Responsible investing
Environmental social governance (ESG) strategy
During the year the Company made signifcant progress on the development of an in-depth proposal for the Environmental Social Governance (ESG) Strategy to be implemented by the Company in the future. Although at present the Company does not have an explicit, detailed written ESG Strategy, de facto CEIBA has taken signifcant steps in the past in each of the three areas of such a strategy. The actions of elaborating, discussing and adopting a formal ESG Strategy will allow the Company to build a mutual understanding around the expectations of its stakeholders in relation to CEIBA’s ESG Strategy, which in turn should also have a positive efect on the Company’s fnancial sustainability.
In parallel with obtaining input regarding strategic goals from the Board, the Investment Manager, ESG specialists and other third parties, a detailed analysis will be carried out during the year of the Company and its assets. The principal goal is to present and table the formal ESG Strategy of CEIBA for approval during the present year so that we can present, explain and embed our ESG Strategy as one of the factors driving long-term value creation within CEIBA and infuencing its performance against the strategic goals of the Company.
In short, we believe that by having a proper ESG Strategy in place, the Company will add a formal ESG framework as one of the drivers for long-term sustainable fnancial returns and adequately manage environmental, social, and governance factors as both risks and opportunities.
It is our intention that during the present year an in-depth analysis will be carried out on the general status of ESG factors within the Company, its subsidiaries and assets. Along with the above and the wider review of the ESG context in Cuba, this should enable the Company to highlight key ESG topics for focus. We also intend to verify whether it would be possible to periodically undertake existing assessments and methodologies to review ESG performance of the underlying assets and implement and monitor sustainability action plans. As a result, the Company will produce a draft ESG Policy and Approach that will be presented for approval to the Company’s shareholders.
In order to set the ESG policy and approach for the Company, it is important to understand the backdrop of ESG issues within the investment territory, Cuba, so that we are aware of current legislative frameworks and how they might impact the investments of the Company, now and in the future. It will also enable both the Company and its shareholders to understand the ESG performance within Cuba and align the ESG approach with both the wider context and abrdn’s best practice approach. What follows is a summary overview of Cuba and how it performs in all the areas that are taken into account in when performing an ESG analysis.
Our general conclusion is that there are a large number of areas in which Cuba’s performance stands out, especially compared to other Latin American and Caribbean countries, whilst there are other areas where it does not, principally because of the fact that Cuba has a single-party political system and is perceived internationally to score low on questions of political rights and civil liberties.
Over the last 25 years, Cuba has made a large number of small steps forwards, as well as some steps back, and more recently, it would appear that bigger steps forward are being taken, including the adoption of a new Constitution, the introduction of new legislation that regulates ongoing reforms, private enterprise and initiatives, monetary reforms (including currency unifcation), and the signifcant roll out of internet services, U.S. Dollar bank accounts and private import-export rights.
| ESG TOPIC | MEASURE | PERFORMANCE | |
| Anti-Money Laundering | G | FATF | Cuba is FATF compliant Cuba is a member of the Financial Task Force of Latin-America, GAFILAT, the purpose of which is to work toward developing and implementing a comprehensive global strategy to combat money laundering and terrorist fnancing as set out in the FATF Recommendations |
| Transparency | G | Transparency International’s Corruption Perception Index | In 2019, Cuba ranked 60th of 176 countries globally and 12th of 32 countries in the Americas |
| Climate Change | E | Paris Climate Change Agreement | Cuba has ratifed its commitment to decarbonize its
economy by 2050 In 2016, Cuba ofcially ratifed the Paris Agreement on Climate Change. Cuba also ratifed the Doha Amendment to the Kyoto Protocol, adopted in December 2012 and the 2030 Agenda for Sustainable Development In 2020, Cuba was the 13th country to submit its nationally determined contribution (NDC). The updated NDC, which has a ten-year time frame from 2020-2030, outlines Cuba’s strengthened climate change mitigation and adaptation of policies and actions |
| Sustainable Development | E, S | 2030 Agenda for Sustainable Development | Adoption of the 17 UN SDGs with the commitment to eradicate poverty and achieve sustainable development by 2030 world-wide |
| Poverty and Nutrition | S | Multidimensional Poverty Index Hunger and Malnutrition Index |
Cuba is in the top fve countries in the world with the lowest value Cuba is ranked amongst the frst 17 countries to reduce the Hunger and Malnutrition Index on a sustained basis for several years |
| Gender equality | S |
Article 44 of Cuban Constitution Parliamentary seats in the Cuban National Assembly Gender inequality index |
“The state guarantees women the same opportunities and possibilities as men in order to achieve woman’s full participation in the development of the country.” As of 2015, women held 48.9% of the parliamentary seats in the Cuban National Assembly, ranking sixth of 162 countries on issues of female participation in political life In 2018, Cuba ranked number 67 out of 189 countries on the Gender Inequality Index, above almost all Latin American and Caribbean countries |
| Homicide and Drugs | S |
Homicide Monitor United Nations Ofce on Drugs and Crime (UNODC) |
Cuba has one of the lowest homicide rates in the Western Hemisphere Cuba reported 4.99 deaths per 100,000 in 2016, which put the country in the top three countries in Latin America and the Caribbean with the lowest homicide rate, lower than the global average, and less than a third of the rate in the Americas |
| Terrorism | G, S | U.S. Department of State | Notwithstanding the fact that in its 2020 Cuba Crime and Safety Report the U.S. State Department’s Overseas Security Council (OSAC) had assessed Cuba as being a low-threat location for terrorism (directed at or afecting ofcial U.S. government interests) on 11 January 2021, the outgoing Trump administration designated Cuba as a “State Sponsor of Terrorism” |
| Rule of Law and Democracy | G |
United Nations human rights conventions The International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights |
Cuba is a signatory to 11 of the 18 conventions and has ratifed eight of them Cuba has not ratifed this covenant |
| LGBT rights | S |
Military stance Same-sex marriage Sex-reassignment surgery |
Homosexuals can serve openly in Cuba’s military Not explicitly included in Cuba’s new Constitution. In early March 2019, the Cuban government launched public consultations on a new Family Code to be adopted in 2021, which would address same-sex marriage Legal since 2008 – surgeries that are performed in Cuban state hospitals are performed as part of Cuba’s free healthcare system |
| Labour | G, S |
Foreign workers Cuban and permanent resident employees |
Work- and residency permits are required and issued for periods of up to three years. Labour contracted through (State-owned) employment agencies. Contracting companies pay (in Cuban Pesos) salaries, taxes and social security contributions. Individual persons are approved on a case-by-case basis. Work regime of eight hours per day, 44 hours per week and 190.6 hours per month. |
In 2020, Cuba was the 13th country to submit its nationally determined contribution (“NDC”). The updated NDC, which has a ten-year time frame from 2020-2030, outlines Cuba’s strengthened climate change mitigation and adaptation policies and actions. The NDC prioritizes the energy and the Agriculture, Forestry, and Other Land Use (“AFOlU”) sectors, and notes that mitigation actions will require fnancial support in technology transfer and capacity building. The NDC informs about Cuba’s 2017 state plan to confront climate change, known as the 100-year plan, ‘Tarea Vida’ (Life Task) – a roadmap that includes a ban on new home construction in potential food zones, the introduction of heat-tolerant crops to cushion food supplies from droughts, and the restoration of Cuba’s sandy beaches to help protect the country against coastal erosion. It also notes that Cuba’s Constitution of 2019 explicitly mentions the goal of responding to climate change through, among others, “the eradication of irrational patterns of production and consumption.” Although the updated NDC still lacks a binding greenhouse gas (GHG) emission reduction target, in the energy sector, Cuba commits to:
- generate 24% of electricity from renewable sources by 2030, to avoid the emission of an estimated 30.6 million kilotons of carbon dioxide equivalent (ktCO2eq);
- to increase energy efciency in commercial, institutional, residential, and agriculture sectors, to avoid the emission of an estimated 700,000 ktCO2eq; and
- to reduce carbon-intensive ground transportation, to avoid the emission of an estimated one million ktCO2eq annually, by cutting fossil fuel consumption in vehicles by 50% by 2030.
In the AFOLU (Agriculture, Forestry and Other Land Use) sector, Cuba has committed itself, inter alia, to increase its forest coverage to 33%, or by 165,000 hectares, in the period 2019-2030, removing 169.9 million tons of atmospheric CO2. In livestock, Cuba plans to install 5,000 solar pumping systems by 2030. In the swine sector, Cuba commits to 100% treatment of waste waters in order to reduce an estimated 8 million ktCO2eq in emissions annually in the period 2020-2030.