Interview with Sabine Chalopin, ESG Manager, Denham Capital
Mar 6, 2018
Climate Action had the pleasure to speak with Sabine Chalopin, ESG Manager, Denham Capital about the challenges of sustainable investment in the energy sector.
How has Denham Capital’s ESG journey evolved? Where do you see it going?
In the last few years, our ESG strategy has evolved from being predominantly an approach to permitting, environmental compliance and risk mitigation, to a tool seeking to create value. We believe in the positive correlation between sustainability and value creation. We are continuously looking to improve ESG practices and have worked with the environmental consultancy, ERM, to ensure that our practices as well as those of our portfolio companies are best in-class.
We believe that there will be increased demand from stakeholders on ESG reporting, especially with reference to the UN’s Sustainable Development Goals (SDGs). We have therefore implemented a structured reporting framework to capture the environmental and social performance indicators from our portfolio companies. As members of the ESG Working Group of the Emerging Markets Private Equity Association (EMPEA), we are engaging with the wider ESG community to provide guidance to private equity firms in SDG reporting.
What are the biggest challenges in screening, managing and monitoring investments for environmental and social risks and opportunities?
At the early stages of investment, the biggest challenge is trying to gather as much information as possible on different issues (such as labour plans, land titles, stakeholder engagement) which may not always be easily available. We work closely with our portfolio companies to collate this information and use a screening checklist. Tier-1 environmental consultants are then engaged to help us complete environmental and social due diligence to identify any gaps against the IFC Performance Standards. During the construction stage, managing projects requires full-time ESG monitoring and we work closely with our portfolio companies to ensure that a skilled environmental, health and safety team is overseeing the project and a robust reporting structure is in place. At the operation stage of a project, whilst there are less environmental and social risks then during the construction stage, it is still important to ensure that there is ESG oversight and reporting.
What are the opportunities in emerging markets and high growth economies for sustainable investment?
There is a fundamental need for new power generation in emerging markets. Between 2016 and 2030, it is estimated that there is a cumulative need for $49 trillion in economic infrastructure to keep pace with projected growth. Nearly 18% of the $49 trillion (US$8.6 trillion) is needed in non-OECD power investments. Whilst electrification rates in the West are close to 100%, electrification rates across developing countries is 31.4%. In other words, 1.2 billion people currently live without access to modern electricity. We believe that low-cost, subsidy-free renewable energy and gas-fired projects have an important role in addressing this power need. This is also in line with the UN Sustainable Development Goals. SDG 7, specifically highlights the need to ensure access to affordable, reliable, sustainable and modern energy for all.
You are sponsoring and speaking at the Sustainable Investment Forum Europe. Why did you decide to get involved?
We believe that it is important to participate with the wider ESG community, to share our experiences and to learn from others. This forum attracts key players in both the private and public sectors and it is a wonderful opportunity to meet other professionals striving to invest sustainably.
Sabine Chalopin will be taking part in the “Decarbonising the energy sector” panel during the Sustainable Investment Forum Europe.