ESG in practice
A good example of what real world ESG means also comes this week from The UN’s International Fund for Agricultural Development (IFAD). In partnership with Cuba’s government, it has just launched the Agroforestry Cooperative Development Project (PRODECAFE).
The project aims to build coffee and cocoa production in the eastern region of the country, while contributing to enhanced resilience of this region’s smallholder farmer cooperatives to climate change.
There are no small sums involved. With an initial investment of US$42.5 million ($18.35 million from IFAD funds and $23.65 from Cuban contributions), the total investment should climb to $63.65 million once further contributions from international donors materialise. Such donors will doubtless be driven by ESG criteria, which this project aligns well with.
“IFAD projects in the country have proven investing in cooperatives is the most efficient way to tackle the problems of low productivity, poor equipment, lack of economic opportunities, vulnerability to climate change and extreme weather phenomena, youth migration to cities, gender inequity and scarcity of nutritious food,” said Juan Diego Ruiz, IFAD’s Country Director for Cuba.
PRODECAFE’s goal is to strengthen food security and improve the living conditions of rural families in Cuba’s eastern provinces of Granma, Guantánamo, Holguín and Santiago de Cuba by increasing the production and sales of agroforestry products, mainly coffee and cocoa, and by reducing their vulnerability to climate change and extreme weather phenomena.
It’s a perfect example of global ESG practice in reality, and a perfect illustration of how and why global finance is beginning to consider ESG a real opportunity across many metrics.
The numbers
The project will directly target 300 agroforestry cooperatives and approximately 17,500 households (around 68,250 people). That figure includes members of cooperatives, as well as day labourers and technical assistance experts who work for the cooperatives.
Special emphasis will be placed on women and youth by creating opportunities for them to increase their income and by supporting their inclusion in the cooperatives and their decision-making processes.
PRODECAFE will also work with the 300 cooperatives to strengthen their physical and productive assets; boost their organisational, managerial and technological capacities; and improve their natural resources and capacities for adaptation to climate variability. Service providers’ capacities to support agroforestry cooperatives will be built through training, technical assistance and delivery of inputs and services.
And, improved technical assistance services, as well as rebuilt and newly constructed access roads to mountainous areas provided by PRODECAFE will indirectly benefit an additional 11,600 rural households (45,240 people) associated with 290 other cooperatives. All massive hits on the ESG scale.
Remember, despite its good social indicators, Cuba’s high dependence on food imports; 80 per cent of consumed food, makes its people highly vulnerable to external shocks such as rises in international food and transport prices.
In addition to agroforestry production, cooperative development plans will support members of cooperatives to diversify their home food production, making them more resilient to climate and economic shocks.
PRODECAFE will promote small-scale agricultural activities, such as poultry production, pig breeding, and cultivation of fruits and vegetables, that enhance participant families’ food security and diet, while bringing in modest but frequent income in periods when there usually is none.
Centralised ESG
Interestingly, ESG investment can align well with global governmental priorities. Cuba’s government has declared food and nutrition security a strategic national objective and a pivotal element of its social and economic policies.
Food shortages are due to insufficient agricultural production, which is linked to the country’s unique situation; Cuba is the only socialist planned economy in the region. The decades-long embargo to which it has been subjected has made it difficult for Cuba to access basic agricultural equipment and inputs.
To help, the new policies assign a growing role to cooperatives to ensure that agricultural production meets the country’s food demand.
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Cuba’s Plan for Food Sovereignty and Nutritional Education is set to be approved in April by the Cuban National Assembly. The planned focus on lowering food imports and accessing financial and technological resources through external credit lines has, in fact, been the main objective of the two previous projects IFAD has supported since it reengaged with Cuba in 2013.
In today’s fascinating new business world, it may be that ESG investors and historically isolated governments like Cuba’s can all find profit and positivity in new investment and alignment.