Good environmental and social due diligence (ESDD) is essential to understanding some of the main risks, impacts and opportunities when investing in a business.
Yet the quality of the ESDD process can vary widely. For example, just 25 per cent use the process to spot opportunities that can add real value to an investment.
CDC has produced a practical and easy-to-use guide for Fund Managers on how to conduct ESDD, based on an analysis of over fifty ESDDs undertaken by a wide range of GPs.
The guidance covers:
- when to perform ESDD and how much time to allocate;
- who should co-ordinate the ESDD process;
- when and how to involve third party technical consultants;
- how to define the scope of ESDD;
- what focus and priority to give to specific risks (e.g. labour, pollution prevention, resettlement etc);
- how to assess a company's ES commitment and capacity, and
- how to summarise outcomes effectively in action plan.
The guidance is supported by case studies, practical tips and templates that Fund Managers can apply to their own pipeline of investments.
This guide is the latest in a series of good practice notes from CDC and is designed to complement the ESG Toolkit for Fund Managers.