Global law firm DLA Piper has partnered with African trade and investment platform Invest Africa to support the development of ESG best practices in African renewable energy projects.
Clear Environmental, Social and Governance (ESG) targets and measurements have become an increasingly important part of fundraising as investors seek to align their portfolios with sustainable growth.
For a continent boasting ample natural resources, this presents a significant opportunity for Africa’s green energy sector. However, renewable does not always equal sustainable and developing and articulating ESG metrics can pose a significant challenge to projects as they prepare investment rounds.
Veronica Bolton-Smith, COO of Invest Africa said, “Africa is particularly vulnerable to the impact of climate change despite contributing very little to global emissions. As the price of renewables fall, they will form an ever more important part of Africa’s electrification. In this context, it is essential that projects be given the tools to apply best practice in ESG not only from an environmental perspective but also in terms of good governance, fair working conditions and contribution to social inclusion. I look forward to working closely with DLA Piper on this important topic.”
The project will host a series of online meetings, gathering experts from the worlds of impact investment, development finance and law. Participants will have the opportunity to discuss strategies to improve ESG practices in African renewable projects from both a fundraising and operational perspective. The inaugural session will be hosted on Thursday 13th May.
Natasha Luther-Jones, Global Co-Chair Energy and Natural Resources and International Co-Head Sustainability and ESG at DLA Piper also commented, “…Renewable energy companies are not automatically sustainable as sustainability is a focus on all ESG factors, not just environmental. We know the need for renewable energy is only going to continue to rise, and therefore so will the number and size of renewable energy companies. The additional challenge is to make sure they are truly sustainable organisations and that’s what we’re excited about discussing during the webinar.”
The ABC’s of ESG
According to Business Insider, ESG is a construct that scores a company in three crucial areas pulled straight from the acronym — environmental, social, and corporate governance — to help investors build portfolios aligned with their value systems. ESG investments promote profit through ethical decision-making and is seen to be less risky.
In other words, ESG investing is more responsible because it is dedicated to providing a positive societal impact. Individual companies or assets are then rated on how well they adhere to the ESG guidelines.
According to a new report from Fitch Ratings, ESG investing in sub-Saharan Africa is closely linked to longer-term sustainable development benchmarks. For example, electrification programmes increasingly include renewable energy generation, or housing estates developments designed to have less environmental impact.