1. Could you tell me a bit about yourself? What is your role as an investment officer for the International Finance Corporation?

I work for the International Finance Corporation as an investment officer. I do for-profit, but also ESG-driven investments in infrastructure projects. So these would be debt-equity, mezzanine, and any sort of financial instruments in private companies to promote development and generate returns.

2. Are there any specific ESG principles that you particularly emphasized in your role?

Yeah, the IFC has its own performance standards. So you can find information online. They’re all publicly available. And IFC’s investment or the World Bank’s investment, they’re governed by our own performance standards. So each of our investments has to adhere to these performance standards. So these performance standards deal with environmental issues, social issues. So basically it’s an ENS framework, which is specific to the World Bank Group. And it has been adopted by quite a few organizations around the world.

3. Regarding these metrics, how would the IFC address environmentally sustainable sustainability concerns and contribute to the efforts to reduce its environmental impact? So who essentially would the stakeholders be that are involved in this specific occurrence?

We work with our investing companies. So basically we would work with senior management to put up an ESG program, depending on how they score on all of our performance standards. These performance standards deal with biodiversity, environment, resettlement, other social issues, and indigenous people. And so we work with primarily our investing companies and their senior management to implement policies and frameworks that would enhance their ESG standing and help them meet our performance standards.

4. Given your current position as the investments officer, how would you navigate the balance between maximizing financial returns, yet also incorporating ESG considerations in the investment decisions you oversee?

ESG is both — it’s a value generator. From an ISC perspective, it’s there to minimize risk, of course, because if your company’s doing well, you’re an ESG, then there is a huge amount of reputational risk that you are undertaking. But at the same time, ESG is also a value enhancer in the sense that investors, especially now in ESG, are all the rage. They’re willing to provide debt and equity to companies who are doing well on ESG. And so we evaluate transactions or projects or investments commercially, and then we bring in ESG to both minimize risks to the investing company and to us as investors, and also to enhance value by creating a framework where ESG is helping the company to raise more financing or helps the company to. So that’s the framework we operate in. So for IFC, it’s both a way to ensure that we minimize the risk. So for example, I’ll give you an example. If it’s a power company, and for instance, if they’re investing in coal, that coal can lead to huge reputational risk, and maybe five, six years down the road, they would not have any avenues to generate power with their coal and supply too, because the world is moving towards a green world. And in that sense, I think it’s important for them to energy future-proof themselves. And so divesting out of coal is not only a decision to safeguard against that risk, but it’s also a decision that would enhance the company’s value if it becomes a green company.

5. How, in regards to the initiatives taken by the IFC, does the IFC specifically involve local communities and ensure a social impact in the regions where investments are made?

As part of all our investments, it’s mandatory for us to have stakeholder engagement and stakeholder consultation. So before we can invest in a company, our ENS team gets on the ground, it has consultations with the local communities, it has consultations with the civil society organizations, and it has consultations and engagements with all the stakeholders in the area. All of this information is publicly available. So before we invest our stakeholder consensus and stakeholder engagement and all of that. So we put up on our website saying that IFC is about to invest in a so-and-so project and the board is considering this project. And that’s primarily for transparency. So if there are any issues or any NGOs or civil society or local community can read, do what to reach out to us before we invest. And they can do so. We also have a grievance mechanism through which complaints against projects on the ESG front or any other front can be communicated to us. So there’s a whole compliance mechanism within the World Bank system through which grievances can be addressed or they can be made known.

6. By operating in more than a hundred countries around the world, are these initiatives that the IFC is involved in standardized, or do specific regions place greater emphasis on ESG and sustainability?

Yeah. They’re standardized. They’re part of our mandate. So no matter where we invest, or what we invest in, we have to follow the same procedure all over the world.

7. In your opinion, what are some of the biggest challenges facing the green business industry today?

There are a lot of, and when I answer this question, I’m going to answer this more broadly and not just about the World Bank, because I think the World Bank has been doing this. The World Bank Group has been doing this. Ever since it was created, that was the mandate. But ESG is a phenomenon that’s very new, new to this world. And it’s something that has picked up pace in the past few years, or maybe even half a decade. And I think the challenges are, A, one size doesn’t fit all. So there’s not one solution that would work for each of the countries or regions or even companies. Every company would have to sit down, think hard through its value chain, and figure out what it can do to reduce emissions and promote social and governance aspects. And I think the second challenge is that there’s a lot of emphasis on environmental challenges, but not so much on social and governance. So when people talk about ESG, they pay a lot of emissions to GHG emissions, but then the social part of it and the governance part of it is not really, so much attention is not being paid to it. Third, I think the climate change around the world is happening so rapidly that companies need to reach net zero, but reaching net zero is not that easy, because, across your value chain, you’ll have to figure out what business activities are the highest emitters and where you can reduce and how you can reduce it. So these are very strategic decisions. And then I think lastly, I think there are a lot of people or companies who are saying that they’re doing ESG, but there’s no uniform way to measure what, who’s doing what, how do you measure performance across different ESG funds or firms, even in terms of something as simple as common accounting or GHG accounting, where you need to figure out how are emissions calculated, there is no consensus. So I think it’s all evolving and yeah, and I think there’s a learning curve involved in this.

8. Focusing on today’s corporate world, how do you believe that the scale and the structure of a large company, such as PayPal versus the startup may influence the priority towards reaching carbon neutrality?

To me, the size of the company doesn’t matter because, at the end of the day, I think investors and shareholders and lenders, they’re becoming very, very aware of the risk that a company is carrying if it does not conform to ESG standards. So as an investor, I think to both minimize risk and drive value, you would be keen to do ESG. I think we’re in a day and age and ESG has reached a point where it doesn’t matter whether you’re a small company or a big corporation. If you’re a small company in a startup looking to raise funds, I think ESG is something you can use to your advantage when you go out and speak to investors if you are an ESG-friendly stock. If you’re a big company, of course, you have more stakeholders, and more sophisticated investors, and they would also be paying close attention to what you’re doing on an ESG front. So to me, it doesn’t really matter. It matters what industry you are in, what your growth projections are, what your strategy is, and where you want to be in the next five to 10 years. If you want to be somewhere, then I think ESG needs to be a part of that discussion.

9. Are there financial incentives or penalties in place for IFC clients based on their ESG performance? And if not, how would the IFC encourage its clients to adopt and adhere to sustainable and ethical practices?

There are a few products where there are explicit penalties or incentives. So that’s the whole field of sustainable finance. So IFC is also doing sustainable finance. So what is sustainable finance? Sustainable finance is sustainable linked loans or bonds where you provide money to the company at the back of them or green bonds where you provide money to a company at the back of them meeting certain targets and criteria. So for sustainability-linked instruments or for green financing-linked instruments, there is an incentive. So there’s a step up in your interest payment if you were not to meet ESG standards, et cetera. But beyond that, if you are talking about debt or equity, I think for all IFC investments, if our ESG requirements are not being met, then we have a right to make that investment. We have a right to get out of that investment. So we do regular checks and hear about a process and we are in touch with the clients regularly. And we have a lot. So I’m part of the investment team, but we have a sizable ESG team who are pretty hands-on with the clients. So if there is a policy breach, this would come under the policy piece. So if there’s a policy breach for IFC’s investment, then these investors would, then IFC has a right to get out of that investment or sell its investment or ask for a free payment, depending on what the nature of the investment is. I think, for example, when you invest, you have a contractual agreement and it’s part of that.