Project Examples

IFC's work in Sustainable Investing focuses the development of market infrastructure for the inclusion of environmental and social criteria in investment decisions. We support projects that increase the provision of investment research on such criteria, enhance methodologies for including this data in traditional equity research and generate new investment vehicles.

Emerging Markets Disclosure Project (June 2008)

In June 2008, IFC accepted an invitation to co-chair and take an advisory role in the Emerging Markets Disclosure Project. This investor initiative is also co-chaired by Calvert and the US Social Investor Forum's International Working Group.

The initiative takes place in three phases:

• Phase I: Publication of a research report by KLD on sustainability reporting practices of companies in seven key emerging markets - Brazil, Russia, India, China, South Korea, South Africa and Taiwan - effectively establishing a baseline for the initiative. Read more... [PDF]
• Phase II: Enlistment of support of investors with US$1 trillion in assets under management to sign an official statement seeking sustainability data disclosure from emerging market companies, using the Global Reporting Initiative's reporting framework. Read more... [PDF]
• Phase III: Under way with country teams composed of a leading investor and supporting investors, coordinating letters, meetings, calls and possibly events to discuss sustainability reporting and engage companies in each market. It will see the establishment of a tracking and reporting mechanism to measure projects' results by August 2009.

Web-based Tool for Private Equity Investors

In September 2008, IFC appointed a consortium led by Relyon Media to develop a comprehensive and user-friendly web-based tool that will enable private equity investors to assess sustainability risks and opportunities associated with each stage of their investment process. The tool is an essential part of the Sustainable Investment team’s Tools & Training program, funded by the Swiss SECO.

The specification for the tool is devised in consultation with a group of private equity specialists including Aureos Capital, EBRD and FMO as well as IFC’s own private equity funds team. A beta version of the website is expected by the end of 2008, and launch of the final product at the end of March 2009.

Bovespa Sustainability Index, Brazil

Following the landmark 2003 report "Towards Sustainable and Responsible Investing in Emerging Markets", the Sao Paolo stock exchange sought IFC's assistance in developing a Sustainability Index that would track the corporate social responsibility performance of Brazilian firms. Successfully launched in December 2005, the Bovespa Sustainability Index provides market-based incentives for more sustainable business practices and included an awareness-raising program for Brazilian companies. In the short time since its launch, this index has consistently matched or outperformed its benchmark.

Read more...

Who Cares Wins Investor Initiative, Global

The Who Cares Wins Initiative was launched in early 2004 with the aim of supporting the financial industry’s efforts to integrate environmental, social and governance (ESG) issues into mainstream investment decision-making.

Since 2004, the IFC, the Swiss Department of Foreign Affairs, and the United Nation’s Global Compact have hosted a series of annual Who Cares Wins closed-door, invitation-only events for investment professionals.

In the past four years, the ESG landscape has evolved significantly. Contributing to this evolution are initiatives such as the Principles for Responsible Investment, industry collaborations, and efforts of institutions and individuals in the investment chain. The catalytic role played by the Who Cares Wins Initiative is coming to a completion.

The 2008 report will be based on a final series of strategic discussions with industry executives before summarizing lessons learned from the Who Cares Wins process since 2004. The final Who Cares Wins report will be published early 2009.

Taking Stock Sector Research, Asia

Taking Stock represents a first step toward filling a very large analytical gap in the Asian investment literature. This gap is striking given that Asia is the fastest growing source of sustainability risks globally, due to its rapid growth in economic activity and in associated environmental, social, and governance (ESG) impacts.

Read more...

Raising the Bar: Valuing Sustainability in Emerging Asia

In February 2008, IFC appointed World Resources Institute to undertake a new project in conjunction with analysts in Asia, aiming to highlight the key sustainability trends facing the private sector in six Asian countries: India, Malaysia, Vietnam, Thailand, Indonesia and the Philippines. The immediate objectives of the project are to:

• Create better understanding of the existing ESG disclosure practices of companies in these markets;
• Highlight the key sustainability trends impacting the private sector in the countries studied;
• Demonstrate to the investment community how these trends will affect corporate financial performance and investment returns, and establish sector-based performance metrics based on these trends that can be used analysts in their long-term equity research.

The project is expected to facilitate improved environmental, social and governance factors disclosure by listed companies throughout the region by focusing companies on the metrics most relevant and useful for long-term investment research.

The initial preparatory reports highlighting key sustainability trends and corporate sustainability reporting practices in the region are expected by December 2008.

Private Equity: Fund Manager Training and Company Support, Africa

Sustainable investment training for a $100 million private equity fund based in Beijing was delivered by a multidisciplinary team from IFC's Funds Department and Environment & Social Development Department. It addressed corporate governance, social responsibility and environmental protection issues. Another highly innovative project will work with fund managers to channel technical and financial assistance to investee SMEs. This will improve the business operations of the SME and assist in promoting and facilitating environmental and social improvements, by demonstrating the business case. The program will be focused initially in Africa.

Product Development: Forestry Bonds, Global

Through a consortium of EU-based investors, IFC has begun to develop new sustainable investment products for emerging markets. The project group is currently investigating the suitability of asset-backed securities for long-term investment in responsibly managed forests. This project is part of the effort to develop investment products that will allow institutional investors to invest in lower income emerging markets.

IFC Invests in State Street Global Emerging Markets Sustainability Strategy

IFC committed up to US$20 million to the State Street/Rexiter/Innovest Global Emerging Markets Sustainability Strategy developed by State Street Global Advisors. IFC played a key role in the development of this innovative concept for institutional investors to capture exposure to the most sustainable companies in emerging markets.

Designed to integrate environmental, social, and governance factors systematically into its portfolio construction process, the Strategy aims to outperform the MSCI Emerging Markets Index by four percent per year over the course of a full market cycle, based on a two-year track record since inception on September 30, 2004.

Sustainable Investment Country Studies

In August 2008, IFC appointed The Energy Resource Institute (TERI)-Europe to conduct country studies in Brazil and India. The studies are intended as in-depth investigations into the state of the sustainable investment industry, initially covering the largest emerging equity markets by market capitalization and trading volume. Both demand and supply side conditions for sustainable investments will be analyzed:

• Availability of sustainability-related investment research;
• Supply of investment products available for sustainable investors;
• Institutional and individual investor views on sustainability and the regulatory environment

The studies will cover listed and private equity markets, and include recommendations for further development of the respective sustainable investment markets.

TERI-Europe is a not-for-profit sustainability research organization based in London. It is affiliated to India’s leading research organization, The Energy and Resources Institute (TERI) based in New Delhi. TERI-Europe endeavors to strengthen international linkages by exploring common grounds for solutions to global problems such as climate change. It informs European industry about sustainable business opportunities in emerging markets and promotes dialogue between organizations on corporate responsibility and sustainable investing.

Global Fund Manager Survey: IFC and Mercer to deliver first "sustainability rating" for emerging market investments

For the first time fund managers in emerging markets will be rated based on their capacity to incorporate environmental, social and governance factors (ESG) into their investment decisions.

To determine the ratings, Mercer will interview 40 managers based in the emerging markets of China, India, South Korea and Brazil. The research will also include a survey of over 200 managers globally, who invest in emerging markets.

Through this research, IFC wants to raise asset owners’ and fund managers' awareness and understanding of sustainable investing, and highlight current investors' demand for sustainable investing products.

The study will be published early 2009.