System include the following elements;

  • Management commitment and employee involvement
  • Worksite analysis and hazard identification
  • Hazard prevention and control
  • Employee safety training

Action Plan & Mitigation Measures

Where appropriate, Cordiant develops Action Plans to ensure that any gaps are addressed. As part of the Action Plans, we thus ensure that the applicable Occupational Health and Safety (OHS) & Environmental Health and Safety (EHS) measures has been addressed and will be complied with. 

As part of the process, we thus require borrowers to implement the measures internally within all affected operations.

Where OHS risks are high, Cordiant does consider bringing in consultants to advise us on the standard of companies’ OHS management prior to investment. As such, Cordiant conducts the gap analysis and do request that borrowers comply with the agreed upon management measures.

Note that this is applicable to both contractors & supply chain.

The objectives of the Action Plan is basically to prioritizing the implementation of management and corrective measures. As such, the Standard Operating Procedure (SOP) agreed upon by the borrower will address the following;

  1. Eliminating or reducing hazards : which includes the replacement of dangerous materials with less dangerous materials
  2. Isolating or controlling hazards at their source
  3. Minimising risks through the design and use of safe systems of work
  4. Providing appropriate protective measures: which can include to prioritise measures aimed at reducing the risk for more than one person (collective protection) over those designed to protect a specific worker (personal protective measures).

 

Work Related Activities Incidents: Procedure Overview Investigation, Monitoring and Reporting

As per the above section, Cordiant does ensure that borrowers have adequate emergency planning and response provisions and procedures for the safety of workers, contractors, and, when appropriate, affected communities. Yet, incidents occurring during such work related activities must be reported to Cordiant within 3 days, for instance;

In addition, details of the incident required to be disclosed include the following;

  1. Name of worker injured
  2. Number of fatalities, lost time injuries or medical treatments (including their status (employee, contractor, visitor, member of the public)
  3. Witnesses (including relevant staff)
  4. Routine/non-routine activity being undertaken
  5. Description of incident: factual statement of what happened
  6. Scene inspection photos/notes- of each incident scene
  7. Sequence of events pre-dating accident
  8. Immediate cause
  9. Unsafe acts in sequence
  10. Unsafe conditions in sequence
  11. Underlying causes of unsafe acts/conditions (initial view)
  12. Root cause(s)
  13. Interim preventive measures
  14. Details of whether work has been suspended and whether restart has occurred or is planned to
  15. Details of planned investigation, including timeline for mobilisation
  16. Details of involvement from external agencies (Police, Health and Safety agencies, corrective / preventive action for EACH significant cause actioned, timed-bound plan (to be attached)
  17. Other interim actions required cross-check to other activities / locations for lessons learned
  18. Any negative publicity (including media) resulting from the incident?
  19. Details of any immediate actions taken to secure repeat or escalation of the incident

Action Plan & Emergency Response Plan:

After investigation, Cordiant ensures that a corrective measures are included in an Emergency Response Plan & Action Plan.

Borrowers must have implemented and complied with such procedures to investigate all near misses and accidents and that effective corrective measures efficient in order to avoid future serious accidents.

This is also monitored through a subsequent Monitoring Report.


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