The objective of the Sub-Fund is to make sustainable investments (or “dark green”) within the meaning of article 9 of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector by contributing to the alleviation of poverty in developing countries through the provision of permanent and adapted financial services to marginalised communities and individuals. The Sub-Fund invests in promising microfinance institutions (“MFIs”) that have a positive social impact so that these institutions reach financial autonomy. In pursuance of its objectives, the Sub-Fund may invest in MFIs, in networks or associations of MFIs, in regional funds, in microfinance vehicles (“MIVs”) and in other microfinance-related products.

The Sub-Fund has two principal objectives, social and financial: help socially oriented MFIs to become long term viable enterprises that reach more poor people and offer better services, and generate sufficient income to sustain its own operations and give its Shareholders a financial return that at least compensates for inflation.

The Sub-Fund will strive to provide tailor-made and innovative solutions to needy MFIs, coupling its own financial assistance with technical support from external consultants. It will deliberately focus on niche activities, activities where potential needs of MFIs are large, but current supply is scarce.

The Sub-Fund invests in the developing countries of Africa, Asia and Latin America.

The decision to invest will be based less on the overall level of development of the country in question, but rather more on the merits of the individual cases, i.e., the potential benefit for the local population and the prospects of autonomy for the MFI.

The Sub-Fund is not pursuing an environmental objective as defined in the EU Taxonomy , but does take measures (including the adoption of an exclusion list) to ensure no significant harm is caused in this regard.

The Sub-Fund’s investment strategy is not aligned to any reference benchmark.

Key Metrics

To monitor the social performance of the Sub-Fund, the proportion of assets invested in MFIs is carefully monitored and reporting is provided on through a quarterly factsheet and annual and semi-annual reports. These also provide a series of other key performance indicators which are used to monitor the outreach of the Sub-Fund. The key performance indicators used to measure the attainment of the sustainable investment objective are segmented both at the portfolio, investees, and end clients’ level.

At the level of the portfolio and investee level, the following key performance indicators are defined:

  • Total amount of portfolio in EUR invested in microfinance providers
  • of microfinance institutions directly financed
  • Geographical distribution of investees (i.e., Latin America, Sub-Saharan and North Africa, Southeast and Central Asia, Developed countries)
  • Percentage of financing in microfinance institution local currency
  • Average financing for microfinance institution
  • Share of investments in low and medium Human Development Index (HDI) countries

Key performance indicators gathered on a quarterly base at end client level are the following:

  • Gender disaggregated data by borrower (i.e., percentage of women and men)
  • Geographical disaggregated data by borrower (i.e., number of clients in rural and urban areas)
  • Lending methodology disaggregated data by borrower (i.e., loan disbursed by group and individual lending)
  • Loan disbursed by GNI/per capita during the period (i.e., number of loans disbursed below or above GNI/capita during period and average loan disbursed / GNI per capita)

Additional key performance indicators are also gathered and analysed to measure the Sub-Fund contribution to the Social Development Goals (SDGs). The Sub-Fund strives to provide contribution to many of the goals focusing on People and Prosperity, traditionally defined as goal N° 1 – No Poverty, goal N° 4 – Quality education, goal N°5 – Gender equality, goal N° 8 – Decent work and economic growth, goal N° 10 – Reduced inequality, and goal N° 17 – Partnership for the goals.

Sustainability Risk and Adverse Impacts

The Sub-Fund’s investments may be subject to Sustainability Risks. Sustainability Risks are environmental, social or governance events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of the Sub-Fund’s investments.

Specific Sustainability Risk can vary for each product and asset class. Such risks are further described hereunder:

(i) Environmental Risk: The risk posed by the exposure to issuers that may potentially be (a) causing or affected by environmental degradation and/or depletion of natural resources or (b) negatively affected by the physical impacts of climate change. Environmental risks may result from air pollution, water pollution, waste generation, depletion of freshwater and marine resources, loss of biodiversity or damages to ecosystems, extreme weather events such as storms, floods, droughts, fires or heatwaves, changing rainfall patterns, rising sea levels and ocean acidification.

(ii) Social Risk: The risk posed by the exposure to issuers that may potentially be negatively affected by social factors such as poor labour standards, human rights violations, damage to public health, data privacy breaches, or increased inequalities.

(iii) Governance Risk: The risk posed by the exposure to issuers that may potentially be negatively affected by weak governance structures. For companies, governance risk may result from malfunctioning boards, inadequate remuneration structures, abuses of minority shareholders or bondholders rights, deficient controls, aggressive tax planning and accounting practices, or lack of business ethics. For countries, governance risk may include governmental instability, bribery and corruption, privacy breaches and lack of judicial independence.

Key potential sustainability risks are monitored, via appropriate due diligence conducted during the investment process, through dedicated due-diligence tools and the SPI Online ALINUS (an abridged version of Cerise + SPTF’s SPI social and environmental performance audit tool).

The due diligence process includes an institutional and contextual analysis of the MFI, drawing upon qualitative as well as quantitative criteria. This analysis will look into the institutional structure of the MFI (history, governance, legal structure, human resources, etc.), it will assess its social profile (social mission, targeted clients, product offering, quality of established links with customers, etc.), and it will examine its financial robustness (cost coverage, capital structure, dependency on donors, portfolio quality, credit methodology, reserves and provisions, etc.).

During the investment process of the Sub-Fund, key potential Sustainability Risks are categorised on the basis of the level of their potential adverse social and environmental impacts (i.e. significant, limited or minimal impact) and reasons, taking into account the possibly to implement mitigation measures are taken into account.

Investments will be approved and made by the Sub-Fund after due consideration of the level of the relevant Sustainability Risks and of mitigating factors that have been put in place as follows:

Environmental riskThe Fund supports MFIs with a low consideration of the environment in their business model which could lead to environmental degradationMedium• The Fund works closely with its Investment Adviser, ADA, to conduct due diligence. During this time, the MFI’s business activities are carefully monitored to ensure that financing is not provided which could contribute to material adverse environmental impact

• The Fund adopts an exclusion list prohibiting investments which are likely to have a substantial negative environmental impact

• The Fund makes an effort in assessing the proximity of MFIs operations to biodiversity sensitive areas and mitigation actions that might be in place.

Social Risk The Fund financially supports MFIs which may have a low consideration of their social impactLow• Investments are specifically oriented towards MFIs with a strong social impact (the only exception is in the context of liquidity management). Investment provided by the Fund is for the sole purpose of supporting microfinance portfolios (where the potential for generating positive social impact is very high)

• The Fund works closely with ADA to conduct due diligence. During this time, analysts ensure that MFIs adopt strategies and practices in keeping with their social vision and mission. Particular attention is paid to the principle of Fair Treatment of Customers and employees. Where possible branch offices and microfinance clients will be visited to ensure that Fair Treatment is upheld across the MFI operations.

• The SPI Online ALINUS is run at the time of investment, allowing the Fund to benchmark each MFI’s performance in core areas reflecting the formalisation of social performance

• The Fund adopts an exclusion list prohibiting investments which are likely to have a substantial negative social impact

• Covenants can be placed on companies requiring certain minimum governance, financial and/or social standards to be met

• Monitoring of core social performance metrics from MFIs is received and analysed on a quarterly basis
Social and Employee mattersFund invests in MFIs which may have low governance standardised and a lack of formalisation of HR issuesMedium• Fund has an exclusion list which has strict labour related requirements

• All MFIs are expected to pay at least the relevant local minimum wage to all staff and strive for minimizing the gender pay gap. . Staff turnover, fair and compensation, safe and equitable working environment, human and career development plans are monitored during due diligence. Any employee labour issue is also investigated.

• All MFIs are expected to comply with their national employment law
Respect for Human RightsBusinesses do not give adequate regards to Human Rights in their practicesLow• Human rights are enshrined in local laws which investee companies are required to respect

• Investee MFIs are expected to maintain a strong social vision and mission which enshrines the importance of human rights. More specifically, MFIs are expected to not engage or provide financing to activities that might involve harmful or exploitative forms of forced labour/ harmful child labour, engage in projects which might limit people’s individual rights and freedoms or violating their rights, activities that involve political or religious content or require resettlement or forced eviction of people.

• During due diligence, and through continued monitoring and covenants, the Fund places a high emphasis on initiatives which support the rights and protection of those living in poverty, notably the Client Protection Pathway and the implementation of high standards in terms of Social Performance as prescribed by the SPI Online ALINUS tool.
GovernanceFund works with MFIs which may have low levels of formalisation and weak governanceMedium• Governance structures and leadership commitments are systematically analysed during due diligence, including due diligence on directors and shareholders. Board gender diversity is assessed and monitored.

• Covenants can be placed on companies requiring certain minimum governance standards to be met

• Local tax law is expected to be respected
Bribery and corruptionUnderlying businesses engage in corrupt practices with consequent legal and reputational issuesLow• Bribery and corruption regulation is in place in Luxembourg and MFIs are required to respect the law

• Levels of corruption and potential exposure to bribery are analysed beforehand. They are taken into consideration in the investment decision-making process. Additionally, sanctions, dispute in courts, lawsuits or any event that has been identified and reported to financial authorities/supervisor/ legal instances, should be reported during the due diligence process.

• Financing provided to institutions is to be exclusively used for the financing of microfinance activities

• Checks are conducted on financial statements on a regular basis

• Name checks are conducted on key individuals at time of disbursement

Although certain key risk factors, notably governance, may have a substantial effect on individual assets, the Sub-Fund investment restrictions, implying a diversification of the portfolio, limit the potential impact on returns faced by the portfolio as a whole.

Sustainability risks are therefore not anticipated to have a material negative impact on the financial returns of the Sub-Fund.

The Sub-Fund opted to collect and report data for the mandatory Principal Adverse Impact (PAI) indicators specified in Table 1 of Annex I of final draft RTS on a best-effort basis.

In relation to the mandatory Principal Adverse Impacts (PAIs) that apply to the Sub-Fund, the mandatory collection is performed on a best efforts basis on the following indicators.

Certain risk factors would eliminate the possibility of investment; in other cases the significance and relevance of risk are considered and identified. In most circumstances, the Sub-Fund will not go ahead with investments where both the significance and relevance of a non-compliance risk is high unless steps can be taken to mitigate it.

PAIs are be collected, monitored, analysed and reported on an annual basis and presented in the Sub-Fund annual report.



The majority of assets are in asset classes which do not have voting rights. Given this, an engagement policy has not been developed for this sub-fund; however, the Fund is an active creditor where possible, and does encourage a commitment to social performance through Social Performance covenants and reporting requirements. Some equity investments are also made on an ancillary basis. In such cases, the Fund exercises the rights which are available in its position as a shareholder, keeping in mind the dual financial and social objectives of the Fund.

Business Codes

Investing for Development SICAV is a member of various groups and initiatives which support and uphold global best practice with regards to ESG. Further information can be found here.

The Fund is a signatory of the National Business and Human Rights Pact since 2023.

LMDF is also a member of various initiatives which support best practices in microfinance and impact investment.


The remuneration policy of the Fund is provided and details that social targets are taken into account in the variable compensation of key staff. The remuneration policy is available here.

These disclosures reflect current practices within the sub-fund. Should there be any evolution in these practices, this will be reflected and explained on the website.