CFM Funds are designed to initiate a transformative shift in climate change mitigation and adaptation throughout the emerging market. Environmental, social and governance standards are an integral part of CFM’s operational and investment processes.
Responsible Investment Commitment
As a responsible investor, CFM believes that all of its funds make sustainable investments, promote environmental and social benefits and place good governance practices at the core of its investment decision making process.
CFM is committed to promoting world-class standards in health and safety, environmental protection, social engagement and business integrity and ensuring sound corporate governance and transparent financial reporting. To achieve this, we:
- Adhere to the highest international environmental and social standards, including the IFC Performance Standards as well as other international standards including the ILO Core Labor Standards, the ILO Basic Terms and Conditions of Work, the UN Guiding Principles on Business and Human Rights, and the UN Global Compact.
- Have a full-time, in-house team of ESG professionals.
- Integrate ESG into all our investment decisions.
- Adopt a focused approach to ESG management for all projects, which enables us to make sure that environmental and social impacts and risks are fully integrated within that project’s operational processes.
The Responsible Investment Code and our Responsible Investment Policy set out our commitment to responsible investment in relation to environmental and social governance. This code is supported by the Environmental Social Management System (“ESMS”) with a grievance mechanism in place for external parties.
CFM considers the potential adverse environmental and social impacts of each investment. This analysis is done in accordance with the legal requirements of each country where the CFM funds invest and further is aligned to good international industry practices. All investment activities are conducted in compliance with our ESMS and this is confirmed through periodic independent reviews.
Our policy framework requires rigorous environmental, social and governance guidelines to be applied and adopted throughout the investment process and provides assurance that at all times the funds, CFM and the projects they invest in adhere to the highest ethical standards.
Integration of Sustainability in the Investment Process
At Climate Fund Managers sustainability risks and impacts are fully integrated into our investment process and the decisions we make before entering into any kind of contractual agreement.
Throughout the investment process, and in accordance with the ESMS, CFM collates and verifies actual data from the project company to ensure ongoing compliance with the funds’ requirements.
The potential adverse impacts of projects are subject to rigorous analysis through the due diligence screening process. This includes a determination of the potential for each investment to contribute to climate change mitigation or adaptation as its principal objective and we do this in line with the OECD DAC Rio Markers Handbook. Each project has to pass this process to proceed.
In the development stage, studies are performed to fully understand the potential sustainability impacts and risks of the project. This includes commissioning an Environmental and Social Impact Assessment (ESIA) and other specialist studies as required to achieve compliance with the highest international environmental and social standards. Once projects move into construction and operation, CFM remains closely involved, conducting ongoing monitoring and evaluation to provide CFM and with the assurance that sustainability impacts and risks continue to be appropriately managed and mitigated.
The due diligence process includes an in-depth ‘Know Your Client (KYC) assessment which is designed to mitigate the risk that CFM will engage or has engaged with a business partner who is involved in money laundering, terrorism financing, is included on a relevant sanction list or other integrity issues occur that could harm the reputation of CFM (e.g. fraud, bribery and corruption). As part of the on-going due diligence of a business relationship, CFM has an ongoing KYC monitoring process which allows CFM to gain and maintain an insight into the nature and background of Customers and their financial conduct.
CFM ensures that its business partners are contractually obliged to immediately report any suspicion of corrupt practices within their business operations to CFM as soon as they become aware. Obligations regarding corporate governance and risk management include implementing processes relating to anti-bribery and corruption are included in the contractual agreement for each project. Compliance with contractual obligations is subject to ongoing monitoring and oversight that allows us to be confident that business partners are meeting all of their legal and ethical obligations.
We expect our project partners to understand and share our commitment to integrating the management of ESG practices fully into their business processes and each project partner is required to adhere to the ESMS.
Transparency and Disclosure
We are fully committed to the transparency and disclosure of information relating to the sustainability aspects of our investments.
Our Responsible Investment includes a commitment to this effect, and this is further reinforced through the pre-contractual engagement process and in the contractual obligations we establish with all of the projects in which the CFM Managed Vehicles (CI1 and CI2) are invested.
On our website we publish details including the environmental and social risk categorisation of each project and the anticipated E&S impacts and review this information on a periodic basis. Disclosure also happens at the local level within our project communities, and is a process that starts in the development phase and continues throughout construction and operations. All such engagement is conducted in line with the IFC Performance Standards and is documented in a project-specific stakeholder engagement plan.
Effective from 10 March 2021, the private placement memorandum for each CFM fund shall explain the European Union Sustainable Finance Disclosure Regulation classification of that fund.