SUSTAINABILITY

    ENVIRONMENTAL AND SOCIAL RISKS

    High environmental and social standards add value to projects as well as local communities and enhance business opportunities

    Managing environmental and social (E&S) risks are an integral part of IFU’s investment process for both direct project investments and investments in funds, financial institutions and other financial intermediaries.

    Effective E&S due diligence reduces risks to workers, the environment, local communities and other stakeholders, improves impact and provides business benefits like access to markets, reduced staff turnover, cost efficiency in production and improved stakeholder relations.

    During appraisal IFU identifies E&S issues which may cause severe adverse impacts and are relevant for the project companies or the portfolio of funds and financial institutions. IFU also evaluates the project sponsor’s, project company’s, fund manager’s or financial institution’s awareness of and capability to manage E&S risks.

    Before the investment is approved, IFU ensures commitment to an action plan describing the actions to be taken to meet the requirements of IFU’s sustainability policy and the relevant sustainability standards over time.

    Throughout the investment period, IFU exercise active ownership and uses its leverage to monitor and assess the E&S performance as well as to ensure continuous improvement through the provision of training and tools.

    SUSTAINABILITY TOOLS

    IFU has developed tools to support the project companies in their sustainability efforts

    Sustainable investments – a handbook for our project companies

    This handbook explains how IFU’s sustainability requirements for direct investments in projects companies should be interpreted and can be implemented to ensure that sustainability is an integrated part of the strategic and daily operation of a company.

    Guidance is provided on how to identify ESG risks and impacts of project activities, and how to prevent, minimise and remedy adverse impacts through a proactive approach. The handbook also provides inspiration on how to identify business opportunities and wider shared benefits for local communities.

    The handbook can be downloaded here.

    ESG Self-assessment Tool

    The tool is a questionnaire that helps to determine to what extent a company meets the most fundamental rights and requirements regarding significant sustainability issues. It can be used to identify issues requiring further attention and to prioritise the sustainability effort.

    The tool has been developed by the Danish Institute for Human Rights in cooperation with IFU, the Confederation of Danish Industry (DI) and the Danish Ministry of Economic and Business Affairs, and its official name is the Global Compact Self Assessment Tool. It can be downloaded here.

    Guideline on preparing a sustainability policy

    IFU requires project companies to adopt a written sustainability policy, which determines the level of ambition for the sustainability effort and is communicated internally and externally to relevant stakeholders. This guideline outlines what the policy should include and how to implement and communicate the policy.

    The guideline can be downloaded here.

    Guidelines on responsible supply chain management 

    IFU requires project companies to promote sustainability issues in interaction with its suppliers and business partners and require them to demonstrate due diligence in relation to potential and actual adverse impacts.

    The guideline provides recommendations for how project companies can work towards ensuring acceptable conditions in their supply chain. It describes how the company can prepare a code of conduct, identify and prioritise critical suppliers, as well as what the company can do, if it identifies critical issues in its supply chain.

    Guidelines can be downloaded here.

    Template for the annual sustainability status report

    IFU requires project companies to prepare an annual report that provides a status on sustainability issues and development impacts, including the implementation of the action plan and actions taken to address adverse impacts.

    The annual report must be submitted to IFU together with the annual financial report and IFU provides access to a digitalised template for which the company must use to prepare the report.

    Other tools

    A number of tools and standards developed by industrial organisations, consultancy firms and NGOs are also available. IFU can assist the project company in getting an overview and choosing the tools that correspond to the situation and the level of ambition of the project company.

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