Upload
others
View
7
Download
0
Embed Size (px)
Citation preview
STRICTLY PRIVATE & CONFIDENTIAL STRICTLY PRIVATE & CONFIDENTIAL
Sustainable Value Creation – Abraaj Performance Acceleration Group A PE Approach to ESG
Agenda
2
Team Introduction
Our Principles and Values
Our Core Policies
ESG Through the Investment
IFC Performance Standards
Beneficial Certifications
The Value of Robust Corporate Governance
Value Enhancement
Sample Case Study – Athi River Steel, Kenya
Geetha Tharmaratnam Director 15+ yrs of experience Alea Group
ESG
2
Aziz Moolji Managing Director 15+ yrs of experience Merrill Lynch, Goldman Sachs
1Sales, Marketing, Pricing & Digital 2Environmental, Social & Governance (ESG)
Wahid Hamid, APAG Head Partner at Abraaj Member of Group Investment Committee & Chair of Global ParCo Review Committee 25+ yrs of experience PepsiCo, Boston Consulting Group
Glo
bal
Ovais Naqvi Managing Director 20+ yrs of experience WPP plc, Omnicom, PwC M
arke
tin
g1
Sale
s &
Fi
nan
ce
Co
rpo
rate
An experienced Abraaj Performance Acceleration Group which leverages central and regional team members
SEA
Alvin Hew Managing Director 25+ yrs of experience P&G, L’Oreal
Mark Wong Associate Director 15+ yrs of experience Reed Elsevier, PwC, BCG
LatA
m Carlos De La Fuente
Managing Director 15+ yrs of experience Coca-Cola, BCG
Akani Rodriguez Lopez Associate Director 8+ yrs of experience Groupon, McKinsey & Company
Hisham Moussa Director 10+ yrs of experience HSBC, KPMG M
ENA
Tarek Kabil Partner at Abraaj, Member of Global ParCo Review Committee 30+ yrs of experience P&G, PepsiCo
SSA
Ashish Patel Managing Director 25+ yrs of experience Intel, PwC
Additional global and regional resources at the Associate and Analyst level
A global team with a significant operating track record, working with locally based APAG regional teams to leverage sector and geographic capabilities
3
The Abraaj Group has an unwavering belief in sustainability, which is interwoven with our values and based on market relevance
1. Our Common Future, Brundtland Commission
“Development that meets the needs of the present without compromising the ability of future generations to meet their own needs” 1
• Sustainability can be achieved by unlocking the value in private sector companies in growth markets as they play a central role in promoting growth and development • And that resilient, long-term financial value can be attained not only through governance and reduced environmental impact, but also through positive social change and inclusive business models
We Believe:
The Classic View:
4
Our values are based on our core business principles
1. Openness and honesty in all dealings, with respect for commercial and personal confidentiality;
2. Objectivity, consistency and fairness in the treatment of all shareholders;
3. Good corporate citizenship and integrity in all dealings with investees and communities;
4. Respect for the dignity and well-being of all internal and external stakeholders;
5. Respect for the environmental and social capital of host countries and commitment to sustainable business practices;
6. Professional operation in a performance-orientated culture, and commitment to continuous improvement.
5
The Partnership has six guiding principles:
Environmental Social Governance
Underpinning our approach are our core ESG policies
6
Social Policy
We seek only to invest in businesses which:
• comply with local law and ILO conventions;
• take action to mitigate their impact on employees, contractors, the local community and all others affected by their operations;
• pay wages which meet or exceed industry or legal national;
• allow consultative work-place structures and associations which provide employees with an opportunity to present their view to management.
Environmental Policy
We seek only to invest in businesses which:
• take account of the environmental impact of their operations and take steps to mitigate any risks;
• are designed and operated in compliance with local law and IFC PS;
• take account of relevant international environmental agreements.
Health and Safety Policy
We seek only to invest in businesses which:
• comply with local legislation and regulations and international standards (IFC PS);
• assess the specific risks arising from work activities and introduce measures to eliminate; or
• reduce those risks.
Business Integrity Policy
We seek only to invest in businesses which uphold high standards of business integrity and honesty and operate in accordance with local and international laws and good practice, including those intended to prevent extortion, bribery, and financial crime.
The ESG management approach at The Abraaj Group is based on dual concepts of value preservation and value enhancement
• Compliance with our values, local regulations and working towards IFC Standards
•Compliance with Fund shareholder agreements
• Focus on risk avoidance and risk prevention through investment lifecycle
•Regulatory/operational risk mitigation
Opportunities for: • Efficiencies •Revenue growth • Stakeholder value •Carbon credits •Preferential access to capital • Improved branding •Product innovation • Improving governance
Value Preservation
Value Preservation
Value Enhancement
7
Pipeline & Initial screening
DD & Final screening
Legal Documentation & Disbursement
Post Acquisition Value
Acceleration
Exit
8
• Inherent risk rating and exclusion list
• Identification of ESG issues to focus on due diligence - internal/external
• ID value creation opportunities
• Residual ESG risk rating, Abraaj’ investment checklists + compliance (local regulations & applicable standards)
• Environmental &Social Impact Report + Agreed Corrective Action Plans (CAP)
• Test and develop ESG as part of value creation plan (VCP)
• Legal/investment agreement: ESG Undertaking as part of SEMS clause+ ESG commitments with appropriate ESG covenants
• Agree ESG aspect of VCP and CAP with ParCo
• Reporting: Quarterly reporting, environmental performance review, ASI, Limited Partners requirements, portfolio reviews
• Monitor CAP and effect ESG VCP progress through opportunistic initiative
• ESG Filing
• ESG assessment at Exit
• Cultivate increased exit valuation through ESG (e.g. IPO)
• Capture ESG Value Add + Case Studies
• Final reporting: Quarterly reporting, ASI, ESG
ESG is firmly embedded throughout our investment process
SEMS: Socio-environmental management system
In investing, the Group comprehensively considers ESG on an ongoing basis
Environmental
• Air Emissions and Ambient Air Quality
• Energy Conservation
• Wastewater and Ambient Water Quality
• Water Conservation
• Hazardous Materials Management
• Waste Management
• Noise
• Contaminated Land
Occupation H&S
• General Facility Design and Operation
• Communication and Training
• Physical Hazards
• Chemical Hazards
• Biological Hazards
• Radiological Hazards
• Personal Protective Equipment (PPE)
• Special Hazard Environments
• Monitoring
Community H&S
• Water Quality and Availability
• Structural Safety of Project Infrastructure
• Life and Fire Safety (L&FS)
• Traffic Safety
• Transport of Hazardous Materials
• Disease Prevention
• Emergency Preparedness and Response
Construction & Decommissioning
• Environment
• Occupational Health & Safety
• Community Health & Safety
Governance
• Improving governance framework
• Fair and reasonable remuneration
• Considering the issue of gift and conflict of interest
• Audit, credit, risk and remuneration committees
• Strategic mapping
9
PS1: Assessment and Management of E&S Risks and Impacts
To identify and evaluate environmental and social risks and impacts of the project
PS2: Labor and Working Conditions
Establish, maintain and improve the worker-manger relationship
PS3: Resource Efficiency and Pollution Prevention
To avoid or minimize adverse impacts on human health and the environment by avoiding or minimizing pollution from project activities
PS4: Community Health, Safety and Security
To ensure that the safeguarding of personnel and property is carried out in accordance with relevant human rights principles and to anticipate and avoid adverse impacts on the Affected Community
PS5: Land Acquisition and Involuntary Resettlement
To anticipate and avoid, or where avoidance is not possible, minimize adverse social and economic impacts from land acquisition or restrictions on land use
PS6: Biodiversity Management and Sustainable Management of Living Natural Resources
To protect and conserve biodiversity and maintain the benefits from ecosystem services
PS7: Indigenous People
To ensure that the development process fosters full respect for the human rights, dignity, aspirations, culture, and natural resource-based livelihoods of Indigenous Peoples
PS8: Cultural Heritage
To promote the equitable sharing of benefits from the use of cultural heritage and protect it from the adverse impacts of project activities and support its preservation
Our environment and social standards are based on world class IFC Performance Standards which amalgamate other key policies/standards
10
We identify standard industry specific inherent risks early in the investment process
Based on industry standards (GICS)
Environmental, Social, Health &
Safety
11
Considers industry inherent risk and residual
risk
Governance, Environmental, Social,
Health & Safety
HSES and governance risk assessment tools
Residual Risks Ratings
H M L H M L
• Rapid diagnosis of risks associated with partner company operations
• Sector specific lessons from Abraaj global portfolio
And further include the complexity of the business in residual risk analysis
Based on industry standards (GICS)
Environmental, Social, Health & Safety
Previously known as managed risk ratings
12
Considers industry inherent risk and
residual risk
Governance, Environmental, Social, Health &
Safety
HSES and governance risk assessment tools
Residual Risks Ratings
Inherent Risk Ratings
H M L H M L
• Expanding our risk analysis to include the complexities (size, nature, etc.) pertaining to partner companies
• Allows for a scientific and consistent approach for measuring company specific risk
Why?
Sound corporate governance is vital for the development of a sustainable business
• Good governance involves a journey and a commitment to an ethic of continuous improvement • The Board’s role is to foster effective necessary, decisions and amplify relationships
The Governed Corporation
SHAREHOLDERS: • Maximize shareholder value • Ensure equitable treatment of all shareholders
BOARDS: • Ensure that Board members and committees are all
receiving requested information in a timely manner •Board members should ensure that they are familiar with
the company, its management and its business
SENIOR MANAGEMENT: • Maximize shareholder value • Ensure equitable treatment of all shareholders • Establish the ParCo’s strategic goals, objectives, values
and standards • Comply with laws and regulations, auditing and
accounting principles, • ParCo’s charter and governance documents
Duties and Powers of the Board Towards
13
Abraaj works alongside ParCos to identify opportunities for value add
How does Abraaj add value for Partner Companies?
Management Quality Growth Return on Capital
Innovation
New Markets
New Products
New Costumers
Reputation/ Differentiation
Preferential Access to
Capital
Carbon Credits
Operational Efficiency
Cost Savings
Energy/Resource Conservation
Employment
Stabilization/Creation
Leadership
Development
Adaptability
Long term Strategic View
Enhanced Corporate
Governance
14
There is value in seeking internationally recognized certifications, benefitting customers, suppliers, and acting as a differentiator
15
•IFS Standards are developed for parties in the supply chain, which would like to use uniform standards to ensure safety and quality of food and non-food products and related services •Requires annual external foreign audits
•Specific requirements to enable an organization to: •plan, implement, operate, maintain and update a food safety management system aimed at providing products that, are safe for the consumer •to demonstrate compliance with applicable statutory and regulatory food safety requirements
•For work place safety and health of workers. •Key areas assessed for certification : •management systems •planning and risk assessment •staff training and awareness, etc.
•Specific requirements for an environmental management system to enable an organization to: •develop and implement a policy and objectives which take into account legal and other requirements •information about significant environmental aspects
•A management tool developed by European Parliament regulation for companies to evaluate, report and improve their environmental performance
•Quality management system: •provides guidance where a company needs to demonstrate its ability to consistently provide a product that meets customer and applicable regulatory requirements •aims to enhance customer satisfaction through the effective application of the system
IFS Certification ISO 22000
OSHAS 18001 ISO 14001
Eco Management and Audit Scheme (EMAS)
ISO 9001
Expansion on this scale and speed has been – and will remain our single biggest challenge. And it is here that Abraaj has really provided immense value.
-- Suresh Aggarwal, CFO
Investment Rationale Opportunity to invest in the leading company in a fast growing sector
High demand for infrastructure from both public and private sector
Proven management team
Value Added
Post staff tragedies in the business, Abraaj worked with the CEO to implement a heightened Health and Safety program, utilizing a specialist consultant placed on site over 3 years. The accident rate subsequently reduced, an enhanced employee-led safety committee now accountable, and a greater investment in PPE.
With the help of Abraaj resources who also process mapped the firm, ARSPL implemented an ERP significantly increasing its agility and speed of reporting to its Board.
Secured funding for the Company’s initial emissions reduction efforts
The robustness of the Board has been improved, lead by 2 senior Abraaj deal team members. The quality and further formalization of Board papers and decision making has increased the institutionalization of this family business. Sub-committees have been added with additional plans to enhance board composition.
Company Description
Current Status
“ ”
Financial Performance
Country: Kenya
Fair Value: US$9.9 mm
Deal Type: Growth Capital
Stake: 15.4%
Investment Amount: US$6.8mm
Status: Unrealized
Investment Date: October 2006
Current MoC: 1.7x
Origination: Proprietary
IRR: 10.2%
Athi River Steel Plant is preparing to raise additional capital to support its enhanced production capacity and finance additional machinery. Expected exit date is March 2014
2008 2009 2010 2011 2012
Revenue 16.4 14.8 13.8 18.7 16.6
EBITDA 3.3 3.0 0.9 3.9 3.0
Athi River Steel Plant: A critical change in Health & Safety process
16
Athi River Steel Plant (ARSPL) is a steel smelting company, established in 1996, which produces hot and cold rolled steel products from recycled scrap metals. These include building steel, fasteners, steel springs building and structural materials
In June 2012, ARSPL commissioned a plant expansion which more than doubled the Company’s production capacity
Tailored ESG training programs are supplemented by an information platform to operationally support the Group
17
Staff receive ongoing internal and external training annually
Comprehensive Training Knowledge Portal
Utilizing Opera, Abraaj’s online community
Abraaj Academy
Knowing the value our ParCos create provides us with deeper engagement opportunities
• 78 carefully chosen quantitative and qualitative indicators forming 6 pillars of sustainable private sector development
• Output is comparable across deal types, sectors and regions • Provides valuable insight into the relationship between
financial performance and ‘intangibles’ providing a framework for engaging our partner companies on key non-financial issues
• As we believe true profitability cannot be achieved without
sustainability, the ASI’s rigorous approach provides us with a crucial lever to accelerate business performance for value creation
The Abraaj Group utilizes an in-house developed, bespoke index to measure and report development across its partner companies
85% of partner
companies pay wages well above minimum wages in 2012
SSA
43.7% of
employees are women in Asia in 2010
ASIA
US$1.95 was
injected in LatAM partner companies for every dollar we invested (2004-2010)
LATAM
230% increase in
employees amongst MENA partner companies (2007-2011)
MENA
118
Our Sustainability Council supports and enhances our activities at the Group and ParCo level
Jose Maria Figueres Former President of Costa Rica CEO, Carbon War Room
Ms. Helene Gayle President and CEO of CARE USA
Prof. Ian Goldin Founding Director of the Oxford Martin School at the University of Oxford
Dr. Joseph B. Wanjui Chairman of the Board, UAP Provincial Insurance, Chancellor of University of Nairobi, Kenya
Dr. Nathalie von Siemens Managing Director – Siemens Stiftung
Sev Vettivetpillai Partner, The Abraaj Group
Ms. Jane Nelson Director of the CSR Initiative, Harvard Kennedy School Chair of the Sustainability Council
Fred Sicre Managing Director, The Abraaj Group
Further we are members of industry partnership and contributors to:
We also provide thought leadership through:
19
Our view is that a partnership between The Abraaj Group and ParCos provides an opportunity to create sustainable shared value with a singular focus
Strong ESG management has been a part of our DNA and a conscious strategy since inception, affording us and our partner companies:
• A competitive advantage in rapidly developing global growth markets
• Opportunities to drive value through Growth, Enhancement of the return on capital, and sustainable entrepreneurship.
As an investor with strong values, Abraaj works with partner companies to assist them in growing responsibly over time
“You cannot separate ESG from value creation in high growth markets. It is not discretionary, rather it is integral to the long-term sustainability of the private sector as it contributes to the development of economies.” Wahid Hamid, Head of APAG
20
The information contained in this presentation is given without any liability whatsoever to Abraaj Holdings, any of its affiliates or related entities or their respective members, directors, officers or employees (collectively "Abraaj") for any loss whatsoever arising from any use of this presentation or its contents or otherwise.
Unless otherwise indicated, information presented here in is as of 31st December, 2012.
No representation or warranty, express or implied, is made or given by Abraaj as to the accuracy, completeness or fairness of the information or opinions contained in this presentation. In particular, no representation or warranty is made that any projection, forecast, calculation, forward-looking statement, assumption or estimate contained in this presentation should or will be achieved. There is a substantial likelihood that at least some, if not all, of the forward-looking statements included in this presentation will prove to be inaccurate, possibly to a significant degree.
Unless otherwise indicated, references to “EBITDA” in this document represent revenues and earnings before interest, taxes, depreciation and amortization adjusted for one-time expenses and other adjustments where deemed appropriate to better approximate business earnings growth.
In considering any performance data contained herein, each recipient of this presentation should bear in mind that past performance is not indicative of future results, and there can be no assurance that any future fund managed or sponsored by Abraaj will achieve comparable results. Nothing contained herein should be deemed to be a prediction or projection of future performance of any fund managed or sponsored by Abraaj.
The information contained in this presentation does not constitute investment, legal, tax or accounting advice. Recipients of this presentation should conduct their own due diligence and other enquiries in relation to such information and consult with their own professional advisors as to the accuracy and application of the information contained in this presentation and for advice relating to any legal, tax or accounting issues relating to a potential investment in the regions described, including in respect of a fund managed or sponsored by Abraaj. This presentation does not constitute a recommendation to invest in the regions described, or in any such fund.
Certain information contained in this presentation concerning economic trends and performance are based on or derived from information provided by independent third party sources. Abraaj cannot guarantee the accuracy of such information and has not independently verified the assumptions on which such information is based. Abraaj disclaims any responsibility for any errors or omissions in such information, including the financial calculations, projection, and forecasts in this presentation.
This presentation does not constitute or form part of, and should not be construed as, or relied upon in respect of, any offer for sale or subscription of, or solicitation of any offer to purchase or subscribe for, any interests in any of the funds managed or sponsored by Abraaj. Any such offer, subscription or solicitation will be made by means of an offering document to be issued by Abraaj in connection with any such offering and any decision to purchase or subscribe for such funds should be made solely on the basis of the information contained in such offering document.
This presentation is being made on a confidential basis and is intended for discussion purposes only and is solely for your information and may not be reproduced or further distributed to any other person or published, in whole or in part, for any purpose. If you were provided with a copy of this presentation by a person other than Abraaj, then it is not intended to be read by you and you should destroy the copy.
By viewing this presentation you agree to be bound by the foregoing limitations and restrictions and, in particular, will be taken to have represented, warranted and undertaken that: (i) you have read and agree to comply with the contents of this notice including, without limitation, the obligation to keep this presentation and its contents confidential; and (ii) you will not subscribe for or purchase any interests in any fund managed or sponsored by Abraaj except on the basis of information in the private placement memorandum for such fund.
Abraaj Capital Limited is a license holding company within The Abraaj Group and is regulated by the Dubai Financial Services Authority.
Disclaimer