ESG and the Abraaj Sustainability Index

Increasingly investors are demanding ESG considerations as an integral part of the investment process - from investment identification, screening, operational management and through to exit.

Integrating ESG Into Our Investments

At Abraaj, we have always considered ESG to be a value-creation opportunity that ultimately builds stronger, more sustainable, and profitable businesses. ESG is therefore a fundamental value driver that is included alongside financial, commercial, and strategic considerations.

Our investment professionals are aware that financial returns are merely one part of a bigger value-creation story. This stems from our belief that to create long-term sustainable businesses and a thriving ecosystem, we need to look beyond the short term. This thinking is particularly relevant in the markets in which we invest and operate.

For a summary of The Abraaj Group's Environmental, Social and Governance Policies, please click here.

How We Do It

Creating sustainable value is at the core of our investment philosophy, and ESG considerations are an important element of every partner company’s value creation plan (VCP). Early in the investment cycle our investment teams, along with our portfolio management arm, the Abraaj Performance Acceleration Group (APAG), actively consider ESG matters in the development of the VCP and 100-day plans.

Abraaj’s ESG evaluation framework requires investments to be screened for ESG issues and opportunities at every stage prior to investment. Action plans are generated to address gaps and add value – with critical matters included in the 100-day plan.

The framework is informed by the Group’s guiding Business Principles, which requires compliance with the International Finance Corporation Performance Standards, ILO Core Labor Standards and ILO Basic terms and Conditions of Employment. This is further supported by the Group’s ESG policies which includes compliance with the United Nations Declaration of Human Rights and the World Bank Group Environmental, Health and Safety Guidelines.

To augment our ESG capacity, Abraaj has integrated ESG capabilities into each of the investment teams. Each of our investment professionals are provided with both external and internal ESG and sustainability-related training annually. 

Establishing Robust Corporate Governance

Good corporate governance and board representation is critical in protecting and driving value within our partner companies. Abraaj has developed a series of bespoke corporate governance tools based on the South African King III Code of Corporate Governance to assist investment teams - a code which is highly relevant for building sustainable private sector businesses within growth markets, and the Abraaj Guide to Good Corporate Governance to support Abraaj board representatives with their responsibilities. 

This enhancement in our partner companies’ governance has enabled us to raise additional financial resources amounting to 5.6x our investment in Latin America, and resulted in one of our North African partner companies being oversubscribed by over 11x when it listed on the London Stock Exchange earlier this year.

Our experience consistently gives credence to our belief that businesses should look beyond economic gain to create environmental and social equity. Only by doing both can we truly create sustainable value for our businesses and for society at large.

Measuring Our Impact - The Abraaj Sustainability Index

Empirical evidence shows that a sustainable investing approach can lead to better risk adjusted financial returns. However, while Limited and General Partners alike are converging on the understanding that ESG integration in investment practices is the new normal, the need to have greater accountability and reporting is stronger than ever.

The Abraaj Sustainability Index, a bespoke index which measures the developmental impact of Abraaj’s global investments was developed in 2008 as the first sustainability index suitable for private equity investing in global growth markets. In developing this index, Abraaj incorporated global best practice standards following rigorous research and analysis. The Index measures six factors that the Group believes are crucial to ensuring the sustainability of its investments.

The Abraaj Sustainability Index generates an annual score for each of the Group’s partner companies and enables them to chart and monitor their own performance through an online system. The aim of the Abraaj Sustainability Index is to improve the index score, which is calculated as a percentage annually, for each of our partner companies year-on-year.

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