1. Microfinance Social Investor Roundtable
Briefing Slides for Antwerp meetings, February 27, 2013

2. OVERVIEW slide to show what initiatives are available to promote Responsible Finance
- RETAIL level -
Self-assessment and implementation
Reporting and external scrutiny
Stating commitment
Smart Campaign (Smart)
MicroFinance Transparency (MFT)
Global Appeal
Tools for self-assessment
Smart Getting Started Questionnaire
Universal Standards for Social Performance Management
Social Audits
Tools for implementation
Smart implementation toolkits
USSPM implementation series
Demonstrating commitment
MFT price reporting
MIX Market
Ratings
Microfinance Institutional Rating
Social rating
Certification
Smart Certification
MFT Seal of Transparency
MIX SP Certificate of Data Quality
Key:
Client protection initiative
Social commitment initiative
In development
February 2013

3. - Direct investors (inc. MIVs) -
OVERVIEW of Responsible investment initiatives and the investor action groups
- Direct investors (inc. MIVs) -
Self-assessment and implementation
Reporting and external scrutiny
Stating commitment
Smart Campaign (Smart)
MicroFinance Transparency (MFT)
Global Appeal
UN PRI’s Principles for Investors in Inclusive Finance
Tools for self-assessment
PIIF Reporting Framework
Tools for implementation
Smart Technical Guide for Investors
Reasonable Covenants
Guidelines on Over-indebtedness
ALINUS
Impact Reporting & Investing Standards (IRIS)
Demonstrating commitment
MicroRate’s Luminis platform*
Evaluation / Audit / Ratings
CERISE social audit*
Global Impact Investing Rating System (GIIRS)*
Luminis fund report*
MIV rating*
Certification
LuxFLAG*
Key:
Client protection initiative
Social commitment initiative
* For MIVs only
February 2013

4. OVERVIEW of Responsible investment initiatives
- Indirect investors -
Self-assessment
Reporting
Stating commitment
Smart Campaign (Smart)
MicroFinance Transparency (MFT)
Global Appeal
UN PRI’s Principles for Investors in Inclusive Finance (PIIF)
Tools for self-assessment
PIIF Reporting Framework
Demonstrating commitment
Key:
Client protection initiative
Social commitment initiative
February 2013

5. Updates from four action groups of the SPTF Social Investor Working Group
Reasonable covenants – Dina Pons (Incofin)
ALINUS (Aligning Investor Due Diligence and Monitoring Practices with USSPM) – Jurgen Hammer (GCAF) and Christophe Bochatay (Triple Jump)
AvOID (over-indebtedness) – Lisa Sherk (Blue Orchard) and Caroline Vance (Deutsche Bank)
Implementation of the Principles for Investor in Inclusive Finance – Emilie Goodall (UNPRI/PIIF) and Antonique Koning (CGAP)

6. Reasonable Covenants Purpose/ objectives
Define reasonable financial and social covenants for debt partnerships.
Reasonable covenants, are covenants which ensure that our MFI partners will adopt a “responsible financing” behaviour which will not harm their end clients.
Define common language regarding Borrowers’ and Lenders’ attitudes in case of breach of covenant.

7. Reasonable Covenants Achieve ments
Lenders’ Guidelines for Setting Covenants in Support of Responsible Microfinance have been finalized !
The organizations that endorse the basic goal of such Guidelines, are:
Agence Française de Développement (AFD); Agencia Española de Cooperación Internacional para el Desarrollo (AECID); Agora Microfinance N.V. and its affiliates; BNP-Paribas; Cordaid; Deutsche Bank Global Social Investment Funds; Grameen Credit Agricole Foundation (GCAF), Grassroots Capital; Incofin Investment Management; Oikocredit; PROPARCO; SNS Asset Management; Triple Jump

8. Reasonable Covenants Achieve ments
Lenders’ Guidelines for Setting Covenants in Support of Responsible Microfinance were formally included in the PIIFs:
Under Principle 3: Fair Treatment, there is an existing possible action that reads - Negotiate terms and conditions that are transparent, fair and reasonable, including break-up clauses(*). 
* The Lenders’ Guidelines for Setting Covenants in Support of Responsible Microfinance provide practical guidance for debt investors to follow”

9. Reasonable Covenants Next steps
External dissemination and awareness raising in the microfinance investment community
organization of webinars
press release, etc
Internal dissemination in MIVs’ Risk and Investment Departments.
It is the responsibility of each supporting MIV to discuss the Guidelines internally
Harmonization of covenants for common MFIs partners.

10. ALINUS (Aligning Investor Due Diligence and Monitoring Practices with USSPM)
Purpose/
Objectives
The SPTF annual meeting in June 2012 in Jordan saw the launch of the USSPM.
· At this meeting a group of active investors created the working group ALINUS, focusing on the selection of indicators to be used by investors to assess and monitor MFI social performance in line with the format and contents of the 6 Sections of the Universal Standards and their Essential Practices for SPM, and possibly
allowing for a progressive consensus among the investor community.
· Participating investors are committed to proactively promote and advocate for the progressive introduction of a standardized core SP measurement and audit tool within their organizations.
- Aligning investors around a standardized due diligence tool will reduce the reporting burden for MFIs—who frequently have to report to their investors in many different ways.

11. ALINUS
Achieve
ments
Since Jordan, various meetings have taken place, in coordination with Indicators Working Group of the Social Performance Task Force, allowing for:
· Participating investors to contribute their existing indicators along the new structure of USSPM
· Gather microfinance stakeholders’ input concerning most adequate and useful indicators corresponding the each existing Essential Practice
· As of mid-February, Sections 1 – 5 have been addressed and a short list of indicators are available for each essential practice

12. ALINUS
Next steps
February 26, ALINUS Workshop planned in Antwerp to go over proposed indicators for sections 1-5 and to brainstorm indicators for section 6 which focuses on balancing financial and social performance.
ALINUS aims for a full set of indicators by June 2013 that will be coordinated with MIX and social audit and rating tools. These indicators will be pilot tested in the second half of 2013 to ensure robustness.
The ultimate framework that will be developed by ALINUS will be available to all investment institutions to offer a single set of due diligence and monitoring indicators based on the Universal Standards for SPM and shaped by the expertise and experience of investors across a variety of institutions.

13. Overindebtedness Purpose/ Objectives Achieve- ments
Create a space for MIV interaction and knowledge sharing on OID. Identify areas where there is an interest for collective action, such as building consensus around OID definitions, measurement, indicators to monitor
The group’s existence is based on the premise that its members believe that there is a need for broad-based collective action on over-indebtedness by investors, that the problem cannot be tackled by any one actor alone but investors working together can have an impact
Achieve-
ments
Further developed the “Code of Conduct” for investors to reduce the risk of overindebtedness, adding concrete suggested actions to each section:
- Monitor markets’ growth capacity
- Ensure that the MFIs adequately assess and monitor their clients’ repayment capacity
- Perform rigorous analysis of MFI overlending risks
- Encourage the development and use of credit bureaus
- Work with peers to raise awareness, improve measurement and take individual and collective action

14. Overindebtedness Achieve- ments (cont.) Challenges
Held discussions with Emilie at UNPRI regarding incorporation of the Code into the PIIF
Initiated conversations with the MIX, CGAP and Annette Krauss (Univ of Zurich) on measuring market saturation levels
Challenges
Lack of standard terminology and methodology for assessing market growth potential
No mechanism to collect OID studies and research in a systematic manner
Over-indebtedness tends to be a localized and highly specific problem, so it is difficult to discuss at a broad, global level, adding to the challenges of lacking standard terminology
Code of Conduct
Maintain reasonable estimates of each market’s growth capacity
Perform a rigorous analysis of client over-indebtedness and MFI overlending risks as part of our investment process when financing MFIs  
Use best efforts to ensure that the MFIs to which we lend adequately assess and monitor their clients’ repayment capacity
Have an open dialogue with MFI management and Board to ensure that they are aware of the risks and warning signs of over indebtedness
Encourage the development and use of credit bureaus
Work together with peers in the industry to raise awareness, improve measurement and take individual and collective action to address markets where there are concerns about rising risk of over-indebtedness

15. Overindebtedness Challenges (cont.) Steps towards Implementation
At the same time, there has not been much interest by investors to take on the challenge of forming country-level groups to discuss local issues more rigorously
Participation (and interest?) in the group has been waning: Has the group achieved its goals and reached its logical conclusion?
Steps towards Implementation
Finalize Code and proceed with implementation in the PIIF to make it broadly available
Continue discussions on methodology and terminology for assessing market growth potential and saturation
Establish a more systematic means to collect research and data on OID studies

16. PIIF (Principles for Investors in Inclusive Finance)
Purpose/
Objectives
The aim of the PIIF is the greater adoption of responsible investment in inclusive finance by indirect and direct investors (see
There are a number of other PIIF ongoing activities, but specifically this SPTF action group’s purpose was to:
Share learning regarding implementation
Develop a reporting framework

17. PIIF Achieve ments Share learning regarding implementation
Most is available via the PRI signatory-only extranet
Five action plans and eleven case studies have been published
As these focused on investment managers only, a series of case studies from asset owners are in development, on environmental and social themed investing more broadly.
A catalogue of support materials for investors has been compiled, by Principle.
Discussions on hot topics, including in recent months Microfinance Institutional Rating and its use for investors; understanding pricing in microcredit; and a governance roundtable co-hosted with CMEF and CFI.
Develop a Reporting Framework
The draft PIIF Reporting Framework was piloted on a voluntary basis in 2012, with over 50% participation rate. The summary results of this are being published 27 February.

18. PIIF Next steps Reporting Framework
The feedback from the pilot has been incorporated and the supplements finalised, with input from two advisory groups – one for direct investors, and another for indirect investors – thank you to those involved.
The PIIF supplements are currently being incorporated into the wider PRI Reporting Framework, which is due for launch in October 2013.
An accompanying assessment methodology is being developed, for trialling October 2-13 – April 2014 during the reporting period.

19. PIIF Next steps Guidance accompanying the Reporting Framework
Guidance for indirect investors in encouraging implementation of the PIIF, building on the PRI’s recently published Aligning Expectations: Guidance for asset owners on incorporating ESG factors into manager selection, appointment and monitoring.
Deepening understanding into the correlations between financial and social performance indicators; a joint project including investors, raters and academics. The first phase, looking at client protection indicators, is due mid-2013.
Mentor programme, connecting small and resource-constrained signatories with more experienced PRI / PIIF signatories.
Further discussions on hot topics ,including profits in microfinance; the compatibility of impact investing with fiduciary duty; opportunities and risks of investing in sub-Saharan Africa (part of PRI’s annual conference, PRI in Person, Cape Town, 1-2 October 2013).