Promoting sustainable development
70
in each of our operations
MANAGING ESG RISKS Our approach to ESG By nature, development operations present a risk to a population’s environment and to governance. Proparco’s approach aims to identify and address environmental and social (E&S) risks as well as governance risks (G). This approach also enables us to assist our clients in managing the ESG risks. The aim? Avoid, reduce, or even compensate a financed project’s negative impact and reduce Proparco’s financial risks related to these ESG risks. Our approach, which is similar to AFD’s and to international financial institutions best practices, is based on IFC Performance Standards, the norms of the International Labor Organization (ILO), the Voluntary Guidelines on the Responsible Governance of Tenure of Land of the Food and Agriculture Organization (FAO), the United Nations Guiding Principles on Business and Human Rights as well as the resources of the Corporate Governance Development Framework (CGDF). This approach consists in evaluating environmental, social and governance risks of each project that is submitted to Proparco’s decision making bodies. Based on internal or external expertise, we then propose to our financing beneficiaries actions for implemention to manage E&S risks and improve their environmental, social and governance practices. During the operation phase, we monitor the implementation of these actions and ensure that the project properly manages any risk and unforeseen negative environmental and/or social contingencies. Finally, when necessary, we can set up specific, in-depth client support to strengthen its capacity to drive and implement environmental, social and governance performance.
Ex-ante assessment of ESG risks for projects signed in 20211 Estimated ESG risks for projects signed in 2021 are split as illustrated in the graphics below.
Ex-ante E&S risk categorization of projects signed by Proparco in 2021 and of the portfolio
Governance risks on projects signed in 2021 5% 2%
40% 30%
0%
High risk
20%
Major risk
10%
Low/moderate risk
0%
A
B+
B
C
IF-A
IF-B
IF-C
93%
Negligible risk or not applicable
% of Proparco portfolio projects at 31/12/2021 % of projects signed in 2021
The E&S profiles of projects financed in 2021 shows a lower proportion of high risk projects (IF-A and A) in favour of less risky projects. Regarding governance issues, it should be noted that changing the scope of application for governance analyses (focusing on equity projects from now on ) has reduced the number of analyses carried out vs 2020.
Proparco’s Sustainable Development Report 2021
