Research into companies in the developing world published by CDC, the UK’s development finance institution, shows a strong link between good financial performance and good environmental, social and corporate governance practices.
The research is part of a report detailing the developmental impact of CDC, which is owned by the UK government.
The report demonstrates the effect in the poor countries of Africa and South Asia, where CDC invests in promising businesses that employ and train people and pay taxes to local countries.
Analysis of almost 350 businesses in which CDC has invested shows that those companies with good ESG systems financially outperform those with poor systems by 15 per cent.
While the private sector is widely recognised as the engine of much needed economic growth and poverty reduction, a lack of finance and investment still holds companies back.
At an event to launch CDC’s 2009 Development Review, Sir Bob Geldof spoke about the importance of investment for the world’s poorest countries.
He said: “Poverty can only be alleviated through aid, but will only be eliminated through trade, investment and growth. And it is trade and investment that will support the dynamism and enterprise of people in sub-Saharan Africa and South Asia and give them the jobs, dignity and opportunity that they deserve.”
CDC’s capital supports 794 companies (an increase of 113 on 2008) in 71 developing countries. In 2009, CDC made new investments totalling GBP359m.
Across CDC’s portfolio a total of 733,000 people are employed in the 617 companies that reported employment data.
USD2.8bn was paid in taxes to domestic governments by 463 companies reporting tax data last year to CDC.
Richard Laing, chief executive, CDC Group, says: “By backing the entrepreneurial spirit and ideas of people in developing countries CDC plays a vital role in improving lives and tackling poverty. It’s important that we are able to understand and measure our impact and that is why the 2009 Development Review is an essential means for us to report back on the results of our investment and to think about what we can do to improve.
“With supplies of commercial capital to developing countries reducing in 2009, capital from development finance institutions such as CDC took on even greater significance last year. Against such a difficult backdrop, CDC was able to invest more than GBP359m in promising businesses last year, and it continued to support new and often pioneering ways to back the untapped entrepreneurial potential in developing countries. Jobs transform lives. We estimate that the businesses in which we invest support, directly and indirectly, well over three million people.”
