Sustainable & Responsible Investing 360° by R. Scott Arnell

Author:R. Scott Arnell
Language: eng
Format: epub
Publisher: Rowman & Littlefield Publishers
Published: 2022-05-20T00:00:00+00:00

How do you vet targets and how do you do ongoing due diligence once a company is in your portfolio?

Since the beginning of our first fund, we have always been well supported by the development finance institutions. People like IFC and CDC and TEG, and that group of organizations, DFC, now OPEC, as it used to be known. Legally, we’ve always been absolutely insistent on all of our companies operating to the highest possible standards. When we do investment agreements with people, it is always essential that they sign up to a very, very stringent set of rules around issues like corruption and bribery and anti-money laundering.

LeapFrog has developed a rigorous sourcing and investment process incorporating best-practice ESG principles that it implements with respect to investment activities. First, LeapFrog has a Responsible Investment Code (RIC) which is formally adopted by each portfolio company. The RIC outlines material ESG risks and serves as a basis to discuss these risks openly with each portfolio company since the beginning of the process.

Second, as part of its FIIRM Framework, LeapFrog has developed an ESG questionnaire that deal teams and companies complete during due diligence which provides a clear report on the current status in ESG and opportunities for improvement.

Third, LeapFrog has worked with specialized independent consultants in higher-ESG risk investments to fully analyze potential risks and opportunities.

We talk a lot about partner selection, which means that we try very hard to find businesses that are operating to world-class standards in terms of governance around these issues. A good example of that is the Mahindra Group, which was one of our first partners in India. We invested in their insurance business, which was a fantastic outcome for us both financially and from an impact perspective. We want to find the people in these countries where the governance is absolutely top notch.

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