In the same week, three oil giants – Chevron, Exxon and Shell – received a strong and clear message from shareholders and authorities: they must wake up and take sustainable goals and climate risks seriously. The same message is being sent by the National Commission of the Retirement Savings System (Consar) to the Retirement Savings Fund Administrators (Afores).
As of January 2022, Afores will have to incorporate sustainable criteria in their methodologies and prioritize environmental, social, and governance (ESG) investments in their portfolios, as well as push within the public companies in which they are represented to comply with sustainable principles. “There have to be robust ESG policies. It is dangerous if (the Afores) put something lax in their methodology,” said Octavio Ballinas, financial vice president of Consar. “We get to be the bad guy in the movie.”
The road, as we see it in the oil industry, will be uphill. A not minor sign that reflects the challenge faced by the largest investors in the country in this change of thinking, is that only 4 of the 11 Afores that make up the system are signatories of the Principles for Responsible Investment, the United Nations guidelines that define a strategy and practice that incorporates ESG factors in investment decisions and asset management.
Among the Afores that have committed to these guidelines are Afore Banorte XXI, Citibanamex, Sura, and Profuturo. These same firms are members of the Green Finance Advisory Council, a body that integrates the public and private sectors to develop a sustainable financial market. The work of the rest of the Afores is still an unknown for their savers and regulators.
Read more on the subject and find the most important economic news from around the world with the Born2Invest mobile app.
Sustainability in many ‘environmental funds’ is far from sustainable
“There are a couple that had advanced on their own initiative, but the rest of the sector does not have (ESG criteria),” said Ballinas. The official even points out that the new regulation was not without controversy. The Afores “did not want us to impose these obligations on them and that is why the circular has a transitory provision (that gives them time to incorporate ESG factors in 2022).”
However, the Mexican Association of Afores insists that the guild is advancing “very fast” in adopting these criteria, although it recognizes that there is a certain disparity. “The capacities are different. There are Afores that have much more specific trained personnel,” says Alvaro Melendez, Amafore’s technical vice-president.
To understand how the regulator could evaluate these factors as of 2022, here is a hypothetical example outlined by the Consar executive: if an Afore invests in a passive instrument (that replicates the behavior of an index) called ESG, but does not have a methodology and does not use evaluations from an independent firm on sustainable assets, the Afore would be sanctioned.
The rise of green bonds
“The ESG issue cannot go for passive investment. We are going to set the standard. If I analyze your methodology and I see that it is a blunder, I will fine you,” warned Ballinas. The minimum fines start at 87,000 pesos per portfolio (there are 10 portfolios per Afore), according to Consar data.
The truth is that since the publication of the regulatory change, the Amafore opted to create an ASG investment subcommittee. Currently, the association that groups nine Afores establishes minimum standards for sustainable investments, homologates tools and methodologies, and outlines a work path to adopt ESG criteria.
“We have tried to self-regulate beyond what the regulation requires and try to have the best international practices on the subject”, assures Melendez. The first goal that Consar envisions for 2024 is that close to a third of the global capital portfolio -which represents 40% of the total portfolio- of the Afores’ investment companies should already have ESG criteria. “It is something we think will happen organically. We are not thinking of setting a limit,” said Ballinas.
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
First published in EXPANSION, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.
Entrepreneurship: the Region Laâyoune-Sakia El Hamra Launches the Program RIYADA
RIYADA, the integrated program of support for project leaders who can benefit from PIAFE funding comes to promote the entrepreneurial...
Finlombarda Invests 1.5 Million in a Fund Promoted by P2P Lending October to Finance SMEs in Lombardy
In May 2020, the fintech company October launched a new direct lending fund dedicated exclusively to investments in loans to...
DeFi Projects Raised $200 Million in 2020 and $1 Billion since 2017
Geographically, between 2018 and Q1 2021, the largest funding to DeFi came from North America and Apac (80% of the...
Dirham Project: the World’s First Regulated Stable Currency
The team behind the project has implemented the dirham as a stable currency, the terms of the DAH protocol are...
Five Impact Investment Projects around the World
Impact investing gives investors the opportunity not only to earn a return on their money but also to have a...
Crypto6 days ago
Stablecoins: The New Kid On The Crypto Block
Cannabis6 days ago
Bill Authorizing Medical Cannabis Cultivation Advances in Brazilian Congress
Crypto6 days ago
Bitcoin Mining Banned, Search Engines Ban Exchanges: China Cracks Down
Biotech6 days ago
Investing in Respiratory Therapies: Saving 30 Million Euros per Year