How can responsible private investment contribute to the SDGs?

SDGs
1
Samantha Lacey: Manager, Environment and Social Responsibility, CDC
Peter McAllister: Director, Ethical Trading Initiative (ETI)
Andrew Wilson: Director of Policy, International Chamber of Commerce
Julian Wolfson: Associate Director, Business Development, Europe, Acumen (tbc)
Caroline Rees: President, Shift
Natasha Buckley: Implementation Support Manager, Principles for Responsible Investment


Emerging markets private equity investment reached its highest level in 2014 since the Financial Crisis, with investors committing $33.75 billion to 1,246 deals compared to $26.77 billion and 1,058 deals a year earlier, according to the Emerging Markets Private Equity Association. Sub Saharan Africa in particular has attracted record amounts of private investment, attracted by the potential of a young population, a growing middle class and increased macro-economic stability.

The key role of private investment in driving economic growth and job creation is increasingly emphasised by governments and donors. The Financing for Development Summit, taking place in Addis Ababa in mid-July and aiming to secure the means for implementing the Sustainable Development Goals, highlights the key role of private investment. At the same time, it also emphasises the need for investors to adopt principles and reporting standards for socially and environmentally responsible business, which includes good health and safety, constructive community relations, preventing pollution, protecting workers rights and biodiversity, preventing and fighting corruption, illicit financial flows and tax evasion.

As CDC, the UK development finance institution and among the largest players in emerging markets private equity, launches its updated ESG Toolkit for Fund Managers, this online series will examine how improvements in responsible investment practice can improve business performance and development outcomes.

Key questions to address include:

1. How can responsible investment practice contribute to improved business performance in developing countries?

2. Where are we seeing the most progress in managing environmental, social and governance issues in developing countries, and where do the greatest barriers remain?

3. How can the adoption of responsible business practices in developing countries amongst local firms improve their competitiveness and opportunities to access global supply chains; and how can large companies play a role in supporting local firms to improve ESG performance?

Editor's Note:

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2

Welcome everyone to this live chat!

We're joined by a great panel to explore how private investment can contribute to the Sustainable Development Goals. We'll structure this written discussion around the three questions outlined in the introduction. Please post your comments and any other questions you'd like to put to the panel.

Before we begin, I'd like to ask our panellists to introduce themselves.

3

Hi, I’m Sam Lacey, I work in the Environmental and Social team at CDC. CDC is the UK’s Development Finance Institution whose mission is to support the building of businesses throughout Africa and South Asia, to create jobs and make a lasting difference to people's lives in some of the world's poorest places. We work primarily through providing capital to businesses through private equity and loans either directly or through funds.

I’m delighted to participate in this conversation today, in particular because CDC has just launched a new ESG Toolkit to help investors to identify and manage environmental, social and governance challenges in the businesses in which they invest. It’s here if you want to have a look: http://toolkit.cdcgroup.com/

4

Ok - let's kick off with the first question:

Question 1: How can responsible investment practice contribute to improved business performance in developing countries?

5

Hi this is Natasha Buckley from the United Nations-supported Principles for Responsible Investment (PRI). The PRI is an international network of investors working together to understand the implications of sustainability and to incorporate these issues into their investment decision making and ownership practices.

We have over 1380 signatories to the Principles, representing US$59 trillion of assets - that is over half of the world’s investible assets. In implementing the Principles, signatories contribute to the development of a more sustainable global financial system. (See www.unpri.org)

Once signatories have signed the Principles, the role of my team is to support them with the implementation of the Principles in their investment decision-making processes. We take an asset class specific approach, and I cover private equity.



Zahid Torres-Rahman said:

Welcome everyone to this live chat!

We're joined by a great panel to explore how private investment can contribute to the Sustainable Development Goals. We'll structure this written discussion around the three questions outlined in the introduction. Please post your comments and any other questions you'd like to put to the panel.

Before we begin, I'd like to ask our panellists to introduce themselves.

6

I have been an international development consultant for over 40 years, working worldwide on donor funded projects and for the private sector. In 2008/09 a group of us realised that an new approach was needed to achieve sustainable enterprise development. We established a company in the UK in 2009 and raised over half a million pounds in impact investment from 23 private individuals. This has been invested in a social enterprise in Transylvania, but our approach could be replicated anywhere in the world. Our enterprise is small, in the so called missing middle and unsuitable for institutional funding, we are small with only eight employees but the largest employer in town. We sustainably wild harvest from the forests and have over 1000 of the poorest members of the community collecting - our social impact is considerable.

It would be a great help if institutional lending could somehow support pump priming activities in this area of the missing middle - which is where many of the opportunities to address the Sustainable Development Goals can be found.

Jim Turnbull, CEO, Food Development Company Ltd

7

Thanks for joining us today, Sam. I'm looking forward to the discussion.

Dr Sam Lacey said:

Hi, I’m Sam Lacey, I work in the Environmental and Social team at CDC. CDC is the UK’s Development Finance Institution whose mission is to support the building of businesses throughout Africa and South Asia, to create jobs and make a lasting difference to people's lives in some of the world's poorest places. We work primarily through providing capital to businesses through private equity and loans either directly or through funds.

I’m delighted to participate in this conversation today, in particular because CDC has just launched a new ESG Toolkit to help investors to identify and manage environmental, social and governance challenges in the businesses in which they invest. It’s here if you want to have a look: http://toolkit.cdcgroup.com/

8

Welcome, Natasha.

Natasha Buckley said:

Hi this is Natasha Buckley from the United Nations-supported Principles for Responsible Investment (PRI). The PRI is an international network of investors working together to understand the implications of sustainability and to incorporate these issues into their investment decision making and ownership practices.

We have over 1380 signatories to the Principles, representing US$59 trillion of assets - that is over half of the world’s investible assets. In implementing the Principles, signatories contribute to the development of a more sustainable global financial system. (See www.unpri.org)

Once signatories have signed the Principles, the role of my team is to support them with the implementation of the Principles in their investment decision-making processes. We take an asset class specific approach, and I cover private equity.



Zahid Torres-Rahman said:

Welcome everyone to this live chat!

We're joined by a great panel to explore how private investment can contribute to the Sustainable Development Goals. We'll structure this written discussion around the three questions outlined in the introduction. Please post your comments and any other questions you'd like to put to the panel.

Before we begin, I'd like to ask our panellists to introduce themselves.

9

I'm Peter McAllister, Executive Director at the Ethical Trading Initiative (ETI), a leading alliance of companies, trade unions and NGOs that promotes respect for workers' rights around the globe.
To open, my interest lies in the way the the SDGs have moved us on from the MDGs by recognising the value of economic growth and the role of business.

10

There is growing evidence across industry sectors that when environmental, social and governance aspects are proactively managed by a business, they generate opportunities to improve business performance. This of course benefits both the business itself, and also in time, the investor.

There are opportunities for improved business performance in a range of different areas of environmental, social and governance. Examples include: improvements in labour practices – if you treat employees well, protect their safety, improve their livelihoods and economic well-being, you have a more productive and committed workforce. Other examples are efficient use of resources, e.g. energy and water use or reducing the cost of doing business, e.g. by eliminating bribes and facilitation payments



Zahid Torres-Rahman said:

Ok - let's kick off with the first question:

Question 1: How can responsible investment practice contribute to improved business performance in developing countries?

11

Thanks for joining the discussion, Peter.

Peter McAllister said:

I'm Peter McAllister, Executive Director at the Ethical Trading Initiative (ETI), a leading alliance of companies, trade unions and NGOs that promotes respect for workers' rights around the globe.
To open, my interest lies in the way the the SDGs have moved us on from the MDGs by recognising the value of economic growth and the role of business.

12

Hi everyone, I'm Andrew Wilson from the International Chamber of Commerce. ICC is the world's largest business association with more than 6.5 million members in 130 countries. We work to promote open markets and responsible business conduct through a mix of advocacy and stand-setting activities. Our members include many of the world's biggest companies through to SMEs and local business associations.

I'm really looking forward to today's discussion and sorry to be a bit late joining-- we've had a few IT problems!!

13

Hi panellists

Natasha – very impressive to hear that over half of the world’s investible assets are invested in line with PRI. If the principles are having the desired effect, there is presumably a very significant impact. Can you describe what this looks like?

Thanks, Mike



Dr Sam Lacey said:

There is growing evidence across industry sectors that when environmental, social and governance aspects are proactively managed by a business, they generate opportunities to improve business performance. This of course benefits both the business itself, and also in time, the investor.

There are opportunities for improved business performance in a range of different areas of environmental, social and governance. Examples include: improvements in labour practices – if you treat employees well, protect their safety, improve their livelihoods and economic well-being, you have a more productive and committed workforce. Other examples are efficient use of resources, e.g. energy and water use or reducing the cost of doing business, e.g. by eliminating bribes and facilitation payments



Zahid Torres-Rahman said:

Ok - let's kick off with the first question:

Question 1: How can responsible investment practice contribute to improved business performance in developing countries?

14

Thanks Jim. Where can people find out more?

Jim Turnbull said:

I have been an international development consultant for over 40 years, working worldwide on donor funded projects and for the private sector. In 2008/09 a group of us realised that an new approach was needed to achieve sustainable enterprise development. We established a company in the UK in 2009 and raised over half a million pounds in impact investment from 23 private individuals. This has been invested in a social enterprise in Transylvania, but our approach could be replicated anywhere in the world. Our enterprise is small, in the so called missing middle and unsuitable for institutional funding, we are small with only eight employees but the largest employer in town. We sustainably wild harvest from the forests and have over 1000 of the poorest members of the community collecting - our social impact is considerable.

It would be a great help if institutional lending could somehow support pump priming activities in this area of the missing middle - which is where many of the opportunities to address the Sustainable Development Goals can be found.

Jim Turnbull, CEO, Food Development Company Ltd

15

Welcome, Andrew! It would be great if you could share any relevant resources that ICC has put together on this topic.

Andrew Wilson said:

Hi everyone, I'm Andrew Wilson from the International Chamber of Commerce. ICC is the world's largest business association with more than 6.5 million members in 130 countries. We work to promote open markets and responsible business conduct through a mix of advocacy and stand-setting activities. Our members include many of the world's biggest companies through to SMEs and local business associations.

I'm really looking forward to today's discussion and sorry to be a bit late joining-- we've had a few IT problems!!

16

It's vital that investors send the right signal to companies - that they recognise its in their long term economic interests for returns on investment.

The 'how' part lies around demanding a level of accountability & transparency - asking how their businesses are contributing to the SDGs.

17

To give a bit of colour to my previous comment. An example from among CDC’s investments is Vlisco, a company which designs, manufactures, distributes fabrics across West Africa, has made a strategic decision to build a sustainable and localised supply chain, with good labour and health and safety standards. On the business side – this has improved its operational efficiency and reduced costs. On the development side – there has been a positive effect on local communities as the company has provided employment opportunities to underprivileged women and delivered training to local communities.


Dr Sam Lacey said:

There is growing evidence across industry sectors that when environmental, social and governance aspects are proactively managed by a business, they generate opportunities to improve business performance. This of course benefits both the business itself, and also in time, the investor.

There are opportunities for improved business performance in a range of different areas of environmental, social and governance. Examples include: improvements in labour practices – if you treat employees well, protect their safety, improve their livelihoods and economic well-being, you have a more productive and committed workforce. Other examples are efficient use of resources, e.g. energy and water use or reducing the cost of doing business, e.g. by eliminating bribes and facilitation payments



Zahid Torres-Rahman said:

Ok - let's kick off with the first question:

Question 1: How can responsible investment practice contribute to improved business performance in developing countries?

18

Responsible investment requires strong ethical approach to business and this is in fact the only way to succeed where corrupt practices might be the norm - setting an example and building a professional relationship with the authorities.

Social and environmental considerations are really at the core of best business pracice

19

Peter - I agree with your comment regarding the SDGs. However, what is your view on where we have got to on Financing for Development agenda with the conference in Addis next week. In your view is the outcome doc going to create the kind of change to financial markets that ensures that capital is directed to sustainable activity and away from unsustainable? If not (which I think is the view of many) - what systemic changes would you be advocating for?

Thanks

Mike

Peter McAllister said:

I'm Peter McAllister, Executive Director at the Ethical Trading Initiative (ETI), a leading alliance of companies, trade unions and NGOs that promotes respect for workers' rights around the globe.
To open, my interest lies in the way the the SDGs have moved us on from the MDGs by recognising the value of economic growth and the role of business.

20

Hi everyone. Caroline Rees here from Shift. We're a non-profit organization and experts in the UN Guiding Principles on Business and Human Rights. We work with companies, governments and civil society to put the Guiding Principles into practice.

So we focus on the people part - the most acute environmental, social or economic impacts that companies can have on people through their operations and value chain. And of course for businesses understanding these risks to people and managing them effectively is central to contributing to the SDGs. It's of limited benefit for companies to pursue social investment or philanthropy to advance development if their core operations are - often unwittingly - having the opposite effective.

Investors have a key role to play in bringing this holistic understanding to companies. More on that shortly. I'm happy to join the conversation!