Risk Management at AFC
At Africa Finance Corporation, sustainability is about the continuation of good practices to ensure that what we do now does not deprive us of our future needs. It is about formalising considerations for Environmental and Social Governance (ESG) tenets in our due diligence processes as a complement to the conventional analysis, thereby contributing to our investment decisions and creating measures for ensuring compliance with the principles guiding these tenets. In this regard, sustainability in AFC is about ensuring that negative socio-environmental impacts are avoided and, where possible, we engage with our stakeholders, including project proponents, in establishing corrective mitigation measures. This enables us to make continuous strides on the path towards achieving financial dividends, social dividends as well as environmental dividends, which is known as the “triple D”.
In addition, we have formulated a set of policies and guidelines on the Environmental and Social Risk, Credit Risk, Climate change strategy as well as the Grievance Redress Mechanism. The policies and guidelines, which are supplemented by roadmaps to the management of material ESG issues, have been developed and tailored on the basis of our engagement with the globally recognised ESG frameworks, as well as our association with other financial institutions on their interpretations of sustainable investment. All policies are approved by the Board of AFC and reviewed on a periodic basis.
Furthermore, we believe that good environmental and social governance considerations are a primary objective for responsible investing and for mitigating potential risks and conflicts. It is also to ensure that ESG is effectively captured in the due diligence process. In addition, we remain committed to continuous knowledge and skill improvement, and periodically organise capacity building for our managers to ensure continuous improvement on ESG considerations. This is carried out by providing training, guidance and support towards achieving our corporate sustainability stewardship.
To ensure that we continuously make profits in a responsible manner, we have integrated our internal policies and practices in line with the provisions of the globally recognised standards and principles, including the:
- International Labour Organisation
- United Nations Sustainable Development Goals (SDG)
- International Finance Corporation Performance Standards for Environmental and Social Sustainability
- Equator Principles
- African Development Bank Integrated Safeguards System
- Green Climate Fund
- Joint Impact Model (Development impact quantification tool)
The alignment of our ESG practices with the above standards, conventions, principles and model have contributed to reinforcing our understanding that addressing ESG concerns is about managing risks and opportunities for growth. It is also about developing investment products and solutions that respond to the demands of our clients, in a way that benefits the planet or, at a minimum, has no detrimental impact on our planet. In this regard, by establishing AFC Capital Partners (ACP), an entity to drive its sustainability and climate resilient infrastructure investment, we demand the highest standards in ESG practices that conform with the requirements of the Green Climate Fund, among others, from our clients.
For us, sustainability is about creating profound linkages between healthy investment, improvement of due diligence processes and de-risking the business operating model to maximise long-term value. We disclose our strides on the implementation of ESG and overall sustainability to our stakeholders through reporting, engagement with stakeholders and benchmarking.
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