CDC which is the United Kingdom’s DFI, and the International Finance Corporation (IFC) both represented the DFI perspectives. DFIs invest in some of the most challenging places and at the same time aim to meet very high standards with regard to the financial returns, but also in terms of impact on the environment and on local communities. It was discussed that a significant budget is needed to do due diligence and that client commitment is really essential for paying for due diligence too. According to Samantha Lacey, representing CDC, building relationships with the companies to affirm their commitment, capacity and track record is a useful tool because it enables even company’s without ready-to-go capacity but who are willing to learn and grow sustainably, to be considered on the basis of positive indications from their managers.
But how much influence do DFIs have on companies? Both speakers agree it exists but with limits. One challenge mentioned by CDC was that the investment is made through third party fund managers. Mark Constantine, from IFC, also commented that financial intermediaries make up 50% of IFC investments because of poor global access to bank accounts and access to finance. In such cases, the funds have the same requirements as what the DFIs would maintain themselves, but at the same time, third parties have less capacity to ensure due diligence. Moreover, as primary agriculture is not an area that DFIs tend to invest but invest instead in processing companies for example, it means that the producer is normally one step away. However to counteract that, DFIs often hold board positions which enables them to maintain a good overview of what is going on and have influence on the everyday affairs.
- NGOs should keep holding investors accountable to a higher level and support communities on campaigns. However, while there is a time for campaigns, there is also a time for relationship building and this is also crucial to globally get companies to improve their practices
- Donors should offer research and training for commercial advisors because those are the people whom companies listen to and whom support challenge funds!