World Governance Indicators
The OEF invests in countries all over the world, and we publish the geographic distribution of the Fund in our Annual Report. The World Bank’s World Governance Indicators (WGI) scores countries in terms of: voice & accountability, political stability and lack of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. We have used a composite of these indicators to understand how the Fund’s investments score under the WGI rankings, in terms of their geographic location.
The highest percentile (in darkest green) is considered to have the strongest standards of governance. While this is a crude methodology, the chart shows that 78% of the areas in which the Fund holds investments are in the top 75th percentile of the WGI, meaning that the Fund predominantly holds investments in areas where there are strong legislative and regulatory environments.
This is not to say that we avoid or screen areas where WGI scoring is low; however, we take these factors into account during due diligence and engagement with the manager. The group working in the area which scores in the 10-25th percentile (the amber sector) in the above chart is a private structure investing in growing businesses in Africa. This region is a rapidly developing and inefficient market with opportunities for the capital of the OEF; however, there are risks involved, from financial to environmental and social. Extensive analysis of the group was undertaken during a detailed due diligence process, which included ensuring that there were sufficient processes in place to be comfortable investing in pioneering companies potentially exposed to these risks. The group showed a commitment to ESG across its portfolio which was codified in the Shareholders’ Agreement (prior to investment), including an obligation to report on environmental and social performance annually. We are one of the group’s largest shareholders, alongside a Dutch development fund with equally strenuous ESG requirements.