MICROCAPITAL BRIEF: CDC Updates Environmental, Social, Governance (ESG) Toolkit for Financial Services Providers, Adding Climate Component

CDC Group, a development finance institution backed by the UK government, recently launched an updated environmental, social and governance (ESG) toolkit to assist financial services providers (FSPs) in addressing common ESG challenges such as corruption, money laundering, and gender-based harassment and violence. It is targeted at “environmental and social (E&S) and compliance professionals in commercial banks, microfinance institutions and fund managers who work closely with them.”

Among the new features of the latest toolkit are: (1) a section on mitigating the impacts of climate change, introducing elements relating to climate risk assessments and climate-conscious investing; (2) methods for integrating E&S and business-integrity risk management measures into transaction approvals. Among the goals of the toolkit is to make it easier for FSPs to manage their ESG risks as well as clients’ risks, reducing adverse credit, legal and regulatory consequences. Improving ESG practices and other forms of corporate responsibility – and being able to document these improvements – also can help FSPs attract more funding, encourage their customers to adopt business practices that are more sustainable and nudge other FSPs to be more sensitive to ESG issues.

Established in 1948 as the Colonial Development Corporation, the mission of CDC is to foster growth in “sustainable” businesses to raise living standards in developing countries. Since 2012, it has invested in 1,200 businesses in Africa and South Asia, using debt, direct equity investments and “fund-of-funds” strategies. During 2020, CDC’s investment portfolio was valued at USD 6.2 billion, and it reported new commitments worth GBP 1.75 billion (USD 2.47 billion).

By Sophie Fiala, Research Associate

Sources and Additional Resources

CDC press release
https://www.cdcgroup.com/en/news-insight/news/launching-our-new-esg-toolkit-for-financial-institutions/?fl=true

CDC ESG toolkit
https://toolkit.cdcgroup.com/

Previous MicroCapital article on CDC
https://www.microcapital.org/microcapital-brief-cdc-group-announces-50m-risk-sharing-facility-with-absa-bank-to-boost-lending-to-households-msmes-in-africa/

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