To improve the economic and financial sustainability of the infrastructure sector in India by providing sustainable debt restructuring solutions through private capital raised from institutional investors.
Kotak Infrastructure Investment Fund (KIIF) is an India-domiciled private closed-end debt fund. The Fund seeks to invest in operating infrastructure companies primarily by providing senior secured long-term debt solutions, and may also acquire equity participation from the borrower in conjunction with the credit facilities. The target sectors mainly include transport, renewable energy, water, logistics, digital infrastructure and transport infrastructure for electric vehicles in India.
ENVIRONMENTAL AND SOCIAL INFORMATION
The Environmental and Social Policy (ESP) of the AIIB is applicable to this project. The project has been placed in the FI category, because the financing structure involves the provision of funds through a financial intermediary (the Fund), whereby the AIIB delegates to the Fund manager the decision making on the The use of AIIB proceeds for new investments in accordance with the terms in the project’s legal documentation must be agreed with the fund manager in the form of eligibility criteria and investment guidelines, and enforced through an environmental, social and governance framework (ESGF) to be used as the project’s environmental and social management system (ESMS).
The Fund has adopted a risk-based approach to environmental and social (ES) management codified in its ESGF. In accordance with this ESGF, the fund manager: (i) qualifies and quantifies the ESG risks and impacts of potential beneficiaries in relation to the ESG regulatory requirements applicable in their jurisdiction of operation and to international industry best practices, (ii ) defines measures to align their performance with the same, (iii) identifies and enhances opportunities to add ESG value, and (iv) drives and monitors ESG performance during the investment’s holding period. Coal mining, coal transportation and coal-fired power plants, as well as infrastructure exclusively dedicated to supporting any of these activities will be excluded from eligibility for funding under the project.
The Fund will invest in the operation of Indian infrastructure projects in the transport, power, pipeline, water, digital infrastructure and other infrastructure-related sectors. These mining projects present a variety of environmental and social risks in the form of persistent legacy issues and operational challenges. The risk will be mitigated using the Fund Manager’s ESGF policy, complemented by AIIB monitoring and oversight.
For each investment, the fund manager will prepare an environmental and social action plan (ESAP) determining the measures necessary to align existing and future operations with the applicable standards. The Fund will be required to disclose the name, sector and location of portfolio companies supported by the EBIT proceeds on its website within twelve months of the closing of an investment. The Fund will be required to notify the AIIB of material ESG incidents and grievances at the sub-project level and prepare an annual E&S performance report for submission to the AIIB.
The Fund has an external communication mechanism (ECM) to respond to opinions, requests or concerns from third parties regarding their own ES processes and results, as well as the ES impacts and performance of their sub-projects. In addition, the AIIB will require the Fund to ensure that sub-project entities conduct appropriate dialogue with stakeholders and disclose required ES documentation, in accordance with local regulations, and maintain grievance mechanisms (GRM ) at the sub-project level.
The AIIB will conduct a due diligence review of investments with significant E&S risk, including all Category A and Category B investments determined to potentially induce a) involuntary resettlement, b) risk of adverse impacts on indigenous peoples, c) significant risks or impacts to the environment, community health and safety, biodiversity, cultural resources or d) significant occupational health and safety risks. The AIIB will carry out regular monitoring of the Fund’s activities, including visits to selected investments.