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Date : 22/02/2021 TECHNIQUE ÉCHELLE 1/1
C100 M90 J20 N7
SUSTAINABLE DEVELOPMENT REPORT ANALYSIS OF THE RESULTS AND IMPACTS OF FINANCED PROJECTS
#WorldInCommon
M100 J100
CUTTER
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2020
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Proparco's Sustainable Development Report 2020
“Together, creating effective solutions for tomorrow for a more inclusive, fairer and more sustainable world.”
Proparco’s Sustainable Development Report 2020
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Contents
Editorial
Grégory Clemente Chief Executive Officer of Proparco...............4-5
Key points:
Our 2020 results at a glance............. 6-7 8-9 A significant contribution from our clients to the Sustainable Development Goals (SDGs) 10-11 A first stage in the implementation of our strategic roadmap for 2020-2022 12-13 Our projects’ actual impacts, in line with our ex ante estimates 14-17 Zoom: 2020, a very unusual year - Our response to the crisis
Monitoring
of our operations.....................48-49 50 Strengthening the monitoring of impacts: a strategic workstream since 2019 51-53 A significant support achieved in terms of jobs creation and maintenance 54-55 Major impacts on improving access to essential services 56-57 An effective and significant contribution to the fight against climate change
Proparco's Sustainable Development Report 2020
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Focus:
Our actions for the SDGs in 2020.....18-19
20-25 Supporting jobs and promoting gender equality 26-31 Improving access to essential goods and services 32-35 Supporting the climate change mitigation and adaptation efforts of our clients 36-43 Supporting the transformation of our clients 44-47 Mobilizing private financial flows and delegated funds
Contents Our approach
to promote sustainable development in our operations.........................58-59 60-61 Selecting projects for their expected impacts 62-63 Managing ESG risks 64-65 Engaging clients towards more positive impacts 66-67 Diversifying instruments to accelerate transitions: concessional financing
Proparco’s Sustainable Development Report 2020
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Editorial
More than ever committed to promoting a responsible private sector which contributes significantly to the SDGs Grégory Clemente Chief Executive Officer of Proparco
The year we have just been through has been far from ordinary. Faced with the pandemic which crippled the global economy and stretched health systems to their limits, Proparco’s priority back in March 2020 was to take action alongside its clients to provide an immediate response to the most urgent needs. In addition, and as part of a large-scale approach by France, with AFD Group, and Europe, in partnership with the EDFIs, Proparco deployed several mechanisms to address the needs generated by the crisis, help maintain the economy and prepare the recovery, in particular among African businesses through the deployment of the Choose Africa Resilience initiative. Despite this exceptional context, for the second year in a row, Proparco’s commitments topped the €2 billion mark, including €755 million in Africa. I would like to congratulate our clients here and thank them for their confidence during this extremely difficult period. They can count on our support. I would also
Proparco's Sustainable Development Report 2020
like to say well done to our teams, at headquarters and in all our offices, for their sense of commitment and their flexibility during this very unusual period. While the sudden outbreak of the pandemic marked the start of our strategic roadmap for 2020-2022, the level of expected impacts of our projects, although lower than planned, appears quite significant for a first stage in the implementation of this roadmap with, in particular: • 2.6 million people with new or improved access to an essential good or service within 5 years thanks to projects signed in 2020; • Over 800,000 jobs supported within 5 years by projects signed in 2020, including 75% in lowincome or lower middle-income countries and 31% in fragile or conflict-affected countries; • 719,000 tons of CO2 equivalent avoided every year through projects signed in 2020;
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Editorial • 50% of jobs occupied by women in one third of our clients within the next 5 years and 18 projects signed in 2020 qualified to the 2X Challenge, i.e. €158 million; • €1.77 billion of private finance mobilized by projects approved in 2020 (ratio of 1.00). These results strengthen us in our commitment to promote a responsible private sector and in its capacity to contribute to a prosperous, fair and sustainable world. We remain mobilized more than ever to bring about effective solutions for tomorrow together and help stakeholders and economies adapt, transform themselves and make an even greater contribution to the well-being of all and to the preservation of the planet.
2.6
MILLION PEOPLE will have new or improved access to an essential good or service within 5 years
“For the second year in a row, Proparco’s commitments topped the €2 billion mark”
Proparco’s Sustainable Development Report 2020
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Key points
Proparco's Sustainable Development Report 2020
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Our 2020 results at a glance
Proparco’s Sustainable Development Report 2020
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Key points Our 2020 results at a glance
In 2020, Proparco financed 57 new projects for which ex ante impacts were analyzed and recorded, including 10 projects in fragile or conflict-affected countries.1 The contributions to the Sustainable Development Goals (SDGs) expected from these projects are set out below, as well as the breakdown of these contributions by signed amounts.2
€1,767 M
of private finance mobilized (projects approved), i.e. a ratio of 1.00.
719,000 tons
of CO2 equivalent avoided every year, throughout the lifetime of projects.
€285 M
of projects with climate co-benefits.
A significant contribution by our clients to the Sustainable Development Goals (SDGs)
257 Environmental and Social Action Plans (ESAP) and 14 Corporate Governance Action Plans (CGAP) deployed in our portfolio. 9 new PROPULSE projects (technical assistance) signed for our clients (€905,000). Women: 87% of clients of microfinance institutions financed in 2020.
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324,000 beneficiaries of improved transport services within 5 years.
As defined by the World Bank (2020). A mapping of the contribution to the SDGs expected from the 57 projects signed in 2020 was conducted using a correlation table between our impact indicators and the SDGs. Each time a project contributes directly to one of the SDGs, the amount of the financing signed is recorded for this SDG. With a volume of signatures of €1.17 billion, the total volume of contributions to the SDGs stands at €3.59 billion. It should be noted that a working group has been set up in AFD Group to more clearly define the indicators related to SDG 1.
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Proparco's Sustainable Development Report 2020
9 In low-income countries, 93% of jobs supported within 5 years provided with a social protection for employees and their families, beyond local regulations.
399,000 beneficiaries of new
or improved access to microcredit, including 105,000 in fragile or conflict countries.
1.7 million beneficiaries of new or improved access to an essential good or service in the health sector within 5 years in low-income and lower middle-income countries.
4,300 students benefitting from
new or improved access to education within 5 years.
€ 3.59 Bn
of contributions to the SDGs by new projects financed in 2020
Breakdown of contributions to the SDGs of projects financed in 2020 €1,079 M (30%) €773 M (21%)
€587 M (16%)
€526 M (15%) €285 M (8%) €168 M (5%) €61 M
50% of jobs held by women within a
€58 M
31,800 direct jobs held by women supported within 5 years.
€26 M
18 projects qualified to the 2X Challenge, i.e. €158 M
€16 M
third of our clients within 5 years.
€16 M
An installed capacity of renewable energy of 600 MW once the projects are operational.
803,300 jobs supported within
5 years, including 75% in low-income and lower middle-income countries and 31% in fragile or conflict countries.
Proparco’s Sustainable Development Report 2020
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Key points Our 2020 results at a glance
A first stage in the implementation of our strategic roadmap for
2020-2022
In early 2020, after having exceeded the impact objectives defined under its strategy for 2017-2020, Proparco adopted a new roadmap for 2020-2022. Unfortunately, the results of this first year have been marked by the impact of the Covid-19 pandemic on our geographical areas. Proparco has actively worked to support its clients the most affected and has deployed more extensive mechanisms in response to the needs generated by the crisis and to prepare the recovery. While the level of expected impacts is lower than planned, it is quite significant for a first stage in the implementation of our roadmap.3
2.6 million
people will benefit from new or improved access to an essential good or service within 5 years
Theoretical number of people that will have new or improved access to an essential good or service within 5 years Ex ante impacts of projects signed in 2020
2,590,000 5,780,000
2020 objective 1,927,000
2020 adjusted target
134%
% achieved
These graphics show the impact results expected from the projects of our clients financed in 2020 in relation to the objectives defined in the strategy for 2020-2022. An adjustment exercise has been conducted to take the impact of the health crisis into account: adjusted targets have been calculated with respect to the volume and sectoral breakdown of projects actually signed in 2020. The percentages of the achievements are calculated in relation to the adjusted targets.
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Jobs supported within 5 years Ex ante impacts of projects signed in 2020
803,000 1,588,000
2020 objective 1,004,000
2020 adjusted target
80%
% achieved
Gender equality:
% of financing qualified to the 2X Challenge
% of amounts signed in 2020 qualified to the 2X Challenge
13% 17%
2020 objective 76%
% achieved
Tons of CO2 equivalent avoided per year Ex ante impacts of projects signed in 2020
719,000 1,930,000
2020 forecast 2020 adjusted forecast % achieved
1,219,000 59 %
Amounts mobilized from private actors for sustainable development investments (In €M) Private finance mobilized by projects approved in 2020
1,767 2,775
2020 objective 2020 adjusted target % achieved
2,194 81%
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Key points Our 2020 results at a glance
Our projects’ actual impacts, in line with our ex ante estimates Since 2019, Proparco has strengthened the monitoring and evaluation of the projects of the clients it has financed. The objective is to analyze and report on the results actually achieved. Following a first exercise on 96 projects in 2019, work was conducted in 2020 on the results achieved at the end of 2019 by 214 projects signed between 2015 and 2018. This double page presents its results.
Number of female jobs supported
Number of jobs supported in the geographical area Over a million Between 500,000 and 999,000 Between 250,000 and 499,000
Number of people with new or improved access to an essential good or service
Less than 250,000 Outside the scope of operation
Number of tons of CO2 equivalent avoided per year
Almost 35 million people have benefited from essential services Beneficiaries of projects targeting access to essential services Finance Energy
2,035,300 3,776,600 9,178,400
Education
19,296,100
Health
No objective is available ex ante for more numerous projects (investment funds for example), which makes it impossible to compare monitored results with ex ante objective.
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Jobs Female jobs Access tC02 eq avoided Jobs Female jobs Access tC02 eq avoided
Jobs Female jobs Access tC02 eq avoided
303K 75K 496K 196K
189K 82K
1,5 million Jobs Female jobs Access
480K 105K 656K 256K
Jobs Female jobs Access tC02 eq avoided
561K
Jobs 119K Female jobs 21K Access tC02 eq avoided
568K 216K
166K 67K
671K
1,2 million 916K
1,6 million 2,1 millions
A number of supported jobs much higher than ex ante forecasts 424,000 448,000 95% 40% 36%
DIRECT JOBS
99,918
INDIRECT JOBS Jobs created 3,100,000 and/or maintained 538,000 ex ante objective Objective exceeded % achieved Jobs created % of supported jobs held by women ex ante % objective
475,000 additional tons of CO2 equivalent avoided compared with ex ante forecasts Emissions avoided per year (tCO2eq) ex ante 2019 monitoring
1,191,014 1,665,903
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Key points Our 2020 results at a glance
Zoom
2020,
a very unusual year Our response to the crisis In response to the Covid-19 health crisis and its economic and social consequences, back in March 2020, Proparco offered its most affected clients initial immediate support: deferred repayments, loan restructuring and the provision of additional financing.
In addition to this financial response to support our clients, Proparco also provided its advice and expertise to its clients in difficulty via a guide, training and the mobilization of specialized expertise. The objective was to help set up business continuity plans, improve the protection of workers (hygiene, health, safety) and their jobs, manage the deterioration in gender inequalities, which have been exacerbated by the Covid-19 crisis, establish a crisis governance, secure sites or the organization of construction sites and labor camps, etc. Proparco, like its peers, has also implemented emergency grant programs for its clients in the health and service sectors. The objective is to support and help them scale up their own immediate response to the crisis for their employees and clients. About ten clients, mainly in the health sector, have been able to strengthen their action in coordination with the other European Development Finance Institutions (EDFIs).
Proparco's Sustainable Development Report 2020
Emergency grant
Supporting the operations of Evex Hospitals to combat Covid-19 (Georgia) A partner of Evex Hospitals since 2016, Proparco allocated it a €150,000 grant in 2020 to help it improve the protection of its employees and patients. This included exceptional purchases of intensive care ventilators. This operation was made possible through funds allocated to Proparco by the French Ministry for Europe and Foreign Affairs. It demonstrates the key role the private sector is currently playing in overcoming the health and economic crisis.
Emergency grant
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Mitigating the impacts of the crisis at Bigot Flowers Kenya Bigot Flowers Kenya, a horticultural farm entirely focused on export, saw its sales stop suddenly in March 2020. The €100,000 emergency grant allocated by Proparco has allowed it to rent additional buses to respect social distancing, buy protective equipment for all the staff and give food vouchers to compensate for the drop in the staff’s income from June onwards.
A range of emergency measures deployed back in MARCH 2020 to help our clients overcome the crisis
AN IMMEDIATE RESPONSE
Proparco’s response to the Covid-19 crisis
Proparco provided an immediate response to the most urgent needs of its clients, including deferred repayments in some 20 countries
A HEALTH RESPONSE
AN ECONOMIC RESPONSE
Proparco is actively contributing to the “Covid-19 - Health in Common” initiative deployed by AFD Group
Through the Resilience component of Choose Africa, €1 billion of new financing solutions for start-ups and MSMEs affected by the crisis
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Key points Our 2020 results at a glance
In addition to these emergency measures and as part of a large-scale approach by France, with AFD Group, and Europe, in partnership with EDFIs, Proparco has deployed several mechanisms to address the needs generated by the crisis, facilitate the continuation of economic activity and prepare the recovery.
R E S I L I E N C E France’s response to the crisis situation of enterprises and entrepreneurs in Africa, implemented by Proparco African small and medium-sized enterprises (SMEs) are engines of sustainable growth in Africa. They have been severely affected by the crisis, including with major cash flow difficulties. To provide countercyclical solutions for these players hard hit by this crisis, while helping them become architects of a sustainable recovery, AFD Group has decided to step up its action to support Africa’s private sector by deploying an additional component to the Choose Africa initiative launched in 2019: Choose Africa Resilience. With €1 billion, this new component implemented by Proparco comprises tools for loans, guarantees, equity investments and assistance specifically designed to meet the needs of MSMEs during this unprecedented period. The Choose Africa initiative has thereby been increased to €3.5 billion for 2018-2022.
Proparco's Sustainable Development Report 2020
This new Resilience component implemented by Proparco is France’s contribution to the $4 billion commitment made by some 20 Public Development Banks, including Proparco, to support African MSMEs during the first Finance in Common Summit, organized in November 2020 at the initiative of AFD.
Loan
17 €65 million to MCB to support clients affected by the crisis Mauritius Commercial Bank (MCB) has been supporting business development in Mauritius and the region since 1838. Under the Choose Africa Resilience initiative, Proparco and its German counterpart, DEG, have signed a loan totaling $65 million to give MCB additional liquidity and thereby facilitate access to deferred repayments, restructuring, cash flow financing and recovery loans for companies in difficulty.
Support and economic recovery during the crisis Proparco and EDFIs at the forefront of the European response In partnership with ten other EDFIs, the European Investment Bank (EIB) and the association of EDFIs, in November 2020, Proparco launched a €280 million “Covid-19” initiative as part of the European Financing Partners (EFP) program. Capitalizing on the program’s excellent results, the Covid-19 initiative is a joint response to provide additional resources to banks to allow them to diversify their operations and reach a wider range of people in need.
€280 M
Emergency Covid-19 response Portfolio guarantee to support financial inclusion actors Under the Resilience component of the Choose Africa initiative, the Emergency Covid-19 Response program will build a portfolio of “emergency” credit lines for financial institutions targeting MSMEs in Africa, the Middle East and the Caucasus to assist them with their management of the crisis. The program constitutes the first delegation agreement between the European Union and Proparco for a credit line portfolio guarantee and has a budget of €68.5 million.
Facility
Covid-19 initiative under the European Financing Partners (EFP) program
Bridge Fund: helping African start-ups cope with the financial crisis With a budget of €5 million, this facility has been specifically designed for high-potential African start-ups, whose development and fundraising have been affected by the Covid-19 pandemic. The financing, ranging between €200,000 and €600,000, is provided through co-investments. Led by Digital Africa and deployed by Proparco, the facility also has a rapid process to appraise applications.
This project is carried out with the support of the European Union
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Focus
Proparco's Sustainable Development Report 2020
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OUR ACTIONS TO SUPPORT THE SDGs IN 2020 Proparco has been contributing to financing and supporting companies and financial institutions in Africa, Asia, Latin America and the Middle East for over 40 years. Its action focuses on the key development sectors: infrastructure, especially renewable energies, industry and agribusiness, financial inclusion, microenterprises and small and medium-sized enterprises (MSMEs) and innovative companies, health and education, etc. Its operations aim to increase the contribution of private players to the achievement of the Sustainable Development Goals (SDGs) adopted by the international community in 2015. In 2020, in a difficult macroeconomic context and through a strong mobilization to support existing clients, Proparco signed financing for 57 projects that had been subject to an ex ante estimate of the expected impacts, including 10 projects in fragile or conflict-affected countries.5 They account for a financing volume of €1.2 billion.6 Their expected impacts are presented in this chapter.
As defined by the World Bank (2020). I .e. 91% of the signed amounts in 2020, excluding ARIZ/EURIZ, FISEA projects, exceptional Covid-19 financing and grants.
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Focus Our actions to support the SDGs in 2020
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Supporting jobs and promoting gender equality
projects signed and qualified to the 2X Challenge
The private sector, through its capacity to create employment, is a key contributor to the SDGs. Ensuring the development of quality jobs for the entire working age population, while promoting gender equality, is a major challenge which Proparco contributes to through each of its financing operations. In 2020, through our clients’ projects financed by Proparco, 803,300 jobs are expected to be sustained within 5 years, including 75% in lowincome and lower middle-income countries and 31% in fragile or conflict-affected countries. Close to 90,000 direct jobs created and/or maintained are expected within 5 years, including 32,000 held by women. In 2020, 18 signed projects qualified to the 2X Challenge, i.e. €158 million (13% of signatures), with a contribution from Proparco of $492 million to the 2X Challenge since 2018.
803,300 jobs supported within 5 years
Proparco's Sustainable Development Report 2020
75%
including in low-income and lower middle-income countries
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Helping create and maintain jobs Through the projects signed in 2020, 803,300 jobs are expected to be supported within 5 years in our counterparties and in their value chains. 77% of these jobs will come from 34 projects with financial institutions. In line with Proparco’s positioning, three-quarters of the jobs supported within 5 years should be for the projects of our clients in low-income or lower middle-income countries. This figure has risen compared to 2019 (53%). 246,500 jobs should be created and/or maintained within 5 years in countries classified in 2020 as fragile or conflict-affected by the World Bank, i.e. 31% of the jobs supported by projects financed in 2020.
89,700 direct jobs supported, including 21,400 created: a sharp rise in both figures Through the projects financed in 2020, 89,700 “direct” jobs should be created and/or maintained over the next 5 years with our clients or, in the case of investment funds, with investee companies: this figure has more than doubled compared to 2019. 56% of these jobs are in low-income or lower middle-income countries and 24% are job creations (21,400 in 2020, against 10,000 in 2019).
Quality of employment generally improving With no harmonized definition among development finance institutions, Proparco uses four complementary indicators to evaluate the quality of jobs at its clients. The results for the projects financed in 2020, excluding investment funds, are as follows: • For 64% of projects (54% in 2019), salaries are higher than the legal minimum wage in the countries or prevailing in the geographical area and sector of activity concerned • For 80% of projects (76% in 2019), the employees benefit from social protection for themselves and their families, beyond local regulations • Non-discrimination policies are defined in 78% of projects (80% in 2019) • Prevention measures against communicable diseases are set up for 31% of projects (36% in 2019).
Volume of jobs supported achieves 80% of the adjusted target The evolution in the expected results for the jobs supported by the projects financed since 2017 is shown below, excluding atypical projects to allow a relevant comparison. The graphic indicates the objectives defined under the strategy for 20202022 in terms of jobs supported over the next 5 years for 2020 and for 2020-2022. For 2020, an adjustment exercise has been conducted to take the impact of the health crisis into account: the adjusted target has been calculated in relation to the volume and sectoral breakdown of the projects actually financed in 2020. The results in 2020 correspond to 80% of the adjusted target, mainly due to the fact that the number of jobs supported in the agriculture/agribusiness sector is lower than the estimates, which took two atypical projects into account. 4,834,000
Number of jobs supported within 5 years Atypical projects + 336,000
427,000
PROJECTS SIGNED IN
2017
978,000
2018
1,588,000
+410,000(2) (1)
1,208,000
2019
803,000
2020
Adjusted target 1,004,000
Objective in 2020
Cumulated objective for 2020-2022
(1) In 2018, a project accounted for a quarter of the jobs supported. (2) In 2019, a project accounted for a quarter of the jobs supported.
Proparco’s Sustainable Development Report 2020
Focus Our actions to support the SDGs in 2020
With a difficult macroeconomic situation in Tunisia, exacerbated by the Covid-19 crisis, the €15 million loan to Arab Tunisian Lease (ATL), a longstanding player in the leasing sector, will allow it to develop its leasing portfolio and diversify its sources of financing. Over the next 5 years, this project should support 29,000 jobs related to the companies that may benefit from Proparco’s financing. This project is carried out with the support of the European Union
$15 million invested to support the private sector in Vietnam Through a $15 million investment in the Mekong Enterprise Fund (MEF) IV, a fund dedicated to SMEs and midcap companies in sectors such as health, education, access to consumer goods and services and financial inclusion, Proparco is supporting the growth of the private sector in Vietnam. This operation is expected to support 15,000 jobs over the next 5 years, including 50% for women.
Women: 87% of clients of microfinance institutions financed in 2020 and 41% of direct jobs in financial institutions Through the projects of our clients financed in 2020, Proparco is contributing to strengthening the financial inclusion of women and developing women’s entrepreneurship. Women account for 87% of the clients of the 13 microfinance institutions supported by Proparco in 2020. Thanks to the projects financed in 2020, 31,800 jobs should be created and/or maintained for women over the next five years within Proparco’s clients or, in the case of investment funds, within their investees, i.e. four times more than in 2019. Women account for 35% of direct jobs supported over the next 5 years by projects financed in 2019, compared with 20% in 2019. They account for 41% of direct jobs supported in financial institutions.
Proparco's Sustainable Development Report 2020
Equity investment
Tunisia: 29,000 jobs supported through financing to ATL
Loan
22
10,000 jobs expected over the next 5 years through support to COFINA in Senegal
Loan
23
Through a €5 million loan, Proparco is supporting the growth in the activities of COFINA Senegal, the country’s leading mesofinance institution, to allow it to develop its range of products. In addition to facilitating access to credit for local microenterprises and small and medium-sized enterprises, this loan should support over 10,000 jobs over the next 5 years.
69%
of jobs created in Sub-Saharan Africa within 5 years
held by women
Over the next five years, at least 50% of jobs for women within a third of our clients Over the next five years, women should account for at least 50% of employees within a third of our clients (29% in 2019). Excluding multi-country projects, 94% of jobs held by women and sustained by the projects financed in 2020 are expected in lowincome or lower middle-income countries. In terms of job creation, jobs held by women will account for 52% of jobs created within five years in low-income or lower middle-income countries, and will account for 69% of jobs created in Sub-Saharan Africa within five years.
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Focus Our actions to support the SDGs in 2020
Promoting gender equality and fostering women's empowerment Initiative
Despite growing awareness since the adoption of the Beijing Declaration in 1995 and the progress achieved, women still face a multitude of inequalities which will take about a hundred years to fully overcome at the current rate. Gender equality represents not only a human developpement issue, but also an enormous potential for wealth creation for societies. In this context, Proparco implemented a strategy in 2020 to step up its action for gender equality. The objective is for 25% of its annual financing to qualify to the 2X Challenge by 2022. In 2020, 18 projects financed by Proparco qualified to the 2X Challenge and some 32,000 direct jobs held by women should be sustained within 5 years by the projects financed in 2020. This figure has risen sharply compared to 2019.
2X Challenge initiative: a first successful phase and ambitious prospects Launched in 2018 by Proparco and six other Development Finance Institutions (DFIs), the initial objective of the 2X Challenge initiative was to mobilize $3 billion in commitments that provide women in developing country markets with improved access to leadership opportunities, quality employment, finance, enterprise support and products and services that enhance economic participation and access. At the end of 2020, the original G7 commitment of $3 billion was significantly surpassed with over $11 billion mobilized for 2X eligible projects. The 2X members have themselves invested some $7 billion in operations eligible to 2X. The 2X Challenge has also managed to rally 13 DFIs and Multilateral Development Banks (MDBs). In addition, the 2X Criteria have quickly become the global standard for gender lens investing, aligned with the GIIN/IRIS+ and HIPSO international standards, which are good practices and metrics of impact measurement indicators. The members of the 2X Challenge recently announced new memberships, including MDBs, as well as an even more ambitious objective of $15 billion for 2021-2022.
Loan
Supporting Annapurna, a microfinance institution specialized in loans for women
Proparco Rapport Proparco's Sustainable de Développement Development Report Durable2020 2020
The $15 million credit line allocated to the Indian microfinance institution (MFI) Annapurna will support the development of its microcredit activity for very poor women in rural areas. It should improve the financial inclusion of 62,000 women over the next 5 years. The project qualified to the 2X Challenge with the consumption criterion related to the provision of goods and services for women. The MFI also has a human resources policy that integrates gender equality.
25 Breakdown of financing qualified to the 2X Challenge since June 2018 (total volume of $492 million), by sector and geographical area
18 projects financed in 2020 qualified to the 2X Challenge, i.e. a contribution of €158 million in 2020 and $492 million since June 2018
6% Multi-sectoral funds 11% Infrastructure, energy, telecoms, transport, water and sanitation 78% Access to credit and financial inclusion 8% Latin America and Caribbean
25 % 17%
PROJECTS SIGNED IN
2020
Objective in 2020
Africa 49%
Objective in 2022
30% Asia
South-East Europe, Central 5% Asia and Caucasus Multi-country 2% 6% Middle East
Promoting female entrepreneurship in Honduras The $20 million loan to Banco Ficohsa to support its SME financing activity qualified to the 2X Challenge, based on the female entrepreneurship criterion, as 37.5% of the credit line is dedicated for companies owned or led by women, or promoting women’s economic inclusion. The bank also supports access for women to quality jobs and decision-making.
Financing the development of Access Bank, a pioneer in the promotion of female entrepreneurship and leadership
Loan
% of amounts qualified to the 2X Challenge
13%
Loan
The projects qualified to the 2X Challenge in 2020 represent 13% of signatures, compared with an objective of 17% for 2020 under the strategy for 2020-2022. The Covid-19 crisis and the difficulty to take gender into account in the emergency situation and the response to the clients’ needs explain this level reached. Proparco is developing tools to increase its action toward gender equality.
5% Agriculture, industry and social services
The $25 million signed for Access Bank Nigeria qualified to the 2X Challenge. Indeed, women account for 36% of the bank’s Board of Directors and 46% of employees, and the bank is active in promoting women’s leadership through a dedicated development program. The bank is also a pioneer in the implementation of initiatives to promote female entrepreneurship in Nigeria via programs to finance and support women entrepreneurs.
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Focus Our actions to support the SDGs in 2020
Improving access to essential goods and services By supporting projects that improve access to essential goods and services for people, Proparco assists companies that work to reduce inequalities in emerging and developing countries. Through our clients’ projects financed in 2020 by Proparco, 2.6 million people are expected to benefit from new or improved access to an essential good or service within 5 years, including 86% in low-income or lower middle-income countries and 67% in the health sector. This volume of new or improved access to an essential good or service over the next 5 years corresponds to 134% of the adjusted target for 2020.
Improved access to an essential good or service for 2.6 million people within 5 years Through 22 of our clients’ projects financed in 2020, 2.6 million people are expected to benefit from improved access to an essential good or service within 5 years, including 86% in low-income or lower middle-income countries. These projects include: • 14 microfinance institutions in Armenia, Cambodia, China, Côte d’Ivoire, DRC, India, Kazakhstan, Myanmar, Niger, Palestine and Senegal, as well as 2 investments in funds operating in Egypt and Vietnam, in particular in the field of financial inclusion; • In the health sector, two direct investments, one in a platform of private hospitals in Egypt and Morocco and the other in a pharmaceutical production and distribution company based in Morocco;
• In the education sector, an equity investment in an SME specialized in digital and IT training in Kenya, Tanzania and Uganda, as well as a loan to renovate and increase the capacity of education institutions in Africa and the Middle East ; • A project to finance a solar power plant in India; • A project to improve transport services in Gabon.
2 .6 million people
are expected to benefit from new or improved access to an essential good or service within 5 years
Proparco's Sustainable Development Report 2020
Equity investment
27 Improving the health sector in Egypt and Morocco Through a $20 million equity investment in the private hospital platform Humania North Africa alongside IFC and IFU (total investment of $100 million), 983,0000 additional people are expected to access to health services over the next 5 years in 1 of the 4 hospitals that the platform will have by the end of 2022, with a total of 1.3 million patients.
399,000 people will benefit from a microcredit from a microfinance institution
More projects financed in the field of financial inclusion, fewer in the infrastructure sector Through 16 of our clients’ projects supported by Proparco to improve the financial inclusion of people in 2020, 399,000 people are expected to benefit from a micro-loan from a microfinance institution, i.e. 73% more than in 2019. 26% of beneficiaries of improved financial inclusion live in fragile or conflict-affected countries (105,000 people). However, projects to improve access to energy for people have been seriously affected by the Covid-19 crisis, with just 1 project financed in 2020 (against 12 last year), with a total of 134,000 people benefiting from improved access to energy over the next 5 years (8.5 million in 2019, with a record figure in 2019 thanks to 2 projects that accounted for three-quarters of the result).
Number of beneficiaries of improved access to an essential good or service within 5 years, in thousands 2017 2018 2019 2020
2,200 1,160
680 620 2,020
2,990
1,470
10,000
20
8,540
230
134 1,729 4 399324
Health
Education
Energy
Financial inclusion
Water and sanitation
Transport
Proparco’s Sustainable Development Report 2020
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Focus Our actions to support the SDGs in 2020
Results for access reached
A number of access to essential good or service exceeding the adjusted target
134%
The evolution in the expected results in terms of new or improved access to an essential good or service within five years for projects financed since 2017 is shown opposite, excluding atypical projects, as well as the objectives set out in the strategy for 2020-2022 for 2020 and 2020-2022. For 2020, an adjustment exercise was conducted to take the impact of the health crisis into account: the adjusted target has been calculated in relation to the volume and sectoral breakdown of projects actually financed in 2020.
Loan
of the adjusted target
Contributing to upgrading the Transgabonais railway line The €23.5 million loan to SETRAG, the Transgabonais Operating Company, aims to support the rehabilitation of infrastructure from Owendo to Lopé, E&S measures, the securing of tracks and the rehabilitation of a training center. 324,000 passengers a year are expected to benefit from a more reliable transport service within 5 years, with the Transgabonais being the only stable link between Franceville and Libreville, as there is no continuous paved road.
Proparco's Sustainable Development Report 2020
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Number of people who will have new or improved access to an essential good or service within 5 years
Atypical projects
17,599,000 +10,000,000(2) +6,909,000(3) 5 780 000 +2,200,000(1) 1,303,000
PROJECTS SIGNED IN
2017
4,655,000
2018
4,891,000
2019
2,589,600
2020
Adjusted target 1,927,000
Objective in 2020
Cumulated objective for 2020-2022
Supporting the development of the Mission Laïque Française (MLF) With a total amount of financing of €65 million allocated to MLF, a longstanding operator in French education abroad, Proparco is supporting the development of innovative education of excellence, in particular in Côte d’Ivoire, Egypt, Ethiopia and Morocco. 2,000 additional students are expected within 5 years. The project will also improve the energy performance of buildings and develop two training centers for regional teachers in Abidjan and Rabat.
Loan - grant
1) In 2017, a project accounted for 63% of access. (2) In 2018, a project accounted for 68% of access. (3) In 2019, two projects accounted for 60% of access.
Proparco’s Sustainable Development Report 2020
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Focus Our actions to support the SDGs in 2020
Voices from the Field
INCLUSION & GENDER
By Magali Roux
North and Southeast Asia Regional Director
Promoting access to financing and supporting entrepreneurship Access to financing for microenterprises and small and mediumsized enterprises (MSMEs) is a major issue in the North Southeast Asia region. MSMEs are often the main source of employment. Yet they experience difficulties in accessing financing, which hampers growth, diversification and job creation. The financial inclusion of people also needs to be strengthened in the region: for example, in Myanmar only 30% of the adult population owns a bank account. This demonstrates why Proparco’s action is particularly relevant, as the projects we finance aim to promote access to financing for poor people and support entrepreneurship for a sustainable development that creates jobs, while contributing to reducing gender inequality.
Reducing gender inequality In our operations to finance MSMEs, we pay particular attention to the integration of gender equality and the promotion of the inclusion and social and financial empowerment of women. It is especially important to take this into account in times of crisis when this inequality and vulnerability is exacerbated, as women are often the most affected. Through these projects, we are directly contributing to SDG 1 (No poverty), SDG 5 (Gender equality), SDG 8 (Decent work and economic growth) and SDG 10 (Reduced inequalities).
What is your assessment of the region for 2020? In 2020, we are proud to have signed five financing agreements for financial inclusion in Cambodia, Myanmar, Vietnam and China, with three microfinance institutions (MFIs), a bank and an investment fund, for Proparco's Sustainable Development Report 2020
and
a total of $94 million. Four of these projects particularly support female entrepreneurship and three qualified to the 2X Challenge. Among these projects, we have invested in the capital of the MFI Proximity Finance in Myanmar, where almost 39% of the rural population live below the poverty line. This MFI with a strong social mission, dedicated to agricultural clients, offers microcredits to small producers with repayment terms adapted to crop cycles. The project should provide access to microloans for 32,600 small producers and support 207,400 jobs within 5 years. With 51% of jobs being held by women in the MFI and 50% in the management (including their CEO), the operation also qualified to the 2X Challenge. The project thereby contributes to SDGs 1, 5, 8 and 10.
What has been the impact of Covid-19 on the operational activities? We have seen the impact of Covid-19 on our MFI clients at various levels. Firstly, our clients have trained their
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$94 M
for financial inclusion in the North and Southeast Asia region in 2020 officers in how to respect the protective measures (taking temperature, wearing a mask, hand washing…). Then they were badly affected by the travel restrictions imposed by governments, which made it difficult, or even impossible, to go to certain areas of operation and limited the collection (up to 50% less than planned for certain months) and new disbursements, which affected the growth in their portfolio. They have also had to set up a moratorium on payments in certain sectors, for example, in Cambodia back in March and for the entire year, or totally stop collecting for several months as in Myanmar. The objective of these measures is to relieve companies in the sectors the most affected by the crisis.
What response have you had to develop?
the year, by signing and disbursing new loans to strengthen liquidity, but also by granting deferred repayments to our existing clients and waivers on financial ratios which could no longer be respected. So, we have been responsive by accepting our clients’ requests, whenever it was possible in this very unusual context.
What is the outlook for 2021 in the region? In 2021, we want to continue to support these thematic areas, despite a health situation that remains unsure, as well as a sometimes highly deteriorated political context, as in Myanmar. Discussions are underway with MFIs in Cambodia, Myanmar, as well as with banks in other countries on supporting women’s entrepreneurship.
These operational impacts have had financial impacts for our clients, with a sharp rise in the rate of high-risk loans and restructured loans and an impact of the moratoriums on their liquidity. We continued to support the sector throughout Proparco’s Sustainable Development Report 2020
Focus Our actions to support the SDGs in 2020
Supporting the climate change mitigation and adaptation efforts of our clients
Loan
The Paris Agreement in 2015 reaffirmed the urgency of rapidly reducing global greenhouse gas emissions in order to achieve carbon neutrality in the medium term. To actively contribute to this huge challenge, Proparco has made promoting low-carbon development, resilient to the impacts of climate change, central to its strategy for 2020-2022. Despite a difficult economic context, 16 projects with climate co-benefits were financed in 2020, only 3 less than in 2019. The 13 projects with mitigation co-benefits are expected to reduce emissions by 719,000 tCO2 eq per year. In terms of adaptation, Proparco stepped up its commitments in 2020, with 3 projects financed that support the adaptation or resilience of economies and people to the impacts of climate change.
Three of our clients’ projects with adaptation co-benefits financed in 2020 In 2020, Proparco stepped up its financial commitments for private projects that contribute to adaptation to the impacts of climate change by financing three of our clients’ projects in sectors particularly vulnerable to climate change - agriculture, and manufacturing industries: • I n Zimbabwe and Zambia, a $25 million loan to Seedco, the leading African seed manufacturer (see box opposite); • In Kenya, a $18.7 million loan to Kenya Nut Company, including $4 million to install a drip irrigation system that will save water; • In Egypt, a $20 million loan to T&C Garments, a jeans manufacturing factory (see box opposite).
Proparco's Sustainable Development Report 2020
Contributing to climate change adaptation for agriculture in Sub-Saharan Africa (Zimbabwe) While agriculture was a pillar of Zimbabwe’s once thriving economy, agricultural yields and production have plummeted over the last 20 years. The $25 million loan to Seedco Group, the leading African seed manufacturer, will finance the development of hybrid field seeds better adapted to climate change and the construction of a corn drying unit to reduce crop losses related to climate hazards and increase yields.
Loan
3
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Supporting the growth and green initiatives of T&C Garments in Egypt Through a $20 million loan to one of the leading jeans manufacturers in Egypt, Proparco is supporting the launch of two green initiatives: to improve wastewater filtration combined with the installation of a recycling system to reduce water consumption by 90%, and install solar panels that will meet 30% of the factory’s electricity needs.
13 projects financed with mitigation co-benefits, with 719,000 tons of CO2 eq avoided per year In 2020, Proparco supported the energy transition, while improving access to renewable energy for companies and people by financing 13 projects that are expected to avoid 719,000 tCO2 eq per year on average, including 85% in lower middle-income countries and 28% in fragile or conflictaffected countries.
Equity investment
33
These projects account for € 266 million of financing for projects with climate co-benefits and include: • 7 credit lines fully or partly dedicated to the climate with financial institutions in Kenya, Costa Rica, Paraguay, Brazil, Turkey and Vietnam;
Supporting decentralized energy solutions for Commercial & Industrial (C&I) companies in Nigeria Proparco is supporting Daystar Power, one of the main providers of hybrid solar energy solutions for companies in West Africa. The facilities should supply about 153 GWh of reliable and clean electricity per year to companies by 2025. They will thereby contribute to reducing their dependence on diesel and improving their energy supply. 127,000 tCO2 eq will be avoided per year. This project is carried out with the support of the European Union
• 2 “business” projects in the agriculture sector in Nigeria and in the service sector in Cameroon; • 4 solar infrastructure projects: in Latin America, Africa and India. These projects have a future installed capacity of 600 MW and an expected renewable power generation capacity of 954 GWh.
719,000 tons of CO2 equivalent avoided per year
Volume of emissions of tCO2 eq avoided reached 59% of forecasts for 2020 The volume of emissions of tCO2 eq avoided every year by projects signed in 2020 only corresponds to 59% of the adjusted forecast, which takes into account the actual proportion of climate finance in signatures in 2020. This result is due to the unprecedented sectoral breakdown of climate projects signed in 2020: a single energy infrastructure project in the energy, digital and infrastructure (ENI) sector was signed in the context of the health crisis, whereas these projects have historically contributed the most to the volume of emissions avoided. This project, which only represents 5% of climate finance in 2020, accounts for 58% of the expected total volume of avoided emissions per year. The evolution in the expected results for tCO2 eq emissions avoided per year by projects signed since 2015 is shown below. +1,070,000(1)
Number of tons of CO2 eq avoided per year Atypical projects
1,980,000 1,650,000
1,600,000
1,930,000
1,529,000 719,000
PROJECTS SIGNED IN
2015
2017
2018
2019
2020
Adjusted forecast 1,219,000
[Forecast for 2020]
(1) In 2019, a project accounted for 35% of total emissions avoided per year.
Proparco’s Sustainable Development Report 2020
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Focus Our actions to support the SDGs in 2020
Voices from the Field
CLIMATE & RENEWABLE ENERGY
By Philippe Serres
South America Regional Director
Towards a low-carbon trajectory With 75% of the population living in cities, Latin America is one of the most urbanized regions in the world. It has already achieved its demographic transition, while the transition towards a low-carbon growth model has only just started. The challenge therefore lies in developing projects on climate change and adaptation, in line with this urban reality. While the energy mix is already very green in many countries, the main development challenge in this region lies in the industry, public transport and water and sanitation sectors.
What is your assessment of the region for 2020?
to the achievement of SDGs 11 (Sustainable cities and communities) and 13 (Climate action).
In 2020, Proparco’s Regional Department for South America is proud to have a great harvest for financing with climate co-benefits. A total of nine projects were approved for €347 million, including six with climate co-benefits for €236 million: three credit lines, two projects for transport infrastructure and one project for water and sanitation.
What impacts has Covid-19 had on the operational activities?
With over two-thirds of our commitments classified “climate”, our results in 2020 clearly reflect the priority given to the climate issue in this region. For example, we have financed the first fleet of electric buses in Bogota, alongside the local development bank Financiera de Desarrollo Nacional (FDN), via a loan for the equivalent in Colombian pesos of €44 million to replace old diesel buses with 250 electric buses. With this flagship project, we are contributing
Proparco's Sustainable Development Report 2020
Generally speaking, the non-essential activities targeting consumers (tourism, non-food retail sector, passenger transport) have suffered the most. This has led to lower turnovers to differing degrees. The renewable energy and water and sanitation projects have been considered as essential services and their implementation has never been compromised. Some clients in the hospital sector have been temporarily affected.
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Signing in 2020 of a €44 million equivalent loan to replace old diesel buses in Bogota with 250 electric buses
€236 M of projects with climate
co-benefits approved in
South America in 2020
What response have you had to develop?
What is the outlook for the region in 2021?
In the very first days of this crisis, Proparco started discussing with all its clients to anticipate any difficulties and look at solutions. Firstly financial solutions, via the possibility of allocating liquidity lines or restructuring existing commitments, but also technical, for example, by sharing best practices for protecting staff. In the end, only two clients experienced a fall in turnover to the extent that they had to negotiate a restructuring of their debt. In both cases, Proparco was responsive to its clients to provide them with appropriate and swift support. This did not prevent us from continuing to finance new counterparties in 2020, which reflects our countercyclical role.
We are particularly optimistic for 2021, even if it will take longer than expected to recover from the crisis. The prospects for the climate are very positive. In Brazil, we are seeing progress with projects that will contribute to strengthening the country’s low-carbon trajectory in the fields of water and sanitation, street lighting and metro concessions. In Ecuador, we are closely following bid invitations for the construction of solar and wind power plants. Finally, building on our first experience with electric mobility in Colombia, we would like to finance new concessions for electric buses in the region. As in 2020, we have also identified growth drivers for our “climate” commitments through the allocation of green credit lines to commercial banks.
Proparco’s Sustainable Development Report 2020
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Focus Our actions to support the SDGs in 2020
Supporting the transformation of our clients One of the key objectives of Proparco’s action is to support the transformation of our clients to strengthen their Corporate Social Responsibility (CSR) approach, improve their operational performance and, of course, increase their positive impacts on the SDGs, in particular through our support for innovation. We are continuously developing our range of tools for this purpose, drawing on our internal expertise and on the French and international expertise we mobilize, and the technical assistance we finance for the needs and ambitions of our clients.
Guarantee
257 E&S Action Plans already deployed Developing an Environmental and Social Action Plan (ESAP) for a solar project in India As part of the financing for the Electro Solaire Private Limited project, a 200 MW photovoltaic power plant located in the State of Gujarat, an E&S assessment was conducted, then an ESAP developed in coordination with the Asian Development Bank. The plan comprises the development of an E&S management system, the monitoring and evaluation of the impacts on bird fauna, an increase in the project’s E&S capacities and a gender action plan.
Proparco's Sustainable Development Report 2020
A significant improvement in the E&S/CSR performance of our clients over time Since 2017, the E&S support and monitoring implemented by Proparco has contributed to improving the E&S performance of clients in all sectors. Proparco notes that most of the progress is achieved in the first three years of the financing or investment. In addition to the compliance works that are sometimes required for industrial facilities, the achievements concerning the deployment of E&S management systems and the recruitment of dedicated E&S staff are particularly structuring. The progress is noted for clients financed directly (in debt and equity), but also for the investee companies of the funds Proparco invests in.
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Strengthening our clients’ CSR approach The number of clients supported in this area is constantly increasing. Proparco is currently supporting the environmental and social (E&S) and CSR performance of 453 clients or projects. In 2020, 55 additional projects/clients were subject to an ex ante E&S assessment. Proparco is also supervising the implementation of 257 E&S Action Plans (ESAPs). Through its intermediated financing, Proparco is supporting the E&S structuring of banks and funds and is thereby building their capacity to in turn support tens of thousands of SMEs.
Implementation of the 257 E&S action plans
257 E&S Action Plans (ESAPs) deployed Proparco has developed 257 ESAPs working with its clients in order to establish a framework for improving their E&S performance. To do so, Proparco brings its expertise, provides tools and puts its clients in contact with competent external specialists.
25% 44% 31%
Within Proparco’s portfolio, over half of the action plans have a completion rate of over 50%, half of which are fully implemented.
100%
> 50%
< 50%
Evolution of clients’ E&S management systems T0 Monitoring
13%
34%
28%
4% 13%
25%
46%
37%
Helping TURACO in Ethiopia improve its E&S performance
Evolution of clients’ E&S performance
Monitoring
35% 19%
29% 32%
Low
Moderate
22%
19%
30%
Good
14%
Excellent
The “E&S management system” indicator reports on both organizational and human resources that the client implements to improve its E&S performance. The “E&S performance” indicator reflects the results achieved with regard to Proparco’s requirements, which include the IFC standards. The indicators are measured ex ante, upon the signature of the project (“T0”), then updated during the investment or financing (“monitoring”).
Loan
T0
As part of the financing for Turaco (production of consumer goods), Proparco and Ethos have developed an ambitious E&S Action Plan and provided assistance for its implementation. In one year, there has been significant progress, including the recruitment of an E&S team and the development of a management system, the characterization of occupational health/safety risks and an improvement in the Group’s wage policy.
Proparco’s Sustainable Development Report 2020
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Focus Our actions to support the SDGs in 2020
Accelerator of impacts
€ 868,000 dedicated to
PROPULSE support
Proparco's Sustainable Development Report 2020
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Loan and PROPULSE assistance Objective: zero deforestation for an agribusiness group The objective of this PROPULSE project financed in 2020 is to provide SIFCA Group, a leading agribusiness group in West Africa, with an independent and continuous satellite monitoring tool for the risks of deforestation in its supply basins. The tool will allow SIFCA to take swift action on deforestation directly or indirectly attributable to it and implement its zero deforestation commitment.
13 PROPULSE “Responsibility” projects financed by Proparco since 2017 to strengthen our client’s CSR practices
Personalized support for our high-potential clients through our technical assistance products Since 2017, Proparco also financed 13 PROPULSE “Responsibility” projects, amounting to € 868,000 and aiming at strengthening our clients’ CSR practices, in addition to the expertise provided by Proparco’s ESG experts during the appraisal and monitoring of projects. These PROPULSE projects aim at building employees’ capacity, promoting employees, promoting gender equality, implementing E&S management systems, promoting performance standards in companies and achieving certification (ISO 14001, OHSAS 18001, SA8000, etc.).
Proparco’s Sustainable Development Report 2020
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Focus Our actions to support the SDGs in 2020
Improving our clients' operational performance Proparco helps its clients strengthen their operational performance and develop robust governance models to improve profitability and achieve stronger and more sustainable growth. This support may be implemented through a Governance Action Plan formalized following an assessment of a client’s governance, or a “Performance” technical assistance project implemented by PROPULSE, Proparco’s technical assistance service.
A growing governance support
Implementing a governance plan with an Armenian bank In 2020, ACBA, an Armenian bank seeking to increase both SME portfolio and capacity to attract external investors, benefited from personalized assistance which has allowed it to strengthen its governance. Following excellent cooperation with Proparco, a Governance Action Plan, based on overhauling and strengthening the Board of Directors, was implemented with this client.
Proparco's Sustainable Development Report 2020
Loan
Loan
In addition to the evaluation of the governance practices of our clients and their projects in the context of the annual financing allocated by Proparco (26 analyses conducted in 2020), we are currently providing more specific support to 14 companies for the contractual deployment of their Corporate Governance Action Plans. The monitoring of the implementation of Corporate Governance Action Plans, based on two pillars, highlights a better functioning of Corporate Governance Action Plans and an improvement in the internal control set up by clients.
Helping building the capacity of a company’s Board of Directors in Kenya In 2020, Proparco supported Kenya Nut Company, a family-run company set up in 1974 and specialized in growing and producing high-quality macadamia and cashew nuts, by conducting a detailed assessment of its governance. The objective was to upgrade the company with the best market practices. Proparco is in particular assisting KNC with capacity building for the Board of Directors.
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Implementation of Governance Action Plans (14 CGAP in the portfolio)
Evolution of Governance indicators within total portfolio
Board of Directors
T0 18% 65%
> 80%
Monitoring
33% 17%
< 70%
50% 67%
18%
70-80%
17%
17%
Control (internal)
T0
39%
Monitoring
33%
Basic
28% 50%
Emerging
Advanced
33% 17%
Developed
8 “Performance” assistance projects financed since 2017, for a total of €345,000 “Performance”:
our technical assistance service to strengthen our clients’ operational performance and sustainability Both diagnostics and Governance Action Plans may be combined with a PROPULSE technical assistance service classified as “Performance”. The objective is to strengthen the company’s sustainability by addressing issues related to good governance and, more generally, issues related to operational excellence, the quality of products and services, talent management, etc. This type of assistance allows our clients to make progress with skills and practices and thereby adapt to an increasingly competitive local and international environment. Since 2017, 8 projects have been financed in this field, totaling €345,000.
Proparco’s Sustainable Development Report 2020
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Focus Our actions to support the SDGs in 2020
Accelerator of impacts
Engaging our clients towards more impacts and innovations Because we have the conviction that strategic and/or technical assistance tailored to our client’s needs is essential to scale up the impacts of their activities and address the challenge of the SDGs, we have allocated new financial resources and a team dedicated to Proparco’s technical assistance (TA) activity, which became PROPULSE in 2020. Alongside «Responsability» and «Performance» TA services (see pages 39 et 41), the “Impact” TA service aims to engage Proparco’s clients towards more impacts on development. In 2020, 5 PROPULSE “Impact” financing operations were carried out for our clients’ projects, for a total of €500,000. The objective is to promote access to basic services (e.g.: digitalization), decent jobs (e.g.: small planter schemes) and the fight against climate change. 64% of PROPULSE projects financed in 2020 are located in Africa.
Green and Impact Bonds TA facility
In 2020, Proparco continued its efforts to mobilize and deploy additional financing to its own budget and the FISEA funds that have been available since 2010. At the end of 2020, Proparco thereby had several budgets from the French State, European Union and Green Climate Fund totaling over €40 million of financing, allowing it to support clients in targeted thematic areas. Furthermore, in 2020, Proparco diversified its range of PROPULSE services by proposing, in addition to conventional projects to finance TA recruited by its clients, PROPULSE Expertise, which involves making experts directly available to our clients. The Green and Impact Bonds facility was thereby launched in 2020.
Proparco's Sustainable Development Report 2020
Facility
Growth in technical assistance financing and launch of PROPULSE Expertise
In 2020, Proparco decided to help financial institutions in emerging and developing countries structure and issue green and social bonds. The objective of this facility is to encourage Proparco’s counterparties to define a strategy focusing on financing environmental and social investments. This technical assistance support may be completed with financial support from Proparco via a subscription to the green and/or social bond structured.
64%
Since 2017, 36 PROPULSE financing operations deployed for our clients’ projects with Proparco’s own resources for a total of €2 million.
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of PROPULSE projects are located in
AFRICA
36% are for Responsability, 24% for Performance and 30% for Impact. 84% are dedicated to clients operating in Africa.
3% Latin America and Caribbean 1% Middle East 4% Multi-country
Africa 84%
0% South-East Europe, Central Asia and Caucasus
Equity investment and PROPULSE assistance
Geographical breakdown of Technical Assistance projects from 2017 to 2020 (in value)
Loan
8% Asia
Supporting a bank’s ambition to mainstream climate change into its activities To assist Banco Promerica and PFC Group with the implementation of their strong ambitions to mainstream climate change into their activities, Proparco conducted an initial diagnostic and awareness-raising sessions on this issue. The Climate Action Plan that was subsequently formalized sets out the actions targeted for 2021-2022: carbon footprint measurement and integration of the physical risks associated with climate change.
Increasing financial inclusion for rural communities in Zambia The PROPULSE assistance to AB Bank Zambia aims to set up digital credit and savings services for rural communities by developing the use of eTumba, a digital platform created in 2019. The objective is to increase the financial inclusion of rural communities living remotely from the physical branches, especially women, and create intuitive products that meet the needs of the targeted populations.
Proparco’s Sustainable Development Report 2020
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Focus Our actions to support the SDGs in 2020
Mobilizing private financing flows and delegated funds Mobilization of private finance by projects approved in 2020, by geographical area
Europe and Central Asia
MENA region
Latin America & Caribbean
29%
10% East Asia and Pacific
4%
South Asia
Sub-Saharan Africa
10%
4%
38%
Multi-country
5%
Mobilization ratio of 1.00 in 2020 In 2020, the mobilization ratio of projects approved by Proparco stood at 1.00, i.e. a level equivalent to 2019 (1.01), despite the crisis. However, the structure of the instruments that had a strong mobilization impact was modified due to the crisis, with a lower contribution of direct equity investments (0.63, compared to 1.37 in 2019) and a greater contribution of credit lines (85%) due to their larger share in the volume of financing in 2020 (65%). However, it should be pointed out that the mobilization ratio for private financing in SubSaharan Africa increased compared to last year to 1.17 (1.02 in 2019).
Proparco's Sustainable Development Report 2020
Volume of private finance mobilized by projects approved in 2020, by instrument Equity Investment funds Equity 12% Direct investments
1% 1% Guarantees
Loans 4% Bonds 0%
85% Credit lines
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Mobilizing private financing towards sustainable development investments As part of its strategy for 2020-2022, Proparco aims to reinforce its role as a catalyst for private players. The objective is to double the mobilization of financing flows and private investments towards the SDGs. In 2020, Proparco mobilized €1,767 million of private finance (OECD method) in relation to a volume of projects approved by Proparco, and eligible for the calculation of private sector mobilization of €1,768 million, i.e. a ratio of 1.00.
€1.77 billion of private finance mobilized by projects approved in 2020 In 2020, the 82 projects approved by Proparco and eligible for the calculation of private sector mobilization raised a total of €1,767 million of private finance, including 49% by projects located in low-income and lower middle-income countries. €414 million of private finance have been mobilized by projects approved with climate co-benefits, i.e. 23% of the private finance mobilized.
Mobilization of private finance by projects approved in 2020, by country income categorization Low-income and lower middle-income countries
49%
Upper middle-income countries
41%
Multi-country
5%
High-income countries
4%
49% of the private finance mobilized is
from projects located in low-income or lower middle-income countries. 8.50
Amount of private finance mobilized, in € Bn8
Ratio of mobilization by instrument (projects approved in 2020) Loans Bonds Credit lines Guarantees
0.04
Equity - Funds Equity - Direct
0.24
0 1.32 0.16 0.63
Ratio of 1.01 2.39
2019
Ratio of 1.00
1.78
2020
2.77 Adjusted target 2.19
Objective in 2020
Cumulated objective for 2020-2022
PROJECTS APPROVED
A volume of private finance mobilized reaching 81% of the adjusted target In 2020, amounts mobilized from the private sector reached 81% of the adjusted target. This is primarily due to both equity and loan mobilization ratios, which were lower than estimates considered for the target calculation, given a weakened economic environment. The trend in the expected results in terms of private finance mobilized by projects approved in 2019 and 2020 is shown below, as well as the objectives set out in the strategy for 2020-2022 and the adjusted target for 2020, which takes into account the amount of the approvals in 2020 and the breakdown of the instruments financed.
8
Proparco’s Sustainable Development Report 2020
46
Focus Our actions to support the SDGs in 2020
Mobilizing delegated funds for the SDGs Deploying blending instruments to unlock investment and increase our impacts In addition to its own financial resources and those borrowed on the markets, Proparco mobilizes “blended” funds, which are additional subsidized (“concessional”) resources, or allow it to back higher risks of financing, and whose management is entrusted to it (“delegated” management). Between 2020 and 2022, under its new strategy, Proparco aims to increase its capacity to mobilize these concessional resources, which will be used primarily for:
Resources
€200
• Redirecting investment flows and private financing towards the sectors, products and services of the economic, social, environmental, territorial and digital transitions. Where necessary, these flows will be backed up with premiums and interest rate subsidies in relation to the effort and additional impact achieved. • Supporting our clients, where necessary, in the form of technical assistance and support funds. The objective is to support (i) their progress towards best practices for Corporate Social Responsibility and (ii) their capacities to innovate, implement and support transitions. • The emergence of the players and solutions of tomorrow (venture capital, social economy...), including in fragile States, as the concessional resources are used to assume the risk or innovative nature.
M of delegated funds managed by Proparco
National resources mobilized for blending operations In 2020, Proparco also mobilized €52 million of national resources (grants and interest rate subsidies) for “blended” operations in line with Proparco’s thematic priorities (climate, financial inclusion, entrepreneurship, social sectors) and geographical priorities (Africa and fragile States). These national resources have been used in various ways: technical assistance, investment subsidies, interest rate subsidies, grants with back-to-back loans, project preparation (FAPS), partial risk guarantees.
Proparco's Sustainable Development Report 2020
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Two new delegated financing envelopes allocated by the European Union in 2020
project in Papua New Guinea, to assist this country with its objective of a 70% access to electricity by 2030 (vs. 12% today) and a transition towards 100% of renewable energies by 2050.
In 2020, the European Union allocated two new delegated financing envelopes to Proparco: • A €68 million EFSD guarantee instrument and €3.5 million technical assistance grant for a portfolio of senior credit lines allocated to microfinance institutions and banks active in the MSME segment: this is the new Emergency Covid-19 Response initiative. • Alongside a €20 million Proparco senior loan, a €16.6 million investment subsidy for a 45 MW hybrid solar-biomass power plant
In addition to the acceleration of positive impacts and innovation enabled by concessional financing, all these projects have an effect on the mobilization of private finance for the SDGs. None of these projects would have come about without the support from the European Union or Green Climate Fund, which are real allies for Proparco in this approach.
These new budgets come in addition to those already available to Proparco, with a total of 7 projects and €200 million of delegated funds managed by Proparco. Year of allocation by the CE
Amount
ARE Scale-up Facility
2015
€12 M
Africa
Renewable energies
Equity investment
T&C facility
2017
€26 M
World
Renewable energies
Garantees
MENA Facility
2019
€23 M
MENA
Financial inclusion
Guarantees, credit lines, performance grants, TA
EURIZ
2019
€19 M
Africa
Financial inclusion
Guarantees, TA
CreatiFI
2019
€6 M
ACP
Cultural and creative industries
Equity investment, TA
EFSD Emergency Covid-19 response
2020
€71 M
Africa and Financial inclusion neighborhood
Credit lines, TA
EFSD FISEA+
2018
€35 M
Africa and Impact investment neighborhood
Equity investment, TA
Project’s name
Total
Geographical area
Sector
Operation
€192 M
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Monitoring
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OF OUR OPERATIONS
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Monitoring of our operations
Strengthening the monitoring of impacts: a strategic workstream since 2019 Proparco is continuing to step up the monitoring and evaluation of the impacts of its projects. The monitoring not only makes it possible to know the actual impact of the funded projects, but also to identify the most effective ways for achieving its impact objectives. Following an initial monitoring exercise conducted in 2019 on 96 projects, in 2020, Proparco monitored the impacts achieved at the end of 2019 by 214 projects signed between 2015 and 2018 (portfolio of €4 billion). The impacts collected through monitoring correspond to 3 key impact objectives of the strategy for 2020-2022 Jobs
Greenhouse gas emissions
Access to essential services
To contribute to maintaining and creating jobs for men and women, Proparco monitors the impacts of funded projects on direct, indirect and induced employment.
Proparco finances renewable energies and establishes a carbon footprint to evaluate the impact of projects on emissions that affect climate change.
To support people in developing countries, Proparco monitors the impact of funded projects on access to education, electricity, clean water, health services and financial services.
Number of jobs supported well above ex ante forecasts At the end of 2019, our clients’ projects financed by Proparco between 2015 and 2018 were supporting over 3.5 million jobs, including: • 424,000 direct jobs, meaning in companies and the investee companies of investment funds, i.e. 95% of the ex ante forecasts (448,000 direct jobs); • Over 3.1 million indirect jobs supported upstream and downstream of our clients’ value chains, i.e. a number well above the impact forecasts (538,000 jobs ex ante). The measurement is now more accurate and reliable using the Joint Impact Model (JIM), developed jointly by Proparco, CDC, FMO, BiO, AfDB and FinDev Canada to estimate the indirect effects of projects (see page 61).
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A significant support achieved in terms of jobs creation and maintenance At the end of 2019, the projects signed between 2015 and 2018 were supporting over 3.5 million jobs, including 2 million in Africa. 77% of the monitored companies created jobs since the project was signed, with a total of some 100,000 direct jobs created since the signing of the financing provided to these projects. Two-thirds of direct job creations are associated with projects located in lower middle-income countries.
A Number of supported jobs much higher than ex ante forecasts 424,000 448,000 95%
DIRECT JOBS
99,918
40% 36%
INDIRECT JOBS Jobs created 3,100,000 and/or maintained 538,000 Ex ante objective Objective exceeded % achieved Jobs created % of supported jobs held by women ex ante % objective
77% of monitored companies created jobs. +99,918 448,077423,726
Direct jobs supported upon project signature (T-0), ex ante (T+5) and monitoring T-0
Ex ante
122,638 69,157
Projects signed in
323,808
2019 monitoring
76,748
2015
123,682104,873 88,424
92,524
134,029
161,657149,581
32,198 40,101 2016
2017
2018
Total +2,599,322
Indirect jobs supported ex ante (T+5) and monitoring Ex ante
3,136,921
2019 monitoring
222,233
Projects signed in
578,985
2015
91,390
482,560
2016
892,917
137,970 2017
1,182,459
86,006 2018
537,599 Total
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Monitoring of our operations
Women account for 40% of supported jobs at the end of 2019, compared to 36% estimated ex ante Prior to the signing of the financing, the proportion of jobs for women in the jobs supported was expected to remain stable in the portfolio. The monitoring of the impacts has allowed us to note that the results exceed the expectations, with 40% of jobs for women supported by projects at the end of 2019 compared to the 36% estimated ex ante.
Percentage of female jobs supported 40% 3636% %
36% 40 %
T-0
Ex ante
2019 monitoring
Africa, the top continent in supporting jobs, with 2 million jobs at the end of 2019, including 1.6 million in Sub-Saharan Africa In line with the objectives of Proparco’s strategy, it is in Africa that the projects signed between 2015 and 2018 support the most jobs: Africa accounts for 47% of the jobs supported. Asia comes second, with 23% of the jobs supported.
40% of supported jobs are held by women at the end of 2019
Sectors that support the most jobs: Financial institutions and industry Among the projects financed by Proparco, the projects in the financial and social sectors (education and health) support the most direct jobs per million euros invested by Proparco. However, it is the many players in the value chains of the manufacturing and agribusiness sectors that support the most indirect jobs.
Direct jobs supported by € M invested, by sector Energy Industry and manufacturing Agribusiness Microfinance Other Social sectors Financial institutions
Proparco's Sustainable Development Report 2020
Indirect jobs supported by € M invested, by sector Social sectors Energy
177 484
354
Services Other
367
Microfinance
1,254
462
Financial institutions
1,390
656
Agribusiness Industry and manufacturing
1,733
15 152 273
471 953
2,267
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Number of jobs supported by projects signed between 2015 and 2018, by geographical area Number of jobs supported in the geographical area
Number of female jobs supported
Over a million Between 500,000 and 999,000
Jobs Female jobs
Between 250,000 and 499,000
189K
561K
Less than 250,000 Outside scope of operation
Jobs Female jobs
Jobs Female jobs
480K 105K
166K 67K
Jobs 119K Female jobs 21K Jobs Female jobs
303K 75K
Jobs Female jobs
1.6 million
568K
Some 100,000 direct jobs created, including almost two-thirds in lower middle-income countries
Lower middle-income countries are first contributors to direct job creation
Overall, projects monitored under the 2019 exercise have created 99,920 direct jobs since their signature. The vast majority of these projects have contributed to creating direct jobs. Indeed, 77% of monitored companies created jobs (compared to 73% during the previous exercise). Some 66,000 direct jobs have been created by projects located in lower middle-income countries, driven by projects in the financial and education sectors and by investment funds.
This is mainly due to the dynamism of projects in the financial and education sectors and in the investee companies of investment funds.
+38,170
Job creation: Number of direct jobs at T-0 and upon monitoring
218,001
256,171
155,530
+257 2,549
+1,722
89,756 13,502
2,806
High-income
T-0
+65,774
256 171
Upper middle-income
Lower middle-income
15,224
Low-income
Monitoring Proparco’s Sustainable Development Report 2020
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Monitoring of our operations
Major impacts on increasing access to essential services Access to essential services is one of the major challenges for developing countries and central to the SDGs. Proparco, through its mandate, is committed to supporting improved access to essential services in its countries of operation. Out of the 214 projects subject to a monitoring of the results achieved at the end of 2019, 143 projects (67%) aim to create or improve access to an essential service. Through these projects, at the end of 2019, 34.3 million people had benefited from improved financial inclusion and/or improved access to energy, education and health since the projects were signed: • Financial inclusion: 2 million people have gained access to a microcredit and 700,000 loans have been allocated to small and medium-sized enterprises (SMEs); • Energy: 3.8 million people have gained improved access to energy through renewable energy projects; • Education: 9.2 million students have benefited from education services, including university and vocational training; • Health: 19.3 million people have had access to improved health services.
9 million students gained new or improved access to education Over 9 million students have benefited from improved access to an education service, mostly through investment funds. Several funds are supporting education projects, including the Kaizen Private Equity fund, which is entirely dedicated to this sector. As it is difficult to estimate the impact on access of the projects identified by the funds beforehand, no estimate has been made ex ante.
19.3 million annual consultations at the end of 2019 Supporting the health sector is an especially important issue during the Covid-19 pandemic. The projects signed between 2015 and 2018 made it possible to provide 19.3 million annual consultations in 2019. In addition to consultations, certain projects focus on improving medical diagnoses, such as the Biosidus project which conducted over 17 million medical analyses in laboratories in 2019.
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While it is often difficult to estimate the impact of investment funds on access to essential services before the signing of the project, the analysis of the investee companies of investment funds during the monitoring exercise showed that the funds have provided major support to improving access to essential goods and services.
Two million beneficiaries of a microcredit Access to finance for microenterprises is one of Proparco’s strategic priorities. At the end of 2019, 2,035,350 people had access to microcredits through the projects signed by Proparco between 2015 and 2018. Financial institutions account for the majority of the impacts on financial inclusion.
In addition to the 2 million people that benefited from a microcredit, 700,000 loans went to small and medium-sized enterprises (SMEs).
Breakdown of beneficiaries of a microcredit by projects signed between 2015 and 2018 Investment funds
Financial institutions
83% 1,695,860 microcredits 83% of beneficiaries
17% 339,490 microcredits 17% of beneficiaries
The projects signed between 2015 and 2018 provided
19.3 million annual consultations in 2019
The Novastar East Africa Fund, signed in 2015, supports entrepreneurs developing basic services for the poorest in the education, health, food and water sectors in East Africa.
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Monitoring of our operations
An effective and significant contribution to the fight against climate change Proparco contributes to reducing or avoiding greenhouse gas (GHG) emissions by financing renewable energy infrastructures and energy efficiency projects. To evaluate whether projects avoid as many emissions as expected ex ante, a carbon audit was conducted upon project monitoring for each project aiming at avoiding GHG emissions, using detailed transparent standards.The monitoring has shown that the projects signed between 2015 and 2018 have avoided 1.7 million tCO2 eq a year, compared to 1.2 million a year estimated ex ante.
€700 million invested in renewable energies by Proparco between 2015 and 2018 Between 2015 and 2018, Proparco financed 13 photovoltaic solar energy projects with a total investment of €375 million, i.e. over half the investments in the energy sector. Hydropower facilities come second: Proparco invested in 5 hydropower projects with a total investment of €202 million, i.e. over a quarter of investments in the energy sector.
Breakdown of financing volumes in the renewable energies sector from 2015 to 2018 (total: €700 M) Misc.
4%
Wind
15%
Photovoltaic
53% 28%
Proparco's Sustainable Development Report 2020
Hydro
375 M
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€
invested in photovoltaic solar energy
475,000 additional tons of CO2 equivalent avoided compared with ex ante forecasts While many of the projects financed between 2015 and 2018 are still in the early stages of their operating period, they already avoided the emission
of some 1.7 million tCO2 eq in 2019, compared to 1.2 million tCO2 eq estimated ex ante, meaning that an additional 475,000 tons have been avoided. This difference is in particular due to a few dynamic clients that have become leaders on their markets.
Emissions avoided – 2019 monitoring vs. ex ante forecasts (tCO2 eq avoided per year) Ex ante
2019 monitoring
1,191,014
1,665,903
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Our approach
Proparco's Sustainable Development Report 2020
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TO PROMOTE SUSTAINABLE DEVELOPMENT IN OUR OPERATIONS This chapter presents our practices, standards and organization to drive private actors towards a more sustainable and inclusive development, in favour of the SDGs.
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Our approach to promote sustainable development in our operations
Selecting projects for their impacts
As a development finance institution and for the purpose of accountability, Proparco evaluates and reports on the impact of its action through a process to measure the results and impacts of its financing. This process is part of the project cycle and aims to inform the financing decision by characterizing the expected impacts of financing, in particular with regard to Proparco’s three main strategic objectives: scale up its direct impacts on supporting jobs and improving access to essential goods and services, strengthen the mobilization of private finance towards sustainable development investments (SDIs) and accelerate Proparco’s contribution to the emergence of the tomorrow’s actors and sectors.
1 Impact measurement in the project cycle, from identification to ex post evaluation
Identification Pre-identification of impacts
To measure the real impact of funded projects, identify the most effective ways to support the impact objectives and address the increasingly important issues of accountability, Proparco also collects key indicators at the impact measurement monitoring stage and carries out ex post project evaluations. In 2020, Proparco continued to strengthen the monitoring of its projects (see chapter “Monitoring of our operations”) and, as part of the updating of AFD Group’s evaluation policy, conducted a review of the evaluations carried out from 2014 to 2019. The objective was to inform the work on recommendations for the Group’s future evaluation policy.
In 2020, to improve prospective knowledge of the impacts by sector and type of operation, the Impact Proparco's Sustainable Development Report 2020
3
4
5
Appraisal
Decision
Monitoring
Evaluation
Annual reporting on the main results indicators
Ex post study on the results and impacts of projects
Analysis of the contribution to the impact objectives and sustainable development
2020: Further strengthening of the results achieved by projects
A constantly improving impact measuring tool
2
Presentation of the results of the analysis to the Project Committee and Investment Advisory Committee
Measurement unit (IMP) developed sector impact frameworks, working closely with the operational divisions. These frameworks are designed for investment officers and offices and aim to support operational staff during projects’ identification and appraisal. The objective is to help them gain a more rapid and relevant understanding of the potential impact of projects. These frameworks were developed in 2020 for the textile, cement and other building materials, off-grid electricity and fertilizer sectors. Other sectors will follow in 2021. In addition, to obtain an initial estimate of the potential impacts in terms of the jobs supported and greenhouse gas emissions avoided by a project prior to the identification phase, the IMP Unit has developed a tool based on data from the Joint Impact Model (JIM – see focus opposite), which is itself based on data from the GTAP (Global Trade Analysis Project) and UNIDO (United Nations Industrial Development Organization). Using information about the project, the tool produces an initial estimate of the expected impacts. For the time being, it is deployed by the agribusiness, financial institutions, telecommunications and textiles sectors.
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Evaluation of the expected impacts of each project The expected impacts of each project are assessed through the collection of quantitative and qualitative indicators reported from project studies and discussions with the clients. The indicators, gathered in a database, produce an aggregated score which in theory allows the impacts of projects to be compared with each other. The ex ante analysis of impacts, carried out by the Impact Measurement unit in conjunction with the project team, is presented from the broader perspective of project’s contribution to the SDGs.
Our key impact indicators
Number of tons of CO2 eq avoided
Theoretical number of people who will have new or improved access to an essential good or service
Gender equality
Standards
Number of jobs created and/or maintained
Amounts mobilized from the private sector for SDIs
In addition to estimating expected impacts on these indicators, an analysis is systematically carried out to identify potential inconsistencies between Proparco’s financing and direct investments (excluding intermediation) and the Paris Agreement. The objective is to ensure that climate and sustainability issues are better accounted for in projects supported.
Our good practices in impact management recognized As a signatory since 2019 of the Operating Principles for Impact Management, a set of 9 operational principles for impact management, whose formulation was overseen by the International Finance Corporation (IFC), Proparco published its first Disclosure Statement in June 2020 and its second one in June 2021. This note aims to report on the alignment of its processes and procedures with each principle. Independent verifications of the alignement have been conducted by EY.
In 2020 again, Proparco was very active alongside the EDFIs and other key partners in contributing to projects to harmonize approaches to promote the effects of projects on employment, the climate and reducing gender equalities, in particular in relation to the initiatives conducted by the GIIN (Global Impact Investing Network) and HIPSO (Harmonized Indicators for Private Sector Operations). Proparco has also contributed to the development of the Joint Impact Model.
Tool
Enhanced coordination of impact measurement Launch of the Joint Impact Model (JIM) Following a year of close cooperation with AfDB, BIO, CDC, FinDev Canada, FMO and Steward Redqueen to develop a tool to model the effects of projects in terms of indirect jobs and added value, JIM was launched in November 2020. It takes into account the trickle down effects on economies. The model has been adopted by the six founding institutions, approved by IFC, and is in the test phase at 25 institutions.
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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.
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Ex ante assessment of ESG risks of projects financed in 2020
ESG support through risk management Proparco supports the implementation of E&S Action Plans (ESAPs) and Corporate Governance Action Plans (CGAPs) and the achievement of better results in the field by providing its clients with advice, networking and tools.
The ESG risks estimated for projects financed in 2020 break down as shown in the following graphics.
10%
A
24% 17% 3% 24%
B+
Tools
E&S categorization (63 projects)
B IF-A IF-B IF-C
22%
Governance risks (63 projects) 75% 13% 9% 3%
ESG risk management tools Proparco has several tools for the ESG assessment and support. Contextual research, using external databases as well as Proparco’s local knowledge, is conducted on the activities of the project/client. The E&S and G assessment of project/client activities may be carried out in the form of desk reviews and interviews or of comprenhensive E&S due diligence assessments done by independent experts. After financing and agreement on an E&S action plan for the project/client to carry out, internal and/or external reporting is set up between Proparco and the beneficiary of the financing to monitor the evolution of E&S performance. To assess governance practices and suggest improvements to some of its clients, Proparco mainly uses: • Rapid Risk Screening (a pre-analysis rating tool)
Low/moderate risk
• The progress matrix (a tool to measure the maturity of the governance)
Major risk
• Ad hoc questionnaires
High risk Negligible risk or not applicable*
• The results matrix (a rating tool on the results of the due diligence) • Model documents for companies (e.g.: bylaws of a Board of Directors).
E&S performance indicators
Governance indicators
These indicators reflect the ressources which the client deployed and the evolution of its performance. An initial assessment of these indicators is conducted upon project signature (T0) and a regular update is subsequently made:
These indicators improve the monitoring of governance risks (risk monitoring matrix). They also measure the improvement in governance by monitoring the maturity of the governance (progress matrix). The effective implementation of the main commitments set out in the Governance Action Plan is also managed by Proparco, with the preparation of an annual governance monitoring sheet to improve the qualitative monitoring and concerns the five main pillars of the governance approach:
• E&S organization: measures the maturity of the E&S organization. The indicator uses scores from 0 (low) to 3 (excellent). • E&S management system (ESMS): reflects the management system’s maturity of monitored project. The indicator uses scores from 0 (low) to 3 (excellent). • E&S performance: takes account of the progress in the compliance of projects with the IFC Performance Standards and Proparco’s requirements. A score of 0 (low) to 3 (excellent) is attributed based on a set of key questions.
*R isk negligeable or not applicable: the detailed analysis of the governance and ex ante characterization of the governance risk in 2020 target priority projects.
• Commitment to good governance; • Structure and functioning of the Board of Directors; • Environment and control procedures; • Transparency and dissemination of information; • Rights of minority shareholders.
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Our approach to promote sustainable development in our operations
Accelerator of impacts
Engaging clients towards more positive impacts Along with its financing operations (debt, guarantee or equity stake), Proparco offers its clients capacity-building services in order to strengthen their expertise and know-how and to develop their practices. Thus, they adapt to an increasingly competitive local and international environment and take on or deepen a responsible approach from both a social and an environmental perspective. Technical assistance services are of particular relevance in environments characterized by a lack of training, information and expertise. PROPULSE thereby supports its clients in achieving lasting and sustainable growth and thus contributing further to economic and social development.
Our mission
“We engage our clients towards more positive impacts by providing them with expertise and know-how tailored to their needs. We help them develop their strategies and practices and support their commitment to innovation.”
PROPULSE may be delivered directly to Proparco’s clients or delegated to the investment funds that Proparco invests in. Various forms of assistance may be cofinanced by Proparco: • Consultancy services; • I mplementation of internal projects carried out by one or several experts; •T raining (thematic workshops, university courses, external training, etc.); • E xchange visits between companies and practitioners; •S tudies (feasibility studies, market studies, product and diversification studies, audits, etc.); • Seminars and crosscutting events. Often cofinanced by the beneficiary enterprise, these activities may be financed from Proparco’s operating budget, from the French State resources, from those of the European Union or Green Climate Fund (as Proparco is an accredited entity able to mobilize delegated funds).
Proparco's Sustainable Development Report 2020
As PROPULSE is generally combined with financial support provided by Proparco to its clients,Technical Assistance (TA) programs must meet the general impact objectives of Proparco, but also those of the various financing/investment programs/tools they are associated with. PROPULSE is essential for companies that: • Develop less common products or are at a very recent stage of development (venture capital/digital or start-up); • Offer high social impact products or services (social or inclusive enterprises); • Operate in countries where the assistance ecosystem is particularly weak (priority poor countries or fragile States). There are three types of TA: Responsibility TA, Performance TA and Impact TA. They are classified by sector of operation and/or by type of player: financial institutions, agriculture/agribusiness, manufacturing sector, investment funds, infrastructure (energy, water, transport, sustainable cities), health, education, start-ups.
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Proparco’s support for clients throughout the project Assistance from Proparco’s experts (human resources)
PROPARCO network Financing/Investment Division • Understanding of the need depending on the type of partner and its stage of development • Search for and proposal of solutions tailored to the partner’s needs
Project identification
Mobilization of experts during the project implementation phase
Mobilization of expertise to design the project Governance expert • Improvement in the partner’s governance • Design of an action plan • Capacity building
Financing/Investment Officer • Financial and sectoral expertise • Coordination of all Proparco’s internal expertise
Due diligence
Environmental and social • Improvement in the partner’s practices • Identification of the project’s E&S risks • Coordination of the specialized external expertise required • Design of an action plan
Formalization
Investment officer • Advice to the client • Participation in decision-making bodies • Coordination of internal expertise Governance Support for the implementation of the Governance Action Plan Environmental and social Support for the implementation of the E&S Action Plan
Implementation
External skills and expertise Accelerator of impacts
Cofinancing of feasibility studies to better define the market needs and appropriate tools before the project
Potential mobilization of Technical Assistance (TA) to support progress in clients’ strategies and practices and support their commitment to innovation, in order to accelerate the positive impacts of their activities
In addition to the support from its experts, PROPULSE, the Technical Assistance service of Proparco PROPULSE, the Technical Assistance (TA) or capacity building service of Proparco, consists in providing external expertise and know-how to Proparco’s clients. TA is complementary to the support offered more globally by Proparco experts as part of their relations with these clients. PROPULSE addresses issues related to the expertise and/or transformation of Proparco’s clients.
Thematic areas of operation
Management & Organization Environment & social Governance Climate & Biodiversity Diversification/innovation Accessibility Inclusion
Proparco’s role in technical assistance projects
Identification Definition of the client’s need during the appraisal or monitoring of the financial operations
Build the capacities of your teams in financial management, HR management, your technical and operational performance (e.g.: quality certifications) and/or marketing performance Implement environmental and social management systems and/or obtain certifications
Strengthen governance capacities in your company, in line with the requirements of international financial partners: division of powers, control procedures, transparency, etc. Improve your references in terms of ecology and sustainable development, for example, by developing green finance products, conducting energy efficiency audits, taking measures that contribute to climate change mitigation and adaptation, etc. Develop new products to diversify and enter new markets. Implement innovative production and organizational methods adapted to local and international markets Launch one or several new products that meet the needs of populations on a very low income, MSMEs, cooperatives, farmers Ensure sustainable and responsible practices throughout your value chain to support sustainability and promote inclusive development
Appraisal Specification of the content of the technical assistance and most appropriate expertise to respond to the need
Decision Agreement on the content of the technical assistance and the maximum amount covered by Proparco
Monitoring Support for the recruitment of the service provider, monitoring of the quality of the service and impact of the technical assistance in the company
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Our approach to promote sustainable development in our operations
Diversifying instruments to accelerate transitions: concessional financing To accelerate transitions, private sector and investors’ access to concessional resources is increasingly integrated into international donors’ strategies - their resources devoted to these activities are growing. In recent years, Proparco has seized this opportunity to use concessional resources blended with market instruments to diversify and adapt its instruments to the needs and levels of risk of the projects and companies it wishes to finance and support in the search for additional and transformational impacts.
Proparco has access to various sources of concessional financing With the “7 pillars” accreditation, Proparco has been able to manage delegated European Commission funds since 2015. Proparco is currently implementing seven delegations of funds, directly or in partnership with AFD
Proparco's Sustainable Development Report 2020
and the EDFIs, in the form of facilities to be used for several financial operations. Proparco has been accredited since 2016 to mobilize funding from the Green Climate Fund. This partnership is a strategic opportunity for Proparco to further strengthen its support to the private sector in its low-carbon transition.
67 The accreditations from these institutions are a recognition for Proparco. They demonstrate its effective capacity to appraise, implement and manage financing for a wide range of possible operations (in terms of the type of instrument, risk-sharing and the amount). It highlights its institutional capacities (banking institution, manager of international mandates), technical capacities (fiduciary, control human and logistical) and its overall thematic and geographical expertise. To build an overall comprehensive partnership with these entities, facilitate the mobilization of funds through capitalization and feedback and ensure compliance with the very demanding accountability requirements of the delegators, Proparco has built and gradually strengthened its expertise and organization with a dedicated unit and capacities. Since 2019, Proparco has also been able mobilize funds from the French Government in the form of grants and interest rate subsidies which it can use to provide differentiated financing for projects that
generate additional positive impacts. These various concessional resources are complementary and complete the incentive nature of its own financing through resource blending.
Specific analyses on the proper use of concessionality The operations using these concessional resources follow the usual appraisal and decision process of other financial operations, with a specific analysis produced to justify their use for private actors. The mobilization of these resources is regulated by the positioning note on the use of concessionality approved by the AFD Group board of directors at the end of 2018. This positioning note complies with international principles and best practices in terms of resource blending as expressed by the OECD and the DFI and MDB Working Group on Blended Concessional Finance.
Concessional resources to unlock private
investments and scale up the positive impacts of projects
Principles for the proper use of concessionality – international references Group
OECD-DAC blended finance principles for unlocking commercial finance for the sustainable development goals
DFI enhanced principles for blended concessional finance in private sector projects
Date of creation
Adoption of the common principles on blended finance in October 2017
2013 (Principles) then 2017 (Enhanced principles)
“Blended finance is the strategic use of development finance for the mobilization of Definition of blending additional finance towards the Sustainable Development Goals (SDG) in developing countries”
Principles
- Serve development - Increase the mobilization of private finance - Be adapted to the local context - Strengthen transparency and impacts - Strengthen partnerships between private actors and development actors
“Combining concessional finance from donors or third parties alongside DFIs’ normal own-account finance and / or commercial finance from other investors, to develop private-sector markets, address the SDGs, and mobilize private resources” - Additionality - Minimum concessionality - Business sustainability - Market strengthening - High standards
Proparco’s Sustainable Development Report 2020
Proparco's Sustainable Development Report 2020
A World in common June 2021 - ISSN number: being awarded Editor: Proparco Creation: Patrick Martin Translation: Carré Noir Photos credits iStock P. 5 : Alain Goulard - Proparco P. 14: Evex Medical P. 15: Fredrich Ochieng P. 16: Rights reserved P. 17: Rights reserved P. 22: Rights reserved P. 23: Riccimedia - AFD P. 24: Annapurna P. 25: Access Bank P. 27: Miloud Boudjemai P. 28: Iskander Ezzerelli P. 29: mlfmonde P. 30: Proparco P. 32: TCGarments P. 33: Rights reserved P. 34: Proparco P. 35: Electribus P. 36: CC0 Creative Commons P. 39: SIFCA P. 41: Kenya Nut P. 43: Backdrop Ltd P. 55: Proparco
Proparco is the private sector financing arm of Agence Française de Développement Group (AFD Group). It has been promoting sustainable economic, social and environmental development for over 40 years. Proparco provides funding and support to both businesses and financial institutions in Africa, Asia, Latin America and the Middle-East. Its action focuses on the key development sectors: infrastructure, mainly for renewable energies, agribusiness, financial institutions, health and education. Its operations aim to strengthen the contribution of private players to the achievement of the Sustainable Development Goals (SDGs) adopted by the international community in 2015. To this end, Proparco finances companies whose activity contributes to creating jobs and decent incomes, providing essential goods and services and combating climate change. For a World in Common.
Proparco’s Sustainable Development Report 2020
www.proparco.fr/en
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