62
Our approach to promote sustainable development in our operations
Managing ESG risks Our ESG approach Development operations carry risks by nature with regard to the environment, communities and governance. Proparco’s approach aims to identify and address environmental and social (E&S) risks as well as governance (G) risks. The process also allows us to assist our clients in managing the ESG risks. The objective: avoid, reduce, or compensate the negative impacts of funded projects and reduce the financial risks for Proparco related to these ESG risks. Our approach, similar to that of AFD and to best practices of international financial institutions, is based on IFC Performance Standards, the norms of the International Labour Organization (ILO), the Voluntary Guidelines on the Responsible Governance of Tenure of Land of the Food and Agriculture Organisation (FAO), the UN Guiding Principles on Business and Human
63 projects
Rights as well as the resources of the Corporate Governance Development Framework (CGDF). This approach involves assessing the environmental, social and governance risks of each project submitted to Proparco’s decision-making bodies. Based on internal or external expertise, we then propose to the financial beneficiaries’ actions to implement in order to manage these risks and to improve their environmental and social practices. During the operation phase, we monitor the implementation of these actions and we ensure that the project properly manages any risks and unforeseen negative environmental and/or social contigencies. Finally, when necessary, we can provide specific in-depth support for the client to strengthen their capacities in the management and implementation of their environmental, social and governance performance.
subject to an ESG risk categorization in 2020
Methodology: ESG monitoring indicators Proparco also uses a set of E&S and governance monitoring indicators for its clients. These indicators are calculated ex ante, i.e. upon project appraisal, and are monitored throughout the duration of the financing/investment by Proparco’s teams.
Proparco's Sustainable Development Report 2020
E&S risk indicators • The E&S categorization reflects the potential risk at the appraisal phase. This indicator is the only one which will remain indentical over the financing/ investment period. It ranges from Category A (high risk) to Category C (low risk). The prefix FI is added for financial intermediaries. Projects rated FI-A, A, B+, as well as certain investment funds rated FI-B, are subject to more detailed due diligence. • The residual risk accounts for the E&S risk to date, by comparing the E&S performance and the categorization. It is rated from very high to low.
