MEDA Blog - Stories from the Field

The History of ESG and How It Applies to MEDA

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Simply put, ESG Investing is when one utilizes environmental, social and governance (ESG) criterion during the portfolio construction and/or analysis processes. Historically, the term ESG investing came out of the field of socially responsible investing (SRI). Arguably, SRI can be used as an umbrella term for many buzz terms: ESG investing, impact investing, ethical investing, valued based investing, green investing, among others. The important similarity amongst all buzz terms within the field of SRI is that they approach investing through some form of environmental, social, or corporate governance perspective. Even the first commonly dated approach to SRI utilized social criteria within their investment decisions. In 1758, the Religious Society of Friends (Quakers) prohibited the participation in the slave trade- the buying and selling of humans.

The practice of considering environmental, social, and governance (ESG) issues in investing has evolved significantly from its origins in the exclusionary screening of listed equities based on moral values.  A variety of methods are now being used by both income-motivated and values-motivated investors in considering ESG issues across asset classes. Best-in-class methods, positive screening, sustainability themed investing, shareholder action and direct investments (normally referred to as impact investing) are a few approaches being applied. Best-in-class or positive screening are investments in sectors, companies or projects selected for positive ESG performance relative to their industry peers. Shareholder action utilizes proxy voting as a way to create change, getting companies to integrate more ESG approaches within their operations. Lastly, impact investing is investing in companies, organizations and funds in the private markets with the direct intention to make measurable social or environmental impact (ie. Sustainable agriculture, financial inclusion).

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A personal case of gender reframing

“Essentially all of the income gains that middle-class American families have experienced since 1970 are due to the rise in women’s earnings.”

-Economic Report of the President (US), 20151

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I always took pride in my work for human development. The fact that my vocation and passion makes tangible lasting impact on the lives of the vulnerable poor, steered my growth and does so even today. Ten years ago, I was having a cup of tea one foggy winter morning in Dhaka, contemplating how SMEs are the driving force for the economic growth of a country such as Bangladesh. It dawned on me then that much of that growth has left vulnerable marginalized groups including youth and women behind. There is still so much left to do – and with this thought I finished my breakfast, which includes a pair of samosas made lovingly by my mother – a housewife in an upper middle class family of four.

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Differences that make a difference: how companies manage grants differently from NGOs

The international development community is accustomed to project implementation taking place in-field by local Non-Governmental Organizations. As such, there are certain norms and expectations which have developed over the decades. With increased investment in blended finance models and grant-based incentives being awarded to private-sector entities, it is important to understand some of the major differences between how commercial entities manage ESG (Environmental, Social, Governance) grants as compared to traditional NGO implementation. In our work through INFRONT and other experiences of the Investment Technical Team, we have seen that there are 3 major areas where commercial entities differ from NGOs in this respect.PAVE FGD

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"Poquito a Poco: Little by Little" – how blended finance facilitates change for low-income and rural households

As MEDA's flagship blended finance program, INFRONT (Impact Investing in Frontier Markets), is in its final year of implementation, the team is focusing its efforts on dissemination and learning. We recently launched two exciting media and communications products to showcase how the project is having an impact in frontier and emerging markets through a combination of investment and technical assistance. This blog will focus on a short film that was created, that features a portfolio company based on Colombia, Rayco and describe the following aspects of the film initiative: process, partner, and promotion.

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Last summer the INFRONT team started working with Twice Upon A Time to produce two short documentary films featuring Rayco and Maureauto Colombia, two companies based in Colombia that received a Sustainability Innovation Grant through the INFRONT project. The goal of these two films is to create awareness, generate empathy and present the business case of sustainability and environment, social, and governance (ESG) practices.

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