The objective of the Sub-Fund is to make sustainable investment 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.

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 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 Sub-Fund does not have a specific environmental objective and is not aligned with the objectives of the Paris Agreement, but does take measures (including the adoption of an exclusion list) to ensure no significant harm is caused in this regard.

For full details on LMDF’s social performance management, please refer to the Social Performance Report.

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 the ALINUS (an abridged version of Cerise’s SPI4 social performance audit tool), and presented to the Investment Committee.

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

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 practices in keeping with their social vision and mission. Particular attention is paid to the principle of Fair Treatment of Customers. Where possible branch offices and microfinance clients will be visited to ensure that Fair Treatment is upheld in all MFI branches.

• The 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. Staff turnover and compensation are monitored during due diligence

• 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

• 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 Smart Campaign, PPI and ALINUS
GovernanceFund works with MFIs which may have low levels of formalisation and weak governanceMedium• Governance structures are systematically analysed during due diligence, including due diligence on directors and shareholders

• 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 this law

• Levels of corruption are analysed beforehand. They are taken into consideration in the investment decision-making 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 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.

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 on 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.