COVID-19 has focused our attention on a singular issue, the global pandemic, and rightly so. With the global scale of its current and foreseen consequences, we must acknowledge that this is a crisis and it is our duty to respond to it as swiftly and as effectively as possible.
But what does this mean for our other concerns? In our rush to provide capital to businesses in need of liquidity, should we cut a few corners on our due diligence, or on our typical environmental and social standards?
Some would say we’re facing an impossible choice: to help people maintain employment and incomes, or to save lives by continuing to protect the environment, respect human rights, and mitigate negative social impacts through our investments.
To me, this conundrum is a false dilemma. It is not one or the other, it must be both.
Facing the unexpected and staying true to our mission
In the midst of the COVID-19 pandemic, FinDev Canada released its revised Environmental and Social Policy. However, the work on revising our previous interim policy began in mid-2019. We received dozens of comments across a broad spectrum of organizations representing civil society, consulting and government.
So, what’s different?
A key policy change has been the explicit recognition of human rights as a part of our risk environmental and social profiling. Sometimes human rights is subsumed in social risks, but in this case we have pulled it to the forefront. In addition, the new Environmental and Social (E&S) Policy recognizes the voices of those who speak up to defend human rights as legitimate stakeholders who must be heard.
We also included gender intersectionality – a term that of late has penetrated organizational policy – in the policy. The revised policy makes it clear how our commitment to advancing women’s economic empowerment fits within the E&S assessment process. It is widely acknowledged that women often carry a greater burden for household duties, child care, and the scarcity of essentials like water and electricity make their lives more difficult. By including gender intersectionality as a component of our E&S Policy, we have expressed our commitment to look closely at how E&S matters impact women.
Another key change we made to our E&S Policy was to recognize the dynamic nature of E&S risk. The E&S risk profile of a financing deal will change over time. How it looks when we first ink business with a company or financial institution will evolve and our risk assessment must evolve, as a consequence. We have committed to not only continue to monitor such changes, but to publicly disclose them, as well, by updating the transactions risk profile when these changes are significant.
A final change I would point to is FinDev Canada’s recognition of its influence over its clients. Most E&S impacts are not due to the actions of FinDev Canada itself. Rather, it is through the companies in which we invest or to which we lend that environmental and social harms might occur. While we do not have direct control, there is a measure of influence that we might be able to bring to bear to ask clients to address E&S issues that might arise as a result of their business activities.
The Way Forward
The COVID-19 crisis has not affected our mission and our commitment as a development finance institution. We are not willing to set aside our commitments to look at E&S issues, including human rights. We must ‘take the time it takes’ to conduct adequate due diligence to ensure we understand how the businesses that we might finance affect the air, soil and water, and how they impact the lives of people: employees, consumers and local communities. Even in the midst of a pandemic, we must continue to ask our clients what measures they are able to put in place to combat negative E&S impacts. Where physical visits to prospective clients are not possible for the time being, we will find virtual ways to undertake thorough E&S due diligence.
What do you say? Is it time to step back from our E&S commitments? Do we face a greater emergency? The answer is an emphatic, no. To do so, would risk making an already dire situation much worse.