Strategic Social Risk Assessment for Extractive Portfolio Companies

Problem:

A prominent investment bank faced potential social performance issues within its extractive portfolio companies operating in challenging environments. It needed a good understanding of the associated risks before initiating direct engagement with these companies, to ensure informed discussions and effective risk management strategies.

Actions:

• Gauged the veracity of reports of environmental contamination and allegations of child labour.

• Assessed the track record of the companies in responding to incidents and potential human rights abuses.

• Evaluated and analysed a wide range of social risks, considering both specific project characteristics and broader socio-political factors. This included assessing the implications of project locations, sourcing practices, government actions, and potential changes in industry practices.

• Assessed the severity of reputational risk for consortium lenders, associated with social performance of the portfolio companies.

Results:

• Provided in-depth social risk screening reports, clearly outlining potential social and reputational risks tied to the portfolio companies.

• Pinpointed manageable risk factors, while highlighting opportunities for enhancing social performance within the respective project areas.

• Enabled informed decision-making processes and fostered productive engagement with the portfolio companies.