In 2014, Actis committed US$280m to establish a whollyowned Indian renewable energy platform, Ostro Energy (Ostro).
Actis’s responsible investment (RI) team worked with Ostro’s management to recruit and install a head of ESG to oversee environmental, social and governance (ESG) issues and manage and mitigate any related risks. Ostro’s head of ESG reports to the CEO.
One of the ESG challenges which was identified very early on was labour standards in the supply chain – specifically the working conditions onsite for all workers, including sub-contractors. A monitoring site visit by the Actis RI team together with the Ostro head of ESG identified gaps in working conditions and paved the way for the development of an improvement programme. Working collaboratively, Actis’s RI team and Ostro developed standards for worker accommodation and labour conditions, as well as guidance regarding access to safe drinking water and sanitary facilities. The outcome was the Ostro Labour Accommodation Standards Policy, based on international best practice (drawing from IFC/EBRD guidance). Therefore, soon after Actis set up Ostro as a renewable energy platform, the company has ensured that the policy forms part of the legal agreement with contractors, and is therefore applied systematically across all projects.
Improvement of working conditions delivers multiple benefits: workers raise fewer grievances and are more productive, and Actis’s experience has shown that overall turnover is lower at projects which provide favourable working conditions. By setting a policy which aligns to international standards and is implemented by the contractors in its supply chain, Ostro de-risked its assets and simultaneously built capacity amongst its contractors. This approach has helped Ostro to secure project finance by meeting lenders’ rigorous ESG standards.
Managing ESG risk in the supply chains of private companies and assets
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Case study: improving working conditions