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Sustainability
Report
2015/2016
1
Contents
04
04 Introduction
06 Message from the Founder
and Group Chief Executive Arif Naqvi
08 2015 Sustainability Highlights Around
The Group, Around The World
Partnership Capital: A Model for Growth Markets
12 In Conversation with
Wahid Hamid and Jane Nelson 12
Sustainability at The Abraaj Group
16 ESG in Growth Markets: The Abraaj Approach
18 Building Strong Businesses: 22
An Interview with Tania Choufani
Stories of Value Creation
20 Koba, Colombia
22 Hepsiburada, Turkey
24 Crossland Logistics, Thailand
26 Libstar Holdings, South Africa
28 Mouka, Nigeria
30 Oncologie and Diagnostic du Maroc, Morocco
32 Building Alliances to Deliver Global Goals
Innovating Sustainable Business Models
38 Emerging Consumers, Emerging Cities:
In Conversation with Sev Vettivetpillai 38
40 Strong Returns, High Impact:
The Healthcare Paradigm
44 Accessible Energy, Sustainable Power
46 Meeting the UNGC Principles
2 3
Introduction 1 Firm | 5 Regions | 20 + Local Offices
c.US$ 9.5bn The Abraaj Group is a global institution
AuM1 investing in select markets across Africa,
Asia, Latin America, the Middle East
US$ 6.6bn and Turkey.
Deployed
c.170 We currently manage c.US$ 9.5 billion Istanbul
Investments across targeted private equity strategies.
US$ 6.3bn By combining deep local reach, a global Dubai
Realized2 platform and underwriting standards,
with extensive operating capabilities, Mexico
we generate industry-leading returns and City
Singapore
Nairobi
create value in market-leading companies.
Our Markets Our Strategy Sustainable Value Creation
Abraaj focuses on global Abraaj invests in emerging The Group has a dedicated team of
growth markets characterized consumers and the fast- operating professionals who work hand
by consumption-driven growing cities where they live. in hand with investment teams to actively
economies, pro-business Our mid-market private equity drive value creation in partner companies,
policies, rapid urbanization, strategies focus on consumer- helping them institutionalize and grow.
favorable demographics and facing businesses capitalizing
growing consumer classes. on increasing disposable Environmental, Social and Governance
Our target markets are income, lifestyle changes and (ESG) factors are deeply embedded in
ultimately select cities within supply-demand gaps in cities our investment process and this has
our regions, where economic across our markets. proven to be a value driver in our partner
activity, consumption and companies.
entrepreneurial talent are Our sector-themed Funds
concentrated. are focused on addressing Responsible investing that enhances
the needs of growing cities financial returns is at the core of our
from all types of real estate philosophy – we aim to leave a positive
and power plants to soft footprint in our markets and are a
infrastructure like hospitals. signatory to the UN-backed Principles for
While we target markets with Responsible Investment and the United
compelling fundamental drivers Nations Global Compact.
at the macro level, our core
view is that strong returns are
generated by the ability to find,
build/grow and exit exceptional
companies and assets. As of December 31, 2015. 1Assets under Management (AuM) includes Net Asset Value (NAV) of all Funds managed by The Abraaj Group, undrawn
capital together with NAV of co-investments managed by the Group, and the balance sheet capital of the Group. 2Including Network International
and Saham exits which were signed in 2015 and proceeds realized in 2016. Past performance is not indicative of future results and there can be no
assurance that any Fund managed by Abraaj will achieve comparable results or be able to avoid losses.
4 5
Message from the Founder
and Group Chief Executive
Arif Naqvi
Fellow stakeholders, helps build market brand. Even more
compelling, it generates new revenue
Welcome to the 2015/2016 streams and product categories.
Sustainability Report. Since our Our commitment
inception 14 years ago, much has For example, in this report, you will to sustainability is
changed at Abraaj and the world read about the efforts of Mouka,
in which we operate. We started the second-largest Nigerian foam- as unwavering as
as a private equity firm focused mattress manufacturer, which the day we founded
on markets surrounding our Dubai devised an environment and zero-
headquarters. Today, we are a waste plan that led it to channel
our company. It is
global financial services firm with discarded scrap foam into a new a business driver
investments and a stakeholder product line for low-cost pillows. in our markets. The
community that span the globe.
Though our mandate and capital An additional important differentiator
sustainability first
base have grown rapidly, our for Abraaj and its approach to approach has been
investment thesis remains the same. sustainability is the importance we validated by the value
place on benchmarking ourselves
We are squarely focused on growth against international best standards we have helped our
markets where partnership capital rather than the requirements of an partner companies
deployment, value addition and individual market. In our markets, create and the returns
local engagement lead to we want to go beyond the minimum
meaningful, sustainable outcomes. required. Elevating the standards is we have generated for
Where others might see frontier one of our ultimate goals and is what our investors.
markets ripe with uncertainty, we led us to embrace and ultimately
see opportunity to help shape the become a signatory to the United
very nature of new economies, ones Nations Global Compact on human
we firmly believe are determining the rights, labor, the environment and
world’s future course. anti-corruption.
Our commitment to sustainability As you will see in the report, at
is as unwavering as the day we Crossland Logistics, a cross-
founded our company. It is a border trucking company based
business driver in our markets. in Thailand, we translated this
The sustainability first approach has responsibility into an action plan time tools to measure impact at our
been validated by the value we have with company management to partner companies and then jointly
helped our partner companies create make sure primary and secondary agree on a plan to improve, often
and the returns we have generated (contract) drivers are both paid fair in geographies where governments
for our investors. I encourage you to and equitable wages and receive usually have little regulation and
explore this report and see how our full benefits. Though Thai law has consequently weak enforcement.
investment professionals go about no such labor provisions, we have But Abraaj is a firm that has built
making that happen. seen a commitment to that equality its reputation and success for its
measure lead to a fall in attrition stakeholders by putting our faith
In growth markets, sustainability and rates of 30% and accident rates in global growth markets. Their
strong performance go hand in hand. of 14% since we instituted the plan. economic story in the modern era
We invest in companies whose own is now unfolding. We are here for
investment in sustainability will have None of this is to suggest the long haul as are our investors,
an outsized impact and encourage sustainability is an easy endeavor many of whom share our belief that
others to commit to similar standards in our markets. Sustainable sustainability is a requirement for
to be competitive. When introduced outcomes do not come fast and productive and inclusive economic
by our partner companies, an they do not come easily. Patience growth. We look forward to
emphasis on sustainability often often requires us to introduce first- continuing on that journey together.
6 Arif Naqvi 7
Founder and Group Chief Executive, The Abraaj Group
2015 Sustainability Highlights Around
The Group, Around The World
The Abraaj Group Recent Activity Abraaj Partner Companies
c.US$ 810mn
Amount Deployed
c.US$ 950mn
Amount Realized
120,405 US$ 6,386,201
Number of Employees Amount Spent on Training
12
Number of Investments
39,029,107
10
Number of Exits
Number of Customers Served (B2C)
Hypermarkets Airlines Drug Retail
Awards
443,640
‘Private Equity House of the Year for
Number of Clients Reached (B2B)
Electric Utilities Packaged Hypermarkets
North Africa’ by Private Equity Africa Foods
Awards 2016
Special recognition award for ‘Large
23,447
Total Suppliers
Cap Deal of the Year for the North Africa 64%
% of Micro
30%
% of SME
6%
% of Large
Hospital Holdings Group’ by Private Suppliers Used Suppliers Used Suppliers Used
Equity Africa Awards 2016 Formal SMEs contribute up to 45% of total employment and up to 33% of national income (GDP) in global growth
markets and c.70% of MSMEs GGMs lack access to credit. (World Bank, 2015)
Abraaj’s partner companies are proud to support and provide access to national and regional markets by actively
engaging MSMEs over the course of their operations.
Note: Information presented herein is from July 1, 2015 to June 30, 2016. Past performance is not indicative of future results.
Nothing contained herein should be deemed to be a prediction or projection of future performance. Note: Information presented herein is as of December 31, 2015.
8 9
Partnership Capital: A Model for Growth Markets 10 11
In Conversation with
Wahid Hamid and Jane Nelson
There is a huge
Wahid Hamid, Partner, The Abraaj Jane Nelson, Director of the Corporate
Group. Wahid Hamid leads the Abraaj Social Responsibility Initiative at the
opportunity to
Performance Acceleration Group (APAG). Kennedy School of Government, Harvard demonstrate how the
The APAG team is central to The Abraaj University, and a non-resident senior partnership capital
Group’s active involvement in driving the fellow at the Brookings Institution. She
growth agenda and ensuring scalability is a Board member of The Abraaj Group.
model can measurably
of our partner companies. help achieve specific
development goals
and generate strong
financial returns.
GROWTH MARKETS build trust with them. That’s why we APPLYING THE MODEL given, as its introduction is one of the impact on these challenges, such
Why does Abraaj believe that its take a broad approach to stakeholder As a Board member of Abraaj, main reasons they want to partner as healthcare, consumer goods and
partnership capital model thrives engagement and why we ensure how do you see this approach with us in the first place. Better labor energy infrastructure. Secondly,
in growth markets and what are that ESG standards are critically We are looking at put into practice across the practices and health and safety through our community investment
its key elements? embedded in our partner companies. a variety of models markets and businesses that standards also get adopted quickly, activities and our employees
Abraaj invests in? as companies know that word can engaging with partners, which range
Wahid Hamid In our view, the In many growth markets, local that would allow spread rapidly in the local community from Junior Achievement to the
partnership capital model has companies can’t solely rely on us to invest even Jane Nelson It gets put into if they don’t get this right. World Economic Forum and Royal
three key elements. The first is our their country’s governance or longer which makes practice in three ways. The first is College of Art, with a particular
commitment to being strong and legal systems for protection when through the world-class strategy, Improving environmental emphasis on initiatives to support
trusted partners for the companies dealing with third parties, so they our model of private management and operations advice performance is more difficult, entrepreneurship. Finally, we are
we invest in. The second element do business with people they can equity well suited to we are able to provide to our partner particularly in companies that active in multi-stakeholder, thought-
is a focus on helping the private trust. This is why vertically-integrated companies. The second is by using are not energy-intensive, where it leadership alliances that promote the
sector contribute not only to family businesses are so common
a partnership capital the proprietary Abraaj Sustainability hasn’t been prioritized, and where role of business in society. Abraaj’s
growth but also to improvements and why they want not just capital approach. Index and other ESG tools to support responsibility for these issues has Founder and Chief Executive, Arif
in governance, legal frameworks but a trusted partner to help develop these companies to become better not been allocated. We have also Naqvi, is a member of the Global
and government accountability. The their business. also operating and business-building performers on sustainability issues. found that some of our partner Commission on Business and
third element is our unique ability to capabilities. We’re also looking at a The third way is by using our shared companies are limited in their ability Sustainable Development, which
bring together a mosaic of investors: WHY PRIVATE EQUITY? variety of models that would allow us learning platform so that partner to measure their energy and water was established in 2016 to develop
traditional investors alongside Why is private equity best to invest even longer which makes our companies can learn from others usage, for example. This is why we’re a compelling economic case for
philanthropic and development placed to operate with this model of private equity well suited to operating in the same sector or looking at introducing simple tools businesses to engage in achieving
finance institutions. These institutions model in mind? a partnership capital approach. geography. and technical assistance programs the Sustainable Development Goals.
bring not only capital but expertise to help companies measure and Arif was also recently appointed
in sustainable development and in Wahid Hamid We don’t believe it is a Jane Nelson The partnership- PARTNERING WITH ESG IN improve their environmental footprint. as a member of the B Team, which
building relationships with local and one size fits all. Hence, not all private oriented, longer-term manner in which FAMILY-OWNED BUSINESSES champions the need for businesses
international stakeholders. equity firms can make this model we approach private equity is well Family-owned businesses are PROMOTING THE MODEL to be a driving force for social,
work as most firms focus on buying placed to operate with this model. We common in growth markets. How How does Abraaj promote the environmental and economic benefit,
These three elements make us low, selling high and adding value bring together a variety of different readily have they incorporated partnership capital model with and he serves on the Board of the
distinct and enable us to be a trusted in the process. At Abraaj, we invest investors to invest in high potential sustainability? stakeholders in order to address UN Global Compact. These are
catalyst for institutional development for the long-term. Our healthcare growth companies, not only providing global development challenges? valuable platforms and I know that
and for sustainable growth in the strategy has a 10-year horizon, for these companies with capital but Wahid Hamid We have found that the leadership at Abraaj is committed
companies and communities we example, and not the regular seven advising them too, helping them to family-owned businesses incorporate Jane Nelson We do so in a number to driving real progress through such
partner with. Our partner companies years that you see in other cases. This strengthen their business capabilities sustainability most quickly when they of ways. The first is through our core forms of stakeholder engagement.
are often introducing new products, is partly because we are doing both and performance as well as their appreciate the direct links with their business of investing in and building
brands and ways of doing business buy and build: pulling together various environmental, social and governance strategic and commercial wellbeing. partnerships with companies in
in communities, so it’s important we traditional investment capabilities but capabilities and performance. Acceptance of better governance is a sectors that can make a measurable
12 13
Sustainability at The Abraaj Group 14 15
ESG in Growth Markets:
The Abraaj Approach
We ensure that our
partner companies
adhere not only to
+ + + = the local regulations
in the countries
in which they
operate but also
to international
best practices.
Enabling Sustainable Identifying Challenges and Opportunities for Incorporating ESG Business Principles into the Creating Value and
Growth, Accountability Responsible Investing Abraaj Business Model Investing in Sustainable
and Engagement Growth
The Abraaj Group is a leader in the The markets we invest in, particularly liabilities and given the company Our ESG Business Principles We then undertake an evaluation Once we make an acquisition,
private equity industry in many of the Asia and Africa, are predisposed to a stronger brand as a result of its underline our ESG risk management of the exposure of our prospective we assess what matters most in
growth markets where it operates. a challenging environment when it commitment to protecting its workers. approach to investing. These investments to these sector risks creating value and then set clear
comes to sustainability as a result principles are clearly outlined in as well as the key ESG gaps and targets linking environmental and
Our strong track record in Asia, of population growth, an increasing In our e-commerce platforms, the Group’s Environmental, Social needs of the company to meet social performance to operational
Africa, Latin America, the Middle middle class, growing pressure we have been proactive in guiding and Governance Management our business principles. A partner efficiency, human development
East and Turkey has enabled us on resources and direct impacts our companies to formalize System (ESG MS). As formalized company’s exposure to risk is impact and strong corporate
to foster continued market growth on climate change, water scarcity environmental policies, implement in our ESG MS, we incorporate a function of factors such as its governance. Abraaj invests in growth
and identify compelling investment and labor practices. Cognizant of energy efficiency programs ESG considerations into traditional management strategy, value chain markets with a long-term horizon.
opportunities. This mindset has this, we have taken an ESG risk- specifically with their logistics due diligence processes in order and geographic location. Our Therefore, our investment teams
allowed us to build a platform in management and value-creation operations, and institutionalize to understand how ESG risks and investment teams undertake a consider not just the valuation of
which we can leverage the skillsets approach in our investment strategy. health and safety practices. opportunities could impact the comprehensive assessment of all a company during due diligence
of our in-country investment teams, We recognize the potential risks of financial and strategic value of these risks in order to develop a but also the nature of ESG risks,
regional execution teams and central investing in companies that do not We further ensure that our partner an investment. corrective action plan and identify liabilities and value-add associated
global functions to add value to our have a formal environmental and companies adhere not only to the priority ESG enablers. These ESG with the company’s operations and
partner companies. social policy or management system, local regulations in the countries Our ESG MS is a holistic approach enablers are then incorporated into growth plans.
thereby missing opportunities for in which they operate but also to to the Abraaj investment model. our value-creation plans.
implementing energy efficiency international best practices led by We evaluate ESG risks through an As an institution, Abraaj strives
programs. We are also mindful that development finance institutions and assessment of the impacts from a to invest in businesses that will
companies which lack adequate life international organizations such as sector and company level. As part maximize shareholder value through
and fire safety systems or have poor the International Labor Organization. of our initial screening, we consider strong operational growth and
workforce engagement and training specific risks of each sector, such substantial capital appreciation.
can result in liabilities, risks to health Through our commitment to as regulatory/legal requirements, Our ultimate objective is to realize
and a dissatisfied workforce. responsible investing we require that marketplace (such as changes in We aim to grow value through structured exits to
our partner companies adhere to the consumer or investor behavior) and strategic and trade buyers or to
For example, in the mattress industry Abraaj ESG Business Principles. The material risks.
businesses which go public markets in the region
in Nigeria, we have been actively Group is a signatory to the UN Global beyond commercial and beyond. In doing so, we aim
engaged with a family-run business Compact and PRI, and sustainable success and become to grow businesses which go
to improve the fire safety measures businesses are core to our culture beyond commercial success and
of the company which in turn has and values. sustainability leaders become sustainability leaders
reduced operational risks and in their own markets. in their own markets.
16 17
Building Strong Businesses:
An Interview with Tania Choufani
ESG drives the
creation of systems
and practices essential
for sustained growth
Abraaj works closely with its healthcare businesses such as Al Kindy
in Morocco to embed robust sustainability practices
Tania Choufani developed a bespoke set of ESG into their day-to-day operations. By We enable companies e-commerce or retail, so they require Likewise, there are stronger
Head of Environment, Social and tools, including a governance tool being a strong partner and having more in-depth due diligence. Greater opportunities for making real
Governance, The Abraaj Group based on the South African King III representation on the Board, we can to integrate ESG not due diligence is also needed in improvements in key sectors
code. We help companies progress drive performance improvements. just into their business markets with weak enforcement like healthcare and energy, to
Q1. What defines Abraaj’s through its four levels of governance models but also into of environmental regulations. This generate measurable social
approach to ESG and sophistication, as we introduce It is also invaluable to get companies puts pressure on companies to and environmental benefits.
sustainability and what is codes of conduct and the right to recognize the impact ESG can their day-to-day have to apply and monitor best
particularly distinctive about it? anti-bribery measures, for example. have on their financial performance. operations. practice ESG themselves. This can Major improvements could be
This progression is especially useful An integral part of our role as a create capacity issues, particularly made by encouraging innovation
We believe that ESG is a growth with family-owned businesses where responsible investor is to identify for small companies trying to grow in ESG. For example, we facilitated
driver and the prerequisite of a minority shareholder interests and a company’s key ESG risks and their business. sourcing of technical assistance for
sustainable, vibrant and market- other ESG issues are typically not opportunities and work with one of our partner companies – a
oriented private sector. reflected in their governance models. management in developing a Q4. On what ESG issues have women’s hospital in Kenya – to install
robust action plan. you seen the most progress in a state-of-the-art incinerator after
We embed ESG throughout Q2. What methods have you growth markets and what are our due diligence identified issues
the investment process, from found most effective in helping Q3. Are there specific challenges the priorities for improvement? with its disposal of medical waste.
due diligence and operational partner companies build relating to different types of The incinerator not only minimized
management to exit, so that we stronger businesses? markets and sectors? We’re seeing a lot more interest in the environmental, health and safety
leave a legacy imprint on the renewable energy, partly because it impacts and reduced disposal costs,
companies we invest in. Direct engagement is essential to Sectors like manufacturing, has reached price parity with fossil- but also gave the hospital a revenue
build regional champions. We enable construction and extractives have fuel-powered generation. stream by extending use of the
What makes us really distinctive as companies to integrate ESG not just higher environmental and social incinerator to third parties.
a private equity firm is that we have into their business models but also risks and impacts compared to
18 19Koba
Company Overview and Investment Rationale Number of Stores
461
415
Koba operates a chain of medium-sized retail 254
315
stores offering food and basic staples under 168
the Hard Discount format. The stores handle 41
69
c.500 different high-quality products (“SKU”) 6
offered at the best prices in the market.
2009
2010
2011
2012
2013
2014
2015
2016
The company locates its stores in densely populated areas predominantly in
Country middle-income neighborhoods, across several cities in Colombia. Koba’s low
Colombia prices are achieved through its high buying power per SKU (stock-keeping
4,849
units), its own distribution network, the elimination of intermediaries and by
4,037
applying simple management principles at the stores and across all functions.
2,532
2,394
The Abraaj Group, through its Fund, invested in Koba in late 2010. At the time of
1,982
the investment, the company had around 20 stores, an incipient organizational
1,424
1,184
structure and a fragmented shareholder base, without the capacity to handle
964
720
420
414
its ambitious growth plan. However, after studying successful Hard Discount
180
Sector cases in other regions, such as BIM in Turkey, Abraaj was convinced of the
growth potential for this model in Colombia. Since the first Abraaj capitalization
Consumer Staples in 2010, Koba has grown at an accelerated pace, with the company’s stores
2011 2012 2013 2014 2015 2016
expanding from 20 to 461 in less than six years. Total Employees Women Employees
Sustainability Progress Looking Ahead
Impact on Households formalization of its HR policy and As Koba expands its geographic
Date of Investment and Communities: Since procedures to ensure the consistent footprint, more communities will
December 2010 Abraaj’s investment, Koba has had application of the policy and benefit from affordable basic goods
a noticeable impact on households practices across its regions. and job opportunities. In Bogotá
and communities by giving access alone the company will expand by
to high-quality food and basic Multiplier Effect: As part of the another 200 stores in the next two
consumer goods at more affordable Hard Discount model, Koba has years. Based on current growth
prices, which can be up to 50% developed over 300 private labels or projections, Koba could become
cheaper than those of traditional exclusive products, manufactured Colombia’s third-largest retailer
retailers. Combined with its by local suppliers, which account for by 2020.
expansion, Koba has been able to almost 70% of company sales. The
increase the number of customers rapid growth of the company has Abraaj will continue to support
served (tickets) to over 9 million encouraged suppliers to invest and Koba in the implementation of ESG
per month. expand their businesses alongside improvements to become more
Koba, creating additional jobs. energy-efficient, reduce waste,
Since inception, Koba has been an provide better on-the-job training
engine for employment generation, As the Hard Discount model has and opportunities to employees and
creating over 4,800 formal jobs gained traction with consumers, offer flexible working conditions
of which 49% have been filled by dynamics in the basic staples retail to accommodate single-parent
women. Koba pays above-average space have shifted and traditional households, among others.
wages, offers on-the-job-training, incumbents have been forced to
and provides unique opportunities become more competitive and
for growth and career progression offer higher value to customers.
across the company. The company
complies with stringent local labor
standards, beginning with the
20 Koba has grown at an accelerated pace across Colombia, with the 21
company’s stores expanding from 20 to 461 in less than six yearsHepsiburada
Company Overview and Investment Rationale Looking Ahead
In 2015, The Abraaj Group invested in Abraaj will partner closely with
Hepsiburada to help implement
Hepsiburada, the largest online retailer in ESG best practices with the primary
Turkey, through its Fund. Hepsiburada is focus centered on obtaining the
ISO 14001 and OHSAS 18001
the only multi-category retailer among the certifications by the end of 2016.
Furthermore, Hepsiburada is
top five e-commerce players in Turkey. committed to aligning its policies
and procedures with established
Hepsiburada represented a compelling investment opportunity for a number best practices by implementing its
Country of reasons. The company enjoyed a strong brand equity in the rapidly formalized supply-chain management
Turkey expanding Turkish online retail sector which is highly underpenetrated procedures and finalizing its external
with online sales comprising 2.0% of the total retail market, compared communication procedures.
to the UK and US averages of 12.6% and 9.2% respectively (as of 2015).
Additionally, Hepsiburada enjoyed a dominant leadership position with Hepsiburada firmly believes these
a growing customer base significantly attributable to traffic from repeat ESG practices will enable it to
visits and unpaid traffic sources. holistically support the growth of
Turkish SMEs by providing them
In 2014, Hepsiburada had a product offering of over 500,000 stock-keeping with a platform to access millions of
Sector units (SKUs) and served over 1.5 million customers. This has since increased potential customers across Turkey.
to 1 million SKUs and over 2 million customers served in 2015. For example, there are currently more
Internet Retail than 1,000 SMEs actively selling
goods on Hepsiburada’s marketplace
platform. Additionally, these best-
in-class ESG practices will enable
Sustainability Progress Hepsiburada to become a choice
online retailer and one of the top
five non-grocery retailers in Turkey.
Striving Toward International on-site contractors and the
Date of Investment Best Practices: Hepsiburada operations department.
February 2015 opened its new custom-built
50,000 m2 warehouse in 2015. At Establishing Higher Standards
Abraaj’s recommendation, following Along the Supply Chain: Prior
its relocation the company hired to Abraaj’s investment, Hepsiburada
certification advisors and began did not have a formal policy for
the process for obtaining the ISO supply-chain management. At
14001 (Environmental Management Abraaj’s recommendation, it is
Systems) and OHSAS 18001 currently developing an extensive
(Occupational Health and Safety) supply-chain management plan
certifications which is anticipated that includes an exclusion list of
2,000,000
to be completed by Q4 2016. certain goods, a checklist-based
system to identify supply-chain
1,500,000
Enhancing the Health issues and risks, and a Code of
and Safety Culture: Since Conduct for all suppliers.
investment, Abraaj has worked with
1,000,000
Hepsiburada’s management to build Hepsiburada now includes an ESG
a health and safety culture at the firm Code of Conduct as a mandatory
which includes over 1,500 hours of annex to all supplier and contractor
500,000
training provided in 2015 covering agreements and seeks strict
a range of topics, including general compliance from its suppliers.
health and safety, proper use of This ensures that goods sold on
personal protective equipment, and Hepsiburada’s platform (e.g. apparel
emergency response. Additionally, and electronics) are not sourced
daily on-site audits are undertaken at from suppliers with a poor record of 2014 2015
the new warehouse to capture gaps labor working conditions and health
with corrective action plans regularly and safety practices. Stock-Keeping Units
circulated to senior management, Customers
22 Hepsiburada has embedded a strong HSE policy in its 23
warehouse and is in the process of obtaining OHSAS 18001Crossland Logistics
Company Overview and Investment Rationale Looking Ahead
Crossland Logistics Co. Ltd is a leading Abraaj will continue to drive the
cross-border trucking (CBT) operator implementation of ESG best
practices particularly relating to
in Thailand operating c.75 trucks with the company’s new fuel-tracking
and management system, and
c.175 employees. Crossland provides an driver-training programs which
integrated door-to-door logistics solution are of critical importance. The
company has seen the benefits of
across Singapore, Malaysia, Thailand, Laos, implementing ESG best practices
which have helped improve its
Country Vietnam and Southern China. EBITDA and gross profit by a CAGR
Thailand of 60% and 16%, respectively, from
2013 to 2015.
The Abraaj Group, through its Fund, invested in Crossland in April 2012. The
investment was premised on the fact that Thailand is a strategically located
logistics and infrastructure hub in the Greater Mekong Sub-Region and would
benefit from greater public and private sector investment.
Moreover, Crossland was an early mover within the region having established
Sector a profitable business supported by a fast-growing customer base. Crossland
represented an attractive opportunity for Abraaj to grow the business into a
Logistics larger regional logistics service provider.
Sustainability Progress
30% 14%
Employee Focus: Shortly set up a 24-hour Command Center in Fall in Reduction in
Date of Investment after investment, at Abraaj’s early 2015 to monitor its trucks and attrition rates accident rates
April 2012 recommendation, Crossland adjusted the driving patterns of its drivers in
driver compensation levels to match real time, resulting in better security
industry standards and hired alternate and precise and faster delivery times.
drivers directly on to its payroll. This Fuel Efficiency
is uncommon in an industry where Improving Efficiency: As part of
companies only pay their main drivers, the value creation plan, Crossland Before: 2.8 km per liter
who in turn pay the second drivers – replaced its old fleet with higher-
usually at a significant discount and standard (Euro 3) trucks, reducing
After: 3.2 km per liter
without the security of employment the company’s carbon footprint and
benefits. Crossland remains one of improving energy efficiency. Abraaj
the few companies in the Thai CBT helped Crossland to put in place
logistics space to provide direct regular maintenance programs which
employment to its secondary drivers. reduced the probability of frequent
Having two drivers is critical on long- truck breakdowns.
haul journeys as it improves driver
safety and security and enables higher In addition, Abraaj helped design
utilization of the trucks. As a result and implement a fuel-tracking and
of these two initiatives, attrition rates management system to improve fuel
have fallen by 30% and there has been efficiency and reduce fuel costs.
a reduction in accident rates by 14%. Fuel efficiency has improved from an
average consumption of 2.8 km per
Abraaj worked with Crossland to liter to 3.2 km per liter. As a result of
upgrade the overall talent and skill these initiatives, attrition rates fell by
level of its driver pool through the 30% and there has been a reduction
establishment of regular training in accident rates by 14%.
programs. In addition, the Group
played a key role in helping Crossland
24 Location, profitability and a fast-growing customer base made 25
Crossland Logistics an attractive investment opportunityLibstar Holdings
Company Overview and Investment Rationale Looking Ahead
In 2014, The Abraaj Group invested, through For the remainder of 2016, Libstar
its Funds, in Libstar Holdings (Libstar) – will focus on the continued
implementation of its corrective
a leading fast-moving consumer goods action plans. Libstar has addressed
75% of the action plans identified
company in South Africa which manufactures by Abraaj at the time of investment.
a broad range of quality private label and As part of its supply-chain
own-branded products for the rapidly management strategy, Libstar has
held three-day training sessions
Country growing South African food, fast-casual and workshops in Cape Town,
South Africa dining, household and personal care markets. Johannesburg and Durban to
educate its workforce in the
Supply Chain Governance Manual.
Libstar has a portfolio of over 3,500 products and a high-quality customer Libstar intends to complete these
base which includes McDonald’s South Africa, Woolworths and Tiger Brands. training sessions with five sessions
expected to be delivered over the
With strong potential for organic growth, Libstar is well positioned to take next two months. In addition to
advantage of key market trends such as grocery consolidation, the rise of these initiatives, Libstar will roll
Sector private label and quick service restaurant (QSR), which are forecast to expand out five core standards across all
steadily given current low penetration rates. A compelling attribute of the its companies by December 2016
Fast-Moving investment opportunity was Libstar’s long-standing relationship as a leading (Product Quality, Product Safety,
Consumer Goods supplier to major retailers and global QSR chains with a consistent track Occupational Health and Safety,
record as a safe and reliable manufacturer in a market characterized by small Environmental Management
players. Further, the management team has demonstrated a unique ability to Systems and Physical Asset Care).
identify, bolt on and successfully grow complementary businesses, expanding
Libstar into a 28-business-unit conglomerate in the past 10 years.
Sustainability Progress
Date of Investment
October 2014 Improving Health and Safety: Manual which includes all the
As a company dedicated to Group’s policies and requirements
incorporating good ESG practices, including a system of mandatory
Libstar has embedded ESG into its compliance with internationally
business model to address gaps accepted standards. This will be
and drive long-term value. Firstly, required of each of the individual
Libstar appointed a Group-level EHS operating companies. The core
Manager as an initial step toward standards include Product Quality,
building a deeper ESG culture. The Product Safety, Occupational
EHS manager has oversight over Health and Safety, Environmental
Libstar’s diverse business units and Management Systems and Physical
3,446
ensures consistency of practices Asset Care. The implementation
3,500
and procedures across these units target date is the beginning of 2017,
and reports directly to the Social and with compliance audits to take place 3,000
Ethics Committee and to the Board in Q2 2017.
of Directors. 2,500
Additionally, a Social and Ethics
2,000
Strengthening Governance: Committee has been established to
1,171
As a next step to further augment monitor the company’s activities with 1,500 1,042
963
its ESG practices, Libstar is in the regard to relevant legislation, legal
765
1,000
process of developing a supply- requirements and prevailing codes of
chain governance strategy which will best practice. The Social and Ethics 500
cover all of its operating sites. This Committee meets biannually and
strategy was initiated by developing provides an update to the Board, 0
2011 2012 2013 2014 2015
the Supply Chain Governance where ESG is a key agenda item.
Number of Employees Trained
26 Libstar is developing a supply-chain policy for each of its 27
operating sites as part of robust quality managementMouka
Company Overview and Investment Rationale
Minimizing Wastage: From a
product sustainability perspective,
Founded in 1959 by the Moukarim family, Mouka has also developed a line of
Mouka is a leading manufacturer of mattress and pillow products that
are 100% made from recycled scrap
mattresses and bedding products. The material. The production process
of the foam mattress naturally
company has grown to become the creates wastage in the form of
second-largest foam-mattress manufacturer foam crumbs. Mouka recognized
an opportunity to compress them
in Nigeria. to create high-density mattress
products and pillows using
Country specialized equipment at each of
Nigeria The mattress manufacturing industry in Nigeria is highly fragmented, with its factories. As a result, none of
Mouka retaining a c.15% market share. Mouka’s product categories are the foam waste produced from the
mattresses, raw foam blocks and lifestyle products. primary product lines is disposed
of. This in turn has reduced the
Aligned with the Group’s mandate of investing in well-managed, high-growth company’s total waste and improved
businesses, Abraaj identified an attractive opportunity to invest in Mouka efficiency. Additionally, these
through its Fund. In engaging with Mouka, the Abraaj investment team saw products contributed c.5% to the
an opportunity to leverage the company’s market position and leading brand company revenues during FY 2015.
Sector name to grow and capture additional market share. Furthermore, the Abraaj
team saw clear areas for value creation that could be achieved with the
Consumer Group’s support.
Discretionary
Sustainability Progress Looking Ahead
Date of Investment
June 2015 Enhancing Fire Safety HSE Culture and Corrective The Abraaj team has been actively
Practices: Mouka lacked adequate Action Plan: Abraaj has worked engaged in the implementation of the
fire safety practices, which resulted with Mouka to develop a robust company’s corrective action and value
in a number of fire incidents health and safety culture beginning creation plan. Since 2015, Abraaj has
prior to Abraaj’s investment. with the appointment of a Health, worked with Mouka to achieve 62%
Abraaj assisted with identifying Safety and Environmental (HSE) of the targeted action items.
and selecting an international Manager. Abraaj engages with the
health and safety consultancy to HSE manager on a bi-weekly basis For 2016, the main goal is to
conduct a comprehensive review to review progress against the continue to achieve progress
of the company’s fire-prevention/ action plan developed at the time with these corrective actions. The
suppression mechanisms and of investment. The action plan has key tasks include implementing
electrical infrastructure. Following a wide range of initiatives including recommendations such as
the review, the company has rolled improving the working conditions, undertaking an electrical and fire
out a proprietary method to segment environmental performance and safety audit, installation of additional
its curing hall (area where foam operational efficiency of the eye-wash stations for employees
blocks cool off after being formed) company. Key achievements to who work with and around
with fire-resistant brick walls to date include: upgrades to the chemicals, and training of the
prevent fires from spreading across storage infrastructure; improved Mouka truck drivers on road safety.
the curing hall and improved fire- bunding around above-ground tanks;
resistant roofs within the production improved procedures related to
areas. As a result, there have been the transportation and handling
zero fire incidents to date since of chemicals; and implementation
Abraaj’s investment. of waste-management plans at
each facility.
28 Worker safety and a strong HSE culture is a 29
priority in Mouka’s factoriesOncologie and
Diagnostic du Maroc
Company Overview and Investment Rationale
Oncologie and Diagnostic du Maroc (ODM) is Formalizing HR policies and
procedures: Since its investment,
the largest healthcare platform for oncology Abraaj has supported ODM at the
and diagnostics services in Morocco. Group level in formalizing written
contracts to ODM employees across
In 2015, ODM served more than 56,000 its facilities, increasing wages for
patients and offered more than 43,000 employees earning below minimum
wage and providing social benefits
radiotherapy sessions. insurance to employees that were not
covered before. This goes beyond
Country the standard practice in Morocco
Morocco The platform is composed of two centers, Clinic Al Kindy and Clinic Menara, where declared employees only
that an Abraaj managed Fund acquired in December 2014 and September represent c.30% of the employed
2015 respectively. ODM offers cancer treatments including radiotherapy, population in the private sector.
chemotherapy, brachytherapy, medical imaging, as well as a number of related
oncology services. Abraaj recognized the Moroccan oncology diagnostics
and treatment market as being underserved and identified ODM as a highly
scalable opportunity with the capacity to become a leading national platform
for oncology and diagnostic services.
Sector
Healthcare
Date of Investment
Sustainability Progress Looking Ahead
December 2014
Improving Patient Safety and Standardizing Environmental, Abraaj’s objective is to build the
Wellbeing: Abraaj’s sustained Health and Safety Practices: leading oncology and diagnostics
support to ODM has been ODM has appointed a Group platform in Morocco. Abraaj’s
instrumental in the enhancement Head of Operations responsible investment and ESG teams will
of ODM patients’ comfort and for implementation and monitoring continue to actively support ODM
employees’ security. In late 2015, of environmental, health and in finalizing the standardization of
Abraaj invested in an extension of Al safety (EHS) practices. The Group EHS practices and formalizing HR
Kindy to launch new services and to Head of Operations, with Abraaj’s policies and procedures. By early
offer a larger and more comfortable guidance, is in the process of (1) 2017, ODM aims to have a fully
waiting area for patients with a upgrading Clinic Menara’s practices integrated environmental, health
section reserved for children. As a to Al Kindy’s alleviated level and (2) and safety management system; to
result, there has been a reduction standardizing the EHS practices have ensured the installation of a
in obstruction of staircases and through the development of a comprehensive fire alarm system in
emergency exit routes which were formalized Environmental and Social both centers and the creation of a
previously blocked due to the large Management Systems (ESMS) formalized emergency plan; and to
volume of families in this area, at the holding level – which will have completed an energy audit for
optimization of the flow of traffic, then be implemented across the the Al Menara Center.
and a reduction in health and whole platform. In addition, the Al
safety hazards. Additionally, patient Kindy Clinic recently completed an
separation and waiting times have energy audit and identified several
been improved, thereby enhancing opportunities for cost savings, the
patients’ treatment conditions and benefits of which are currently being
improving employees’ working assessed prior to implementation.
conditions and security.
30 Patient-centered care is a key feature across 31
Al Kindy and Al Menara Clinics in MoroccoBuilding Alliances to
Deliver Global Goals
In the last 50 years the world economy has expanded sixfold
and average per capita income has almost tripled. Yet not
everyone has benefited from this growth and our world remains
plagued by growing levels of inequalities. With an increasing
population aspiring to improve living standards and quality of life,
our societies and communities face immense challenges which
must be tackled today if we want to leave a more sustainable
and prosperous world for our future generations.
Business and
the Social Compact
In order to deal with the magnitude,
urgency and complexity of these Our investments in educational platforms in South East Asia provide affordable and quality education to students
challenges, an unprecedented unity
and alignment between private Private
sector, governments and civil Sector
society is needed. The Sustainable
Development Goals (SDG) provide • Our focus on investing in cities
a framework developed by all and our strategic stakeholder Forging Global Alliances
stakeholders to contribute their partnerships contribute to SDG 11
skills, intellectual property, capital At Abraaj we have which calls for sustainable cities The recognized leadership of Abraaj
and funds to long-term sustainable always believed that and communities. Our current and our Founder and Group Chief
models for growth across all nations. energy infrastructure strategy Executive resulted in Arif Naqvi being
our business and the which is focused on renewables invited to join the newly created
At Abraaj we have always believed Governments Civil companies we invest supports SDG 7 which calls for Global Commission on Business
that our business and the companies Society in are part and parcel affordable and clean energy for all. and Sustainable Development. Co-
we invest in are part and parcel chaired by the former United Nations
of a broader social and economic of a broader social and • Our healthcare strategy is using Deputy Secretary General Lord Mark
fabric. Our ultimate objective is economic fabric. Partnership Capital (SDG 17) Malloch-Brown and Unilever CEO
to reward shareholders whilst to build a healthcare services Paul Polman, the Global Commission
serving our stakeholders at the group that delivers sustainable, has been launched with five
same time. Our track record affordable and accessible objectives at hand.
since inception consistently As a private equity investor across Some examples include: services to low- and middle-
demonstrates our commitment to a multitude of sectors in growth- income communities in South Asia • To decode the Sustainable
building partnerships and alliances market cities, Abraaj contributes to • Our investments in educational and Sub-Saharan Africa (SDG 3). Development Goals (SDGs)
with NGOs, international and numerous SDGs through the core platforms in North Africa and Asia As with all Abraaj investments, our and show why it makes sense
regional organizations and national of our business. We follow a provide affordable and quality healthcare strategy is focused on for businesses to engage in
governments to offer our thought disciplined approach to best education and contribute to SDG supporting local entrepreneurs sustainable development at
leadership, innovative capabilities practices, launching our partner 4 which calls for inclusive and to grow their businesses and a far more strategic level than
and business acumen to create companies on to a journey of equitable quality education and increase local hiring (SDG 8). they have to date.
an environment for resilient long- long-term sustainable growth. the promotion of lifelong learning
term growth. opportunities for all.
32 33Abraaj executives
participated in
several forums to
advance long-term
value-creation
thinking in the
industry.
•
To show how new business
models can align profitability
with social purpose. Frederic Sicre, Managing Director at The Abraaj Group, speaks on tackling
key challenges around food security and health at the FT-IFC Transformational
• To map out how new financial Business Conference in June 2016
tools can crowd in private
capital and align economic
and social returns. From left to right: Prime Minister of Norway Erna Solberg, The Abraaj Group Founder and Group Chief Executive Arif Naqvi,
In July 2016, Abraaj’s Founder and Group Chief Executive Arif Confederation of Norwegian Enterprise Director-General Kristin Skogen Lund and Unilever CEO Paul Polman with the pledge
• To show how business, Naqvi was invited to become a member of the B Team, and join to support the SDGs at the Oslo Business for Peace Summit in May 2016
government and society can co-founders Sir Richard Branson, Jochen Zeitz and 18 other global
work effectively together to leaders from business and civil society in their collective effort to
build the partnerships needed redefine the role of business as a force for social, environmental and
for SDG delivery. economic benefit. business leaders attending the
annual gathering of Business Looking Ahead
• To quantify the efficiency Mr Naqvi’s particular areas of focus will be the ‘100% Human at Work for Peace could endorse as
gains in achieving sustainable initiative’, which seeks to inspire a movement of business leaders a sign of their commitment to Our passion for At Abraaj, we recognize our role
development if business is who will lead their businesses through the principles of equality, contribute to the SDGs through building sustainable and ability to affect long-term
fully aligned with the SDGs. respect, growth, belonging and purpose. He will also be working with their business activities. Our economic and social development
fellow B Team leaders on the ‘Fostering Collaboration’ and ‘Creating Founder and Group Chief communities mirrors in growth markets as agents of
The conclusions and proposals of Thriving Communities’ initiatives. Executive Arif Naqvi and Paul our passion for change. This is exemplified in the
the commission will be released Polman, CEO of Unilever, led this developing sustainable way in which we deploy capital,
over the next 12 months. initiative in Oslo which resulted with strong ESG practices and a
in over 180 business leaders companies. focus on enhancing productivity
In order to launch momentum formalizing their commitment. and creating regional champions
behind the SDGs, Abraaj On May 2, Arif Naqvi and Paul through strong commercial discipline,
collaborated for a third year Business cannot Polman presented the pledge as well as through our engagement
running with the Business for
Peace Foundation in Oslo. The
succeed in societies to Norwegian Prime Minister,
Erna Solberg, in her capacity as
Abraaj executives participated in a
myriad of meetings and forums to
in stakeholder dialogue and
partnerships, to strengthen the field
Business for Peace Foundation
was initiated in 2007, in the
that fail. Being part of co-chair of the SDG Advocacy
Group at the United Nations.
advance long-term value-creation
thinking in the world of finance
of sustainable investing more broadly.
belief that socially responsible the B Team enables us and industry throughout the year. We have an active year ahead as
and ethical initiatives should not The convictions with which we In 2016 we spent substantial time we work collaboratively with our
be merely window-dressing, to amplify our collective run our business at Abraaj blend contributing to the formulation partners to deliver on our long-
but must stand the test as a
business case. The aim of the
efforts in building a passion to build sustainable
business with a passion to build
of the SDGs through UN-led
roundtables. Abraaj was present
term objectives. The SDGs have
given businesses the opportunity
Foundation is to accelerate
the development of business
sustainable businesses sustainable communities. Our
approach, track record and keen
at the Financing for Development
Convention of the United Nations in
to bring their expertise, networks
and resources to bear in achieving
practices through increasing and communities that desire to share our views on the Ethiopia in July 2015 as well as at goals that can be transformative for
role of business in development
the awareness of the strengths
of the ethical business case. ensure dignity, respect lead to many invitations by
the historic UN General Assembly
in September 2016 which saw 180
society. We are committed to playing
our part in this endeavor and to
In May 2016, Abraaj collaborated
and fair values. governments and international
organizations to participate in
heads of state endorse the SDGs. demonstrating how the private sector
can create financially sustainable
with the Foundation and Unilever gatherings, task forces business models that deliver strong
to develop a pledge that and conferences. returns and achieve high impact.
34 35Innovating Sustainable Business Models 36 37
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