The Impact of Private Capital in Emerging Markets

2019 Sustainability and Operational Excellence Challenge Finalist

Case Study: The Company Ostro Energy

Ostro Energy’s Story Essentials In 2012, emerging market investor Actis Company: Ostro Energy identified a gap in the Indian market for clean energy generation capable of meeting Website: renewpower.in the country’s power demand, which was Country: rapidly growing between 5% and 7% per annum. According to the World Bank, 200 Sector: Power million Indians continued to lack access Business: to electricity by 2014, while many Indian states suffered from an electricity shortfall GP: Actis, an investor in growth markets alongside appalling air quality in the main across Africa, Asia and Latin America (act.is) urban centers. Strong reliance on coal-fired Dates of investment: August 2014 power plants, the traditional use of biomass Investment: Actis established Ostro Energy in rural areas, and a lack of access to clean as a wholly-owned entity energy were limiting the country’s ability to achieve the United Nations Sustainable Development Goals. Impact Highlights In less than four years, Actis built Ostro into Actis identified a gap in the Indian market for To address this demand, Actis decided to a business with broad geographical reach. clean energy generation capable of meeting create a renewable energy platform in India By 2017, Ostro had completed its business the country’s rapidly growing power demand, from scratch, believing its energy expertise, plan ahead of schedule, having signed and decided to create a renewable energy combined with a local presence and long-term power purchase agreements platform in India from scratch that would experience establishing similar businesses for wind and solar projects reaching 1.1 focus on the construction of wind power in other emerging markets, would enable gigawatts (GW) in capacity—the equivalent and solar energy projects. By 2017, Ostro it to be successful. In 2014, the firm backed to powering 1 million Indian homes—in Energy had signed long-term power purchase two experienced energy industry managers , , , agreements reaching 1.1 gigawatts (GW) in to become the Chief Executive Officer , and . These are capacity—the equivalent to powering 1 million and Chief Operating Officer of the newly states where 54% of power is generated Indian homes—in states where 54% of power created Ostro Energy Private Limited, 100% from coal, thus avoiding over 1.4 million was generated from coal, avoiding over 1.4 owned by Actis, which would focus on tons of CO2. Actis sold the platform to million tons of CO2. the construction of wind power and solar Renew Power, an Indian clean energy Ostro has created over 1,500 jobs for Indian energy projects. independent power producer, in 2018. workers, while promoting greater worker welfare under a newly created internationally accredited Labour Accommodation Standards Policy, which is embedded into all contracts with construction companies. There have been zero worker or community strikes related to The Role Played by Private Capital Ostro’s operations. With Actis’ support, Ostro has implemented Within the first four months of initiating governance (ESG) issues into ownership numerous programs to improve the lives of the project, Actis, in partnership with policies and practices would ultimately build local communities. These initiatives include senior management, helped to recruit a more resilient, sustainable and valuable the establishment of 65 health camps that and install a fully functioning team of 70 business. The firm helped Ostro establish have treated over 5,000 people, as well as 11 people. One particularly crucial hire was a an ESG Committee, which would report livestock veterinary healthcare facilities that Head of ESG, who would be responsible for to the board of directors, to oversee the have served over 28,000 animals. The company the implementation of international best management and mitigation of ESG issues also installed solar-power water filtration units practices at Ostro. Actis identified the need to and related risks. A safety specialist and to provide safe, clean and reliable drinking fill this role early in Ostro’s development as it team of community liaison officers were water in Rajasthan after it discovered that encountered a range of challenges endemic also recruited to support an in-house ESG locals were suffering from fluorosis. Over 1.5 to India, including a lack of established function. This emphasis on rigorous ESG million liters of clean drinking water have standards on workers’ accommodation and standards at Ostro enabled the company to been dispensed to nine villages near Ostro’s projects—and clean water continues to be poor labor practices by contractors. secure additional lines of debt finance from dispensed today. From the outset, Actis recognized that development finance institutions such as IFC incorporating environmental, social, and to fund project development. Another key priority for Actis was companies, ensuring all contractors and to spearhead the development and sub-contractors adhered to these principles. implementation of a human resources The same trickledown approach was applied policy that went beyond Indian regulatory to a newly developed Security and Human requirements and was aligned with Rights Protocol. The international best practices as defined Actis worked with the company to develop by IFC and the International Labour an integrated safety, health, environment, Company Organization (ILO). This included and quality management system accredited a requirement to promote equal to ISO 9001, ISO 14001, and OHSAS 18001. opportunities and prohibit discrimination In terms of health and safety, Ostro provided View on the basis of gender. Actis’ Responsible over 4,800 hours of safety training while Investment team and Ostro’s Head of ESG the company’s rigorous safety assessment also created an internationally accredited process identified and corrected 301 Labour Accomondation Standards Policy, potential hazards. There have been zero which was enforced across all projects and worker or community strikes related to embedded into contracts with construction Ostro’s operations.

Beyond the Bottom Line “The reason we During construction phases, Ostro created over 1,500 jobs for Indian workers, while felt comfortable transforming labor accommodations and ultimately promoting greater worker welfare. buying the In addition, Ostro has implemented a variety of programs designed to improve the lives of assets from Actis local communities. For example, Ostro has: • Established 65 health camps that have was because, treated over 5,000 people—who have historically had limited or no access to as a company, healthcare services—on a wide range of health issues including pregnancies, skin Furthermore, while developing projects in diseases, nutrition, and muscle pain; we also follow Rajasthan, the company became aware that • Set up 11 livestock veterinary healthcare dangerously high levels of fluoride were the highest facilities in local villages, which have naturally occurring in local groundwater treated 28,000 animals; resources and consequently many local people living near Ostro’s projects were standards • Supported approximately 1,100 students suffering from fluorosis, which causes dental in local government schools through and skeletal problems, contributes to joint of corporate the distribution of school bags, desks immobility, and affects children’s growth. To and benches, uniforms, sports kits and address this challenge, the company installed e-learning systems; governance, solar-power water filtration units, which • Contributed a total of 45,000 saplings use reverse-osmosis filters to provide safe, ethics, and toward environmental initiatives, including clean, and reliable drinking water. Over 1.5 a river protection drive in Madhya Pradesh; million liters of clean drinking water have sustainability.” and, been dispensed to nine villages—and clean • Supported, at one local community’s water continues to be dispensed today. This request, the installation of solar street initiative further helped the company secure lights, thus improving street lighting a social license to operate in the region while conditions in the village. ensuring safe drinking water for its workforce. Sumant Sinha Chairman and IMPACT HIGHLIGHTS Managing Director, As of: Initial Investment April 2018 ReNew Power # of jobs created 0 1,500 Investments in local communities 0 2% of profits

MWh capacity per annum 0 1,000 CO2 avoided (million tons) 0 1.4 Environmental management system in place No Yes Health and safety policies in place No Yes

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