EFG Hermes is committed to the belief that the Firm’s success is not only defined by the profitability of our business but also by the impact we are capable of creating to improve lives across the communities in which we operate. As a pioneer in promoting impact investment strategies and incorporating sustainability into the fabric of our operations, we aim to instigate change across the markets in which we operate to pave the way for increasingly sustainable business practices among corporations.
EFG Hermes aims to integrate best responsible practices aligned with those undertaken globally, across the environmental, social, and governance (ESG) spheres and throughout its operations. The Firm further seeks to align its development frameworks with the UN Sustainable Development Goals (SDGs) and has been a member of the UN Global Compact (UNGC) since 2011, working to further integrate its internal policies with the 10 principles of human rights, labor, the environment, and anti-corruption as well as Egypt’s Vision 2030.
As part of its efforts to weave sustainability across all Group operations, EFG Hermes launched its Social Purpose in 2014, which seeks to ensure that all products and services offered by the Firm are able to generate value for all stakeholders and lead various efforts to overcome global, social, economic, and environmental challenges. This was further supported by the issuance of our 2017 ESG policy, which seeks to align EFG Hermes’ operations with sound and ethical practices. The Firm’s Corporate Social Responsibility (CSR) department additionally spearheads several initiatives to ensure sound ESG practices in addition to overseeing the work of the EFG Hermes Foundation for Social Development, which seeks to support the most vulnerable segments of our community through projects, in collaboration with policymakers and other partners in order to promote sustainable development and economic prosperity.
In 2018, the Firm became the first financial services corporation in Egypt to commit to the United Nations Principles for responsible Investment (UNPRI), an international initiative developed by investors seeking to promote sustainable finance and a more inclusive financial system at the global level. In October 2020, EFG Hermes was included among 30 regional companies in Refinitiv and the Arab Federation of Exchanges’ Low Carbon Select Index, which provides investors with access to low-carbon equities in the MENA region. These commitments form the basis by which the Firm approaches citizenship, allowing it to take measured and consistent steps to build out integrated sustainable business operations and initiatives that drive value for all stakeholders.
Responsible Investment Strategies
A core pillar of ESG integration at the Group level is the deployment of responsible investment strategies in order to define clear objectives and develop ever-evolving policies and practices capable of instigating positive change. In addition, our ESG considerations are integrated into the full investment cycle of all four business lines, working closely with the Group’s investment professionals to account for the accurate determination of appropriate risks and opportunities throughout our operations.
EFG Hermes manages a large responsible investment portfolio that includes initiatives that directly align to meet goals set by the SDGs, across a range of sectors. The Group manages a number of investments in renewable energy through its platform, Vortex Energy, which has successfully achieved a C-o-C of 1.4x and blended returns of c.13% to its investors from 2015 to 2020. In 2020, the platform divested its controlling and managing stake in Vortex Solar, a 365 MW solar PV portfolio (Vortex III), acquired in 2017 from TerraForm Power, at an enterprise value of c. GBP 500 million. Today, Vortex Energy is establishing Vortex Energy IV, which will provide investors with access to a portfolio of energy transition assets and investments, providing double-digit returns on investments in a sustainable and growing sector. Vortex Energy IV will target various portfolios and businesses, ranging from solar and wind generation assets to IPPs, battery storage and distributed generation, which are forecast to continue to grow and attract capital in the next decade. The project pipeline is targeting clean energy transition businesses that fall along a strategic investment spectrum from traditional businesses to growth and technology-led businesses. Vortex Energy IV is set to contribute to reducing global carbon emissions and achieving net zero policies.
It also manages the EFG Hermes Egypt Education Fund, a USD 150 million investment fund launched in 2018 in partnership with Dubai-based education provider GEMS Education, which aims to provide quality K-12 education and build capacities across the sector in Egypt. It is one of the fastest growing education platforms in the Egyptian market, having deployed almost USD 100 million in the market since establishment. In 2019, the platform acquired a majority stake in leading transportation service provider Option Travel, marking its third investment in the Egyptian market after acquiring four operational schools in the cities of Al Rehab and Madinaty earlier this year and kicking off the development of a fifth international school Al Rehab, which brought the platform’s total capacity to c.10,000 students.
EFG Hermes also operates Rx Healthcare Management, which manages investments across the healthcare sector in order to increase the availability of quality healthcare products and services across the MENA and Africa regions. It invests in highly selective targets, with a clear growth trajectory across healthcare verticals, giving investors access to unique opportunities across the sector’s value chain. The Firm’s investment approach is predicated on providing growth capital through investing in controlling stakes (and on selective basis, in controlled minority stakes) in companies operating in the segments of pharmaceuticals manufacturing and other complimentary healthcare sub-segments. RxHM places a high value on ESG investment considerations, with target investments having to combine both financial viability and fulfil ESG criteria to ensure sustainable value add that fills a tangible healthcare gap in this highly underserved region. Its acquisition is a leading Egyptian medical solutions provider U Pharma through Nutritius Investment Holdings, a special purpose vehicle set up for the acquisition. The transaction attracted significant interest from prominent investors, with proceeds being used to expand the company’s product offering to cover essential categories in underserved therapeutic areas and ramp up production for existing products.
In addition, the Firm operates a rapidly growing NBFI platform, EFG Hermes Finance, which has developed a range of products and services aimed at promoting financial inclusion through its subsidiaries Tanmeyah, valU, PayTabs Egypt, EFG EV Fintech and EFG Hermes Corp-Solutions. Through these activities, EFG Hermes can ensure that each and every one of its activities are capable of generating positive impact on all stakeholders.
Global Recognition and Reporting
In 2020, the Firm was named Sustainability Champion by the Egyptian Financial Regulatory Authority’s (FRA) first publication, recognizing players championing sustainable development in the non-bank financial service industry.. The Firm also disseminates updates through regular reports on its progress in the ESG space, including the UNGC Communication on Progress, UNPRI Transparency Report, and the Firm’s own annual sustainability report. The Firm has also been recognized as a Community Honoree in the Global Finance Outstanding Crisis Leadership 2020 Awards.
Learning and Development
As part of its commitment to ensuring that sustainability remains at the core of all operations across the Firm’s business lines, the department has launched initiatives to further promote sustainable practices among its employees. The Firm has instated policies to conserve energy by reducing electricity usage, minimize waste, and increase efficiency across our entire supply chain. Additionally, the Firm has partnered with Thomson Reuters to provide new e-learning materials during the year to introduce CSR and ESG Investigation courses and certifications at EFG Hermes. The Firm also regularly engages with stakeholders through social media campaigns to promote awareness on relevant sustainability matters and a deeper understanding of the SDGs.
EFG Hermes Foundation for Social Development
The EFG Hermes Foundation for Social Development was established in 2006 in order to positively impact the communities in which the Firm operates. The Foundation believes that partnerships are the true driving force behind realizing tangible impact and promoting sustainable development. Accordingly, it adopts a participatory approach to empower local communities and allow for its ESG programs to have maximum impact on the lives of its residents.
Naga’ El Fawal and El Deir Integrated Development Project
In 2017, the Foundation launched an EGP 70 million sustainable integrated development project, in partnership with several actors, including civil society associations, government entities, and the private sector to benefit the Naga’ El Fawal and El Deir villages in the Luxor governorate. The project aims to build a developed base in order to revitalize the local economy and serve the village’s 75,000 residents. The project marks the Foundation’s third integrated development project in Upper Egypt, following its success with similar projects in Ezbet Yacoub village in Beni Sweif and Al Makhzan village in Qena.
To date, the project has had a number of achievements in the development of Naga’ El Fawal, including the establishment of a health unit in the village, with all necessary medical equipment as well as the establishment of a new water network to replace the asbestos-contaminated one previously in place. The project has also seen a total of 94 houses rebuilt, featuring individual units for each resident family to replace the shared living quarters previously in place.
A key pillar of the project has been the development of a fully equipped community center, including a Montessori preschool, a center catering to children with disabilities, as well as a training facility, all of which are powered by solar energy. The Young Scholars Academy preschool seeks to offer quality education to the village’s 150 children as well as the necessary social skills to provide them with solid foundations to continue their education. In addition, the preschool features a dedicated section to provide the village’s 50 children with special needs with the necessary support to advance their learning and prepare for their integration into public schools in the future. In addition, the preschool has successfully created more than 40 sustainable jobs, including 38 teaching positions and six volunteers. The teachers additionally receive specialized training, including four who have successfully completed training on the Montessori philosophy of early education and 20 who have received training on early childhood development for children with special needs.
Recognizing the adversities faced by many people as a result of the onset of the COVID-19 pandemic, the Foundation mobilized several resources, engaging with EFG Hermes employees and partnering with a number of entities to deploy a coordinated response plan to cushion the most at-risk members of our society from the worst of the crisis.
The Firm partnered with the Egyptian Food Bank to support a total of 10,000 families through the pandemic. Additionally, the Foundation has partnered with the Ministry of Social Solidarity’s local administrative unit in the Luxor governorate to benefit an additional 1,500 families with cash donations. The Foundation also commissioned a group of women to produce 600 special EFG Hermes Foundation branded bags containing detergents which were later disseminated along with 1,700 flyers containing safety measures as per WHO and Ministry of Health guidelines to families across the Naga’ El Fawal and El Deir villages. In addition to sharing crucial information and offering supplies to families in need, this initiative also created work opportunities for local women who support families with children with special needs in their care. In addition, the Foundation partnered with local officials in Luxor to create a quarantine unit with a capacity of 70 patients to curb the impact of the pandemic.
In the coming year, EFG Hermes will continue to build on the foundations it has established thus far in integrating responsible ESG practices into its operations and becoming a wholly sustainable enterprise. More specifically, it will further engage local actors and key stakeholders to catapult greater action and generate maximum impact. As responsible investing gains momentum across the world, the Firm will seek to further focus its efforts to broaden the reach of its programs, deepening the integration of ESG practices into its operations as well as working hard to mitigate risks in order to generate shared value for all stakeholders and promote nation-wide sustainability and prosperity.
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