Development finance institution CDC Group today launched an environment, social and governance (ESG) toolkit for fund managers.
The ESG toolkit, designed to be a practical guide on assessing ESG risks, was launched during a breakfast briefing at Private Equity International’s Responsible Investment Forum by Mark Eckstein, director, environmental & social responsibility at CDC.
The toolkit includes individual sector profiles, such as manufacturing, healthcare, retail, agriculture and aquaculture, and provides guidance on issues such as how to address ESG matters throughout the investment cycle, how to assess and manage governance and business integrity matters, and what to expect when working with CDC.
The free, online tool for fund managers is available to investors and consultants, as a guide to making investment decisions that conform to ESG standards, although the toolkit has been designed specifically for the GP community, Eckstein told sister title Agri Investor.
In a panel discussion following the launch, Janusz Heath, managing director at Capital Dynamics, said that although data within emerging markets is “clearly murkier and more difficult to get hold of” and investment teams may have less experience, it is still important to strive for the same ESG standards as one would in developed markets.
“Fundamentally the disciplines and outcomes that you expect from a GP in Kenya, India, Neasden and Little Rock, Arkansas, as far as we’re concerned are exactly the same,” he said. “It may be difficult to achieve, but the basis of analysis is fundamentally the same.”
Michael Hall, sustainability manager at Development Partners International, agreed companies in emerging markets should be striving for the same level of ESG standards, but that GPs would do well to approach the implementation thoughtfully.
“The most important thing is to kind of capture the spirit of what the standards are trying to achieve first,” Hall said.
“Because if you present a set of standards to a company that’s never had foreign investment firstly, and secondly has never heard of the IFC performance standards, it can be so daunting as to actually become [counter]-productive. You’ve got to spend the time explaining the spirit of what the performance standards are trying to achieve, and then help the company figure out how best to allow themselves to get there.”
Although CDC’s toolkit is primarily aimed at GPs, LPs also play an important role in the ESG implementation process, Philippe Poletti, member of the executive committee & head of mid-cap buyout, at global private equity firm Ardian, later argued during his keynote speech.
“We work closely with some of them and they help us to define the key indicators we should follow,” Poletti told delegates. “They know it’s not an easy topic; they’re also ready to wait and they’re not pushing too much and that’s a great approach. All should have their own speed and LPs, I believe, understand that. We have to move in the right direction, but it’s a long journey.”
A version of this story originally appeared on Agri Investor