MICROCAPITAL BRIEF: CGAP (Consultative Group to Assist the Poor), United Nations Principles for Responsible Investment Initiative Set Standards for Microfinance Investment Vehicle Environmental, Social and Governance (ESG) Performance

CGAP (Consultative Group to Assist the Poor), a policy and research center dedicated to providing financial access for the world’s poor, and the United Nations Principles for Responsible Investment (UNPRI), a network of international investors created to promote the practice of responsible investing, have partnered to create the following criteria for measuring the environmental, social and governance (ESG) performance of microfinance investment vehicles (MIVs):

Environmental:

1. Carbon emission compensation

2. Adherence of funded microfinance service providers to an environmental exclusion list (ie a list of practices that cannot be financed by microfinance service providers because of negative effects on the environment)

3. Procedures to integrate ESG issues into investment decision processes

4. Exposure of funded microfinance service providers to natural disasters and their own adherence to ESG protocols

Social

1. Average loan size and number of active borrowers of microfinance service providers

2. Percentage of female borrowers of each microfinance service provider

3. Percentage of rural vs urban borrowers of each microfinance service provider

4. Implementation of client protection principles

5. Percentage of microfinance service providers offering microentrepeneurial services vs other financial services such as microsavings

6. Percentage of loans used for immediate household needs

7. Percentage of microfinance service provider’s activity relating to health, education and women’s empowerment

Governance

1. Reporting on ESG performance to the MIV’s investors and in its annual report

2. Proper training of MIV staff

3. Review of microfinance service providers’ policies and procedures in relation to corporate social responsibility

4. Requirement by the MIV that microfinance service providers have anti-corruption policies and/or internal whistle-blowing procedures

5. Number of seats the MIV has on the boards of retail microfinance service providers

About CGAP (Consultative Group to Assist the Poor): Housed at the World Bank Group, CGAP (Consultative Group to Assist the Poor) is an independent policy and research center dedicated to providing financial access for the world’s poor. CGAP is supported by over thirty development agencies and private foundations. Its mission is to provide market intelligence, to promote standards and to offer advisory services to governments, microfinance providers, donors and investors.

About the United Nations Principles for Responsible Investment (UNPRI): The United Nations Principles for Responsible Investment (UNPRI) initiative is a network of international investors created under the auspices of the UN in 2005 to promote the practice of responsible investing. Based in the UK, UNPRI has put together six principles for responsible investment, which focus on environment, social, and governance (ESG) principles, collaboration and transparency. Members include signatory investment funds and individual investors who show a commitment to the UNPRI principles. As of October 2010, UNPRI has 800 signatory investment institutions.

By Diana Baide, Research Assistant

[1] CGAP. “Microfinance Investment Vehicles Disclosure Guidelines” 2010

http://www.cgap.org/gm/document-1.9.47636/CG_MIV_Disclosure_Guidelines_ENG.pdf

MicroCapital’s Microfinance Universe profile: CGAP

https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+(Consultative+Group+to+Assist+the+Poor)

MicroCapital’s Microfinance Universe profile: United Nations Principles for Responsible Investment (UNPRI)

https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=United+Nations+Principles+for+Responsible+Investment

Browse MicroCapital’s Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/tiki-index.php