The United Nations Sustainable Development Goals (UN-SDGs) constitute the new global development agenda for 2030 and a universal reporting referential that will hopefully drive the entire investment community in the same direction. Composed of 17 goals, 169 targets and 232 indicators, the SDG framework incites all public and private actors to reinforce their engagement and efforts towards sustainability.
Meridiam’s ESG Due Diligence (DD) process was primarily based, until 2018, on managing ESG risks in respect of the highest international standards of quality. This applied throughout Environmental and Social Impact Assessments and the implementation of subsequent Environmental and Social Management Plans. In early 2018, Meridiam complemented this ESG DD process with the SDG evaluation framework, strengthening it and making it more comprehensive on evaluating assets as part of complex systems, their resilience capacities and the specific impacts and ramifications of a changing climatic system over their life cycle.
In line with Meridiam’s long-term investment and asset management philosophy and strategy, the SDG principles are not only embedded within Meridiam’s global ESG policy but are also implemented on a consistent methodological basis into Meridiam’s internal processes, from investment decisions to post investment management.
Developing the methodology and tool
A comprehensive impact-oriented business approach reinforces Meridiam’s ability to identify the most promising impact-driven investments and better integrate climate and social-related risks in its investment strategy. It also strengthens Meridiam’s role as an asset-manager by facilitating communication on benefits and co-benefits of assets as well as reinforcing stakeholder engagement. In a continuous effort to improve its internal processes, Meridiam has developed an impact-oriented monitoring approach supported by an optimized reporting tool.
As a long-term investor, developer and asset-manager, Meridiam needed an operational monitoring tool to manage and optimize the value creation over time through appropriate and actionable performance indicators. The SDGs framework was filtered and refined to select the most relevant SDGs and targets consistent to each type of infrastructure (Social, Mobility and Energy & Environment.
To reflect the reality of each asset, this evaluation is contextualized and, therefore, accounts for factors such as geographic and socio-economic context, the project’s technical characteristics or the public authorities’ involvement, and is done in a transparent manner over the lifetime of the asset. By identifying the most material parameters such as local context and mission for each asset, and developing a robust benchmark, accounting for regional context and best practices for each indicator, Meridiam was able to develop a bespoke tool to measure the real impact of each asset and its contribution to the SDGs.
First aggregated results for the African Portfolio
In addition to an evaluation of each project’s contribution to the SDGs, Meridiam’s tailor-made tool and methodology can also present results on a global portfolio (please see figure 4 below for the African Portfolio as of December 2018), and type of infrastructure basis. Combined with a quantitative assessment of projects based on the benchmark specifically developed for the tool, the methodology allows for a qualitative assessment of each project/fund/type of infrastructure to present their main benefits regarding each related SDG. Moreover, by identifying the main areas of potential improvement for each asset, this tool allows Meridiam to reinforce its role as a long-term investor and asset-manager.
The annual performance evaluation of portfolios/assets will now measure their contribution to the SDGs and identify what measures can be implemented to reinforce the performance and positive impact of Meridiam over the duration of each asset.