We set sustainable objectives at the Fund and portfolio level and assess each potential transaction against measurable social and environmental investment standards. Then, we systematically review progress made against these objectives. Our sustainability approach is overviewed by our sustainability committee which brings together renowned international figures.
Internal resources: drawing on the investment team members’ experience of Development Finance Institutions
The internal evaluation of the sustainability impacts of the transactions over their life cycle, performed by the investment team, is one of the key components of Blue like an Orange’s systematic assessment procedure of every transaction. Thus, the ESG assessment is fully integrated during the whole investment process, from screening to monitoring. This integration guarantees the “no trade-off” principle between market level rates of financial returns and sustainable development outcomes.
The integration of ESG impact assessment within the investment process is facilitated by the fact that the majority of the team, especially the investment team members, can draw on their experience of working for Development Finance Institutions, the International Finance Corporation (IFC), the World Bank in particular and in the cooperative banking sector.
Setting “Reach Targets” for the fund
Blue like an Orange sets “Reach Targets” in order to manage more specifically the Fund’s contribution to SDGs in our key sectors: sustainable infrastructure, access to finance and access to social services (comprised of healthcare, education and agriculture).
A systematic sustainable impact evaluation and sustainability risks and adverse impact assessment of the potential deals
Blue like an Orange’s investment process includes a parallel track to evaluate the commercial, Environmental, Social, Governance (ESG) and impact aspects of each investment. Both are evaluated by the same investment team to assure a comprehensive and integrated review.
This evaluation includes in most cases reviews by independent parties and is required to meet minimum internal thresholds in order to proceed with the investment. The outcome of this assessment constitutes a specific section of the memorandum prepared for the Investment Committees and discussed among its members.
Sustainable impact evaluation through SDG Blue
Blue like an Orange has an explicit focus on mobilizing private capital to achieve the UN Sustainable Development Goals (SDGs). Therefore, each potential loan is mapped to the SDGs at Goal, Target and Indicator level. Mapping to the SDG Targets and Indicators level may be challenging, as they have been developed with a public sector focus. Therefore, Blue like an Orange’s investment team, at times with the assistance of external consultants, works with the client to determine “SDG Shadow Indicators” that align with the SDG Indicators and are relevant for the company and loan proceeds. Each potential opportunity is evaluated against the SDGs with the determination of a score – a minimum is required to invest. Refer to our SDG Blue methodology.
When IDB invest is a co-investor with Blue like an Orange, each transaction is evaluated by an independent team at IDB Invest and receives a Development Effectiveness Learning Tracking Assessment score (DELTA score between 0 and 10) to assess the social and sustainable impact of the transaction and the additional benefit of the IDB/Blue like an Orange investment.
Sustainability risks and adverse impacts assessment
Integration of sustainability risks
Blue like an Orange considers that sustainability risks could potentially or actually cause a material negative impact on the value of a Fund’s investment and are relevant to the returns of the sub-funds. Consequently, Blue like an Orange integrates sustainability risks and opportunities into its investment strategy and investment decision-making processes.
Identification and prioritization of principal adverse sustainability impacts and indicators
In order to avoid significant harm of investment decisions on sustainability factors, Blue like an Orange is committed to implement a due diligence policy on adverse sustainability impacts that includes, among others, engagement policies and investment restrictions applicable in the investment process and monitoring of the portfolio companies.
ESG due diligence policies
As part of its due diligence policies, Blue like an Orange will perform a KYC and ethical check and an Environmental and Social assessment in order identify and prioritize:
environmental, social and governance events or conditions which, if it occurs, could cause a material negative impact on the value of the investment; or / and
activities of the investment that could have negative effects on sustainability factors (subject matters include environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters)
The E&S due diligence is based on Performance Standards (“PS”) developed by International Finance Corporation (IFC) in 2012.
Systematic monitoring of each investment’s progress against expectations
Blue like an Orange (and IDB Invest when it is a co-investor) systematically monitors progress made against each investment’s Environmental and Social Action Plan. For each transaction, this Action Plan includes monitoring the annual evolution of the fixed set of “Shadow SDG indicators” which measures the company’s contribution to SDG progress at Goal, Target and Indicator level, as stated in the loan agreement. This will enable to monitor and share the Fund’s progress against the “Reach Targets” with investors. Furthermore, for each company that IBD Invest invests in, it has contractual rights to perform an evaluation of each company’s DELTA Score as well as other indicators on an annual basis. As agreed, Blue like an Orange will obtain updates from IDB Invest regarding these evaluations. Decisions and processes are improved based on the achievement of impact and according to the lessons learned.
Assistance provided to the companies through training programs to help them reach their sustainability targets
The partnership with IDB Invest enables all companies that IDB Invest and Blue like an Orange and IDB Invest invested in, to benefit from continuous support from IDB Invest to help them achieve the expected sustainability impacts. This support consists in training programs provided by IDB Invest which are aimed at specifically helping each company reach their Environmental and Sustainable Action Plan. It also includes the possibility to attend sustainability conferences and workshops organized by IDB Invest.