75.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	75.0

* These investment figures are indicative

Project outcome: The most significant expected project level outcome is improved quality of credit for mid- to large-sized companies across about 20 countries in sub-Saharan Africa. The customized assessment supported by ACO3 senior private credit strategy and experienced credit team are expected to be able to offer longer tenor loans and bonds than what the banking sector typically provides. Contribution to market creation: IFC anticipates that supporting a major fund manager in sustainable lending practices will continue to strengthen the competitiveness of the private credit market and will signal to other fund managers the viability and bankability of long-term investments in the region.

Financing Structure: IFC will commit up to US$75million in the Fund, directly contributing to the Fund’s target size of US$500 million. In the approximately twenty African markets that the Fund intends to focus on, the availability of long-term funding is limited, and capital markets are nascent or underdeveloped across the continent. Tightened liquidity, exacerbated by the global interest rate hikes since 2022, coupled with regulatory restrictions on bank lending, has led to higher credit margins for companies on the continent. Equity and debt funds in the region still rely primarily on DFIs and similar investors to raise long-term funds. IFC’s financial additionality benchmarks find almost no long-tenor syndicated loans and no corporate bonds in the main target markets. Resource Mobilization: IFC will act as an anchor investor in ACO3. Given the difficult fundraising conditions in Africa, IFC’s support to the Fund Manager is expected to also improve the risk perception of both international and local institutional investors, providing them with non-commercial comfort to invest in the Fund, thereby supporting Ninety One’s fund-raising efforts. This mobilization of additional investors will allow ACO3 to access a larger pool of capital, enabling the Fund to make larger investments across the continent. Standard setting: IFC’s participation will support the continued application of international best practice standards on E&S impact mitigation measures. The Fund Manager will be required to enhance the Fund’s ESMS prior to IFC’s commitment, that will entail enhanced E&S screening and assessment in line with IFC’s E&S requirements. This will include a mechanism to screen out Category A/higher-risk activities. For investments in bonds, the Fund will be required to define E&S criteria for up-front asset selection. For solar related sub-projects, the approach to screen for forced labor use in the solar PV supply chain will be addressed based on

The Project will support ACO3’s investment in loans and bonds issued by corporates across multiple sectors, including financial institutions (FIs), and countries in Africa. The Fund Manager will maintain a medium E&S risk profile of the Fund’s portfolio and will avoid investments in loans and bonds supporting assets exposed to considerable E&S risks such as (a) significant involuntary resettlement, (b) risk of adverse impacts on Indigenous Peoples, (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or (d) significant Occupational Health and Safety risks. Given the size of the Fund and the limited availability of support services, such as second opinion providers or ESG data providers, IFC has categorized this project as FI-1. The key E&S risks of the Project are related to (i) the underlying activities supported by the proceeds from the Fund’s loans and bonds holdings, and (ii) the Fund Manager’s capacity to identify E&S risks and potential impacts associated with the assets upfront. These risks are typically associated with labor and working conditions, occupational health and safety, supply chain management, pollution prevention and atmospheric emissions, or waste and wastewater management, amongst others. The uniqueness of capital market investments in fixed income instruments is about proper selection of assets upfront. The Fund Manager may not have bilateral relationships with project sponsors of assets to be supported through the loans and bond in its portfolio. The E&S due diligence process to be conducted by the Fund Manager will be based on verifying publicly available information and finalized by applying special filters such as excluded activities and consistency with the key objectives of the Performance Standards. Therefore, the Fund Manager will apply a tailor-made E&S management system allowing for the exclusion of loans and bonds exposed to significant E&S and reputational risks as defined in the Performance Standards and the IFC Exclusion List, as well as coal-related activities, upstream fossil fuels projects and issuers with significant exposures to fossil fuels, and those not meeting relevant national E&S laws.

The ESMS dated August 2024 was prepared prior to first disbursement with IFC support and was approved by IFC. The ESMS is aimed at ensuring that the fund maintains a medium E&S risk profile, ensuring the investments do not directly or indirectly expose the fund to high E&S risk or carbon intensive sectors and controversial projects. It adopts a screening process and a scorecard that assigns a score based on E&S information. For all companies, it bases its assessment on publicly available documents including external ESG reviews where available, and if available through direct investment or direct relationship between Ninety One (through its other investment vehicles) and the company, it will base its assessment on additional confidential information. Where there is a bilateral agreement between the fund and the investee company, there will be an ESAP or engagement plan.
The due diligence process starts with a company screening against the ACO3 exclusion list, which includes the standard IFC exclusion list with additional high risk activities, including investments that may be defined as category A. The ESMS also includes a check to exclude any companies involved in open CAO cases.
The fund investment decisions are based on companies exceeding a minimum ESG score. The scorecard is completed initially by the investment team, based on information they have obtained during investee company engagement and the due diligence process. The current ESG coordinator, Steven Loubser is Portfolio Manager and has voting rights on the IC and responsibility for ensuring the E&S assessment is appropriately carried out. Oversight of the screening and scorecard process is maintained by the ESG team. The ESG team is also responsible for undertaking the physical climate risk based on ThinkHazard, and assessment of supply chain risks for any solar PV exposures. The legal counsel ensures appropriate E&S representations, warranties and covenants are incorporated in the investment contracts.
There are separate scorecards for corporates and FIs. FIs that are exposed to category A investments are placed in the liquidity portfolio, intended to have short term holdings. The deal team undertakes the assessment of the investment against the objectives of the IFC PS, providing a score for the company’s E&S management and performance. Where any gaps are identified, an engagement plan is defined with future actions for the company to address any gaps in performance. Where possible, the engagement plan is included in the legal agreement with the investee company.
Monitoring of the portfolio has the objective of ensuring that all conditions of approval are compliant. The frequency of monitoring a portfolio company depends on the ESG issues identified during the due diligence phase and the ESG risk score allocated to the portfolio company. For corporate investments with a low ESG score and financial institutions in the liquidity portfolio, the ESG team will regularly engage with the company to address items in the engagement plan and closely monitor performance of the company. The scorecard will be revised on a bi-annual basis. For all other investments, engagement will be conducted at least annually, and the scorecard will be revised on an annual basis with any material changes.
If a company’s ESG performance declines despite ongoing engagement, and the updated scorecard indicates a drop to a score of 0 or below, the Fund will take measures to reinforce the engagement process, and if there is no change, steps will be taken to identify exit opportunities of the investment. If a financial intermediary in the liquidity portfolio demonstrates a decline in ESG performance and the updated scorecard indicates a drop to a score of 0 or below, the Fund will seek to exit the investment.

S.no	Title	Anticipated Completion Date	Status
1	External Communications Mechanism	08/02/2024	Completed
2	Other2 - Enhance ESMS	03/31/2024	Completed