the challenge

Ksapa was approached by an impact fund registered as an Article 8 and 9 Fund under the European Union SFRD directive. Recognizing their commitment to the 2030 Sustainable Development Goals is grounded in good understanding and management of Primary Adverse Sustainability Impacts (PASI), the Fund indeed opted to formalize its own approach assessing and mitigating potential Human Rights risks across its investments.

OUR APPROACH

Leveraging its in-house Human Rights methodology, Ksapa identified and mapped the Fund’s specific Human Rights issues, per the 100+ control points included in the International Bill of Rights. This preliminary assessment was then cross-referenced with a documentary review, designed to select relevant issues to the Fund’s key rightsholders, business segments and countries of operation.

• Developing a Human Rights Policy

Building on this risk profile, Ksapa drafted a Human Rights policy, in which the Fund reaffirms its commitment to respecting all globally-recognized Human Rights across its business activities. The Fund acknowledges the importance of pairing its SDG impact goals with clear due diligence processes, to identify, remediate and ultimately prevent adverse Human Rights-related risks potentially tied to any deal it may consider. As such, the proposed policy includes:

1. A public commitment to enforce and promote all globally-recognized Human Rights throughout its activities.
2. A public commitment to uphold the fundamental rights set out in the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work.
3. A mapping of priority Human Rights risks and impacts, assessing their severity, scale and the Fund’s leverage to guide investment decisions and develop relevant measures.
4. The integration of Human Rights risk assessment findings in relevant internal functions and processes, by taking action to prevent, mitigate or remedy potential and actual issues.

• Streamlining Human Rights Due Diligences

 Stressing the sensitivity of Human Rights issues for its investment team, the Fund emphasized building internal capacity and co-developing risk assessment tools and processes. Building on existing due diligence components (KYC, exclusion list, controversy reports…), Ksapa therefore outlined a robust Human Rights Due Diligence process. Should it decide to analyze a potential deal, the Fund will assess actual and potential human rights adverse impacts by engaging with potential investees and working with a third-party on complying IFC Performance Standards. Investment Committee is made aware across every critical phase of potential human right risks, and realistic plan ensuring mitigation with clear commitment of potential investee. These are critical steps ensuring Investment Committee is held accountable under SFRD Article 8 and 9 with best level of awareness related to human rights related “PASI”.

• Designing Actionable Tools

Ksapa further stressed the importance of further engaging investees to develop progress plans on residual Human Rights considerations. The resulting action plan is designed be embedded in contractual documents and subject to a regular review of progress by the investment team and/or audit by a third-party. Finally, this should translate in an annual disclosure and communication of any violations of minimum safeguards.

Ksapa delivered this contribution through a tightly-knit team based between Paris and Boston. Indeed, leveraging its team’s expertise of IFC Performance Standards, Ksapa triangulated sector, country and rightsholder-specific Human Rights, equipping the Fund’s investment team with a comprehensive mapping of relevant Performance Standards and related guidance from international bodies. We matched this toolbox with a streamlined decision-tree complete with sample questions to guide the Fund’s experts.

RESULTS & NEXT STEPS

This combination of practical tools and subject-matter expertise is emblematic of Ksapa’s approach to building internal alignment around Human Rights – particularly in a risk-adverse investment community. As a result, the investment team is now equipped to understand their most salient Human Rights risk and review pipeline opportunities in such a way as to factor these throughout the investment lifecycle. This ensures impact fund compliance with SFRD article 8 and 9.

As part of the next steps, Ksapa has also made available its global network of 150+ experts based across most of the emerging economies targeted by the impact fund. These experts are able to easily engage local companies on sensitive human right issues, and design concrete mitigative plans in close cooperation with investee and impact fund client’s investment team.