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The Fund
Environmental and Social Guidelines


The Manager will make an environmental and social review of projects prior to investment to enhance the screening and selection procedure for investments by the Fund.

The review is intended to minimise negative environmental and social impacts of the Fund’s investments rather than enhance environmental/social objectives of any entity. It is intended to allow the Fund to avoid investing in business which contravene national environmental or social regulations or significantly contribute to environmental or social degradation. It is not intended that the Manager should develop specific technical expertise in this area, engage in more detailed analysis of a business than would normally be the case or advise or coerce investees to perform activities not required by law.

The guidelines present a procedure for environmental/social screening. The appendix shows examples of activities in various categories related to environmental impact.


One aspect of the Fund’s investment objective is “sustainable development”. This demands a long term growth strategy that accounts for external costs, particularly environmental pollution.

Over half the world’s people live below the poverty line (less than US$ 1 per day). The natural resources of developing economies are consumed by rapid development and the demands on resources are compounded by urbanisation, industrialisation and the lack of, and slow, development of infrastructure. Problems stem from market and policy failures, high population density and high poverty, uncontrolled urbanisation, unplanned industrialisation, limited financial resources, limited technology and technical skills and weak environmental institutions. The impacts may be on physical resource (topography, soils, water, geology), ecological resources (flora and fauna), human and economic development (population, infrastructure, land use, energy, agriculture, tourism etc) and quality of life (socioeconomic values, health, culture etc).

The following areas are of particular environmental concern:

  • deforestation land degradation

  • water availability and quality

  • biodiversity

  • energy utilisation

  • air pollution

  • greenhouse gas emissions

The Fund intends to avoid investments which exacerbate environmental problems.

Industrial activities are classified according to four environmental categories. Category 1 is minimal impact activities, such as small scale craft businesses, Category 2 is moderate impact activities, such as construction or food processing, Category 3 is high risk/impact activities, such as manufacture of fertilisers and Category 4 is prohibited activities, such as any business involving radioactive materials. These are detailed in Appendix A of these guidelines.

Environmental/Social Screening Procedure

As part of the normal screening and due diligence procedure the Manager will include the following as required.
Classification of proposed investment according to the four categories outlined above by referring to Appendix A. If the Manager considers that the entity falls into Category 1 or 4 no further review is necessary (if the entity is Category 4 the investment will not be made), although a summary of the basis for classification should be recorded by completing an Environmental Screen Report (see Appendix B).

If the activity appears to fall into category 4, but operations offer an environmentally benign substitute for a conventional technology, the target may be pursued.

If the entity requires an environmental review the following procedure should be adopted as appropriate to each case:

1.Determine what permits, licenses and other documents have been issued by environmental authorities and obtain copies if possible. Complete an Environmental Screen Report.
2.Review documents (of the entity) that characterise environmental issues.
3.Attempt to identify issues and risks that should be considered. It is not necessarily incumbent on the target to police the activities of suppliers or customers.
4.Attempt to identify any additional permits, licenses or other documents that will or may be required to pursue proposed business objectives.

At this point decide whether the proposal should be pursued or not based on:

The degree of current environmental regulatory compliance (including ministerial approvals and permits for natural resource use and pollution discharges).

The expected degree of compliance required and the willingness and ability of the entity to adhere to regulations.

Whether a full environmental audit and/or environmental impact assessment should be required.

If it is decided to consider the proposal further and an environmental audit or environmental impact assessment is likely to be required, the target must provide these prior to investment.

The Manager may liaise with environmental authorities and/or consultants as required.

Prior to investment, an Environment Screen Report should be completed again. In addition, the Manager will include appropriate representations and warranties and appropriate conditions (precedent or subsequent) in transaction documentation.

Appendix A - Environmental Impact Categories

Category 1 - Minimal Environmental Impact

Examples of activities in this category are:
Employee training and education;
Manufacture of wood products (small scale);
Stone crafting (small scale);
Metal working (small scale);
Health and family planning;
Warehousing and archiving;
Consulting, professional or technical services;
Software development;
Computer equipment trading;
Recreational businesses and hotel, restaurant and related businesses;
Retailing businesses;
Trading of crops or food;
Transportation businesses (small scale and excluding transport or hazardous materials).

Category 2 - Moderate Environmental Impact

Examples of activities in this category are:
Manufacture of refrigeration equipment;
Film processing;
Large scale transportation;
Manufacture of tools, hardware and silverware;
Large scale metal working or metallurgical businesses;
Manufacture of vaults;
Trading of metal industry equipment;
Manufacture of medical equipment, tools or products;
Production or packaging or basic industrial chemicals (dry ice, inorganic salts, alcohols);
Manufacture of cosmetics;
Manufacture of wax products;
Manufacture of rubber products;
Manufacture of plastic products;
Trading of rubber or raw plastics;
Livestock industries and processing;
Vegetable/animal oil processing;
Use of irrigation equipment;
Trading of agricultural materials or products;
Manufacture, assembly or repair of engines, machinery, electrical, optical equipment;
Manufacture of jewellery;
Manufacture of sports equipment;
Manufacture of office and artist equipment;
Manufacture of gliders;
Manufacture of vitreous and non-vitreous clay products;
Manufacture of glass products;
Spinning, weaving and finishing of natural and synthetic fibres;
Manufacture of textiles and garments;
Manufacture of leather products;
Paper production and products;
Printing and trading of printing equipment;
Wood processing, carpentry and wood products;
Small ship manufacture and repair;
Manufacture or assembly of vehicle parts

Category 3 - High Risk Environmental Impact

Generally large scale activities will fall into this category irrespective of other characteristics. In addition, examples of Category 3 activities are:
Manufacture of cement, plaster and lime;
Petroleum businesses;
Chemical and petrochemical businesses;
Waste management;
Ferrous and non-ferrous metal processing;
Groundwater extraction;
Metal casting;
Production, distribution and storage of pesticides and herbicides;
Port and waterway development;
Manufacture and trade of hazardous substances;
Manufacture of fertilisers and pesticides;
Manufacture of detergents;
Thermal and hydropower development;
Airports, highways and railway lines;
Manufacture of leaded glass;
Tanning and dyeing;
Large scale tourism;
Urban water supply and waste water.

Category 4 - Prohibited Activities.

This category includes extremely high risk activities including:
Production of lead paint;
Trading in wildlife or wildlife products prohibited by the Convention on Trade in Endangered Species of Wild Fauna and Flora (1973);
Introduction of genetically altered organisms;
Production, proliferation and sale of illegal pesticides;
Use of drift nets in fishing;
Any activity involving radioactive materials;
Activities involving the production or use of products containing chlorofluorocarbons (CFCs) or materials prohibited under the Montreal Protocol on Substances that Deplete the Ozone Layer (1987);
Production of electronic products containing polychlorinated biphenyls (PCBs);
Products containing asbestos.


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