At CDC we have witnessed an evolution in this area over the last ten years – ESG issues have moved from the fringe to the centre stage both amongst emerging market focused private equity investors and amongst businesses themselves.
Why is this? Firstly, social injustice is no longer as distant as it once was. Social media has given people in developing countries the power to voice their experiences either directly or via viral global NGO campaigns.
If the company is trying to access global markets, multinationals need to manage reputational risks associated with investments – there is an ever-increasing pressure on global brands to demonstrate their responsible behaviour.
There are opportunities to boost the value of investee businesses through proactive approaches to labour relations or energy efficiency, good community relations, and the benefits of better corporate governance (as mentioned previously).
Private equity funds are expected to demonstrate their investments satisfy the investor requirements, many of whom have adopted responsible investment criteria.
More and more international banks are signed up to the Equator Principles so if businesses want to get loans from these banks, they also need to be able to demonstrated they are managing their key environmental and social risks.
Zahid Torres-Rahman said:
Ok - let's move on to question 2:
Question 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?