Integrated Environmental, Social and Governance (ESG) Programme
The Programme promotes sustainable private sector investment and helps to reduce negative externalities in selected countries in Africa, Asia and Latin America by improving environmental, social and governance (ESG) practices of both the financial and real sectors. It is implemented by the International Finance Corporation (IFC).
Private investment is essential to meet the Sustainable Development Goals and international investors are progressively requiring robust ESG practices from their investees. However, current ESG practices of many companies in emerging markets are inadequate, resulting in external costs on the environment and society, including inadequate climate change mitigation, leading to a lack of investor confidence and thus becoming a barrier to investment. There is evidence that better ESG practices are positively correlated with firm performance, better access to capital and better development outcomes.
The Programme supports the adoption of good ESG standards and practices at market-wide and at firm level. This includes climate risk management and best practice disclosure of climate finance flows and impact on climate change. It will help 1) regulators to improve the regulatory environment for ESG, 2) build market demand and the capacity of market intermediaries, 3) financial institutions and real sector companies to adopt ESG policies, implement good ESG practices and develop environmental and social risk management systems. Firms will improve their operational and ESG performance thereby benefitting from increased access to finance opportunities, financial institutions will provide more ESG / sustainable financing, and local intermediaries will provide their ESG services to the market on a sustainable basis. It builds on the success of the previous phase which focused on corporate governance and now enlarges that concept to include the governance of environmental and social risks.
The regulatory environment for ESG is improved, gaps in the regulatory framework and supervision are filled creating a level playing field-
Market demand for improved ESG practices is created and local capacity to support the market on the implementation of good ESG practices is developed-
Financial institutions incorporate environmental and social risk information gaps in their decision making and investment strategies-
Companies and financial institutions implement good ESG policies and systems.
Regulators receive support in improving and implementing ESG regulations, environmental and social risk management practices or sustainable banking principles-
Local market intermediaries are trained to offer advisory services on corporate governance (including gender-diverse boards and business leadership), governance for sustainability and on environmental and social risk management-
Knowledge sharing, awareness and dissemination events on ESG standards, regulations, good practices and benefits are held-
Financial institutions receive direct support to effectively build, improve or implement existing and new environmental and social risk management systems and practices-
Real sector companies and financial institutions receive direct support and board/staff training to improve corporate governance and governance for sustainability policies and practices.
Results from previous phases:
The previous phase was implemented in 2014-2020 and focused on strengthening corporate governance of companies in Southeast Asia, Latin America and Sub-Saharan Africa. According to an external evaluation in 2020, key strengths of the Programme were its systemic approach, its relevance to each country's context and its ability to work with key strategic partners who have the necessary influence to attract the interest of other players. Key results include the following:
- USD 2.96 billion of financing facilitated by 31 entities
- 228 entities with improved performance (e.g. in productivity, operations, loan terms, valuations)
- 68 recommended laws/regulations enacted or government policies adopted
|Directorate/federal office responsible||
|Budget||Current phase Swiss budget CHF 15’674’999 Swiss disbursement to date CHF 0 Budget inclusive project partner CHF 29’212’500|
|Project phases||Phase 2 01.06.2021 - 30.06.2028 (Current phase) Phase 1 01.07.2019 - 30.06.2024 (Current phase)|