Global standardization of ESG information to broadcasters, a necessity

Investors who manage assets in Mexico of around $278 billion (6.1 trillion pesos) joined to request that environmental, social, and corporate governance (ESG) risks be also considered among the financial risks, in order to achieve a more efficient investment process to create sustainable portfolios.

On September 30th the Investor Statement will be released, promoted by the Green Finance Advisory Council (GFAAC), where they invite issuers to disclose ESG information through a consensus methodology. More than 70 institutional investors who signed the declaration consider that “climate change is the greatest risk for the global community in terms of impact and probability of occurrence, and in order to comply with the provisions of the Paris Agreement, it is necessary to reduce greenhouse gas emissions by 45% by 2030 compared to 2010 and to be equal to zero by 2050. Failure to do so, will have catastrophic and irreversible consequences for the planet.”

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Mexico as one of the most vulnerable countries regarding climate change

Investors established that Mexico is one of the most vulnerable countries to climate risks due to its geographical and socioeconomic conditions. And that “the situation is urgent and demands forceful actions from all actors involved. The financial sector has a key role in the orderly transition to a low-carbon economy, contributing to the mitigation of risks and the exploitation of opportunities presented by climate change through the incorporation of environmental criteria in their investment strategies,” according to a document.

The group of signatories, among which there are: Amafore, insurance companies, investment funds, asset management, unions (Amafore, AMIB, AMIS and AMAI), the two stock exchanges (BMV and BIVA) and other institutions, specified the need to produce a robust analysis of the climate implications for investment portfolios with quality information that is standardized according to the industry by the issuers of debt and equity.

“The step we are taking is to try to standardize everyone’s criteria, so that the information is comparable, standardized, can be better stored and more in-depth analysis can be performed,” Enrique Solórzano, CEO of Afore Sura, said in an interview.

For her part, Samantha Ricciardi, CEO of BlackRock Mexico comments that “more and more investors are choosing ESG investment strategies in their portfolios, because they are beginning to see the value and benefits that this will have in the long term.”

Meanwhile, Mariuz Calvet, president of the Sustainability Group of BMV, said that “it is an invitation to integrate ESG factors into the business strategy, to measure in a quantitative way which is the impact of the risks and opportunities in the business, which are these material topics for each sector in which the issuer performs and to disclose and integrate them towards the business. For broadcasters, it professionalizes the dissemination of ESG data and does so along financial data.”

The main points of the statement

Establish a clear strategy to reduce greenhouse gas emissions (GHG – measured using the Greenhouse Gas Protocol), throughout its entire value chain, in line with Science Based Objectives; and reduce other environmental impacts resulting from its operations.

Incorporate the risks and opportunities presented by climate change in all its capital allocation decisions, as well as to evaluate the sustainability of its business model.

Build a corporate governance framework from the Board of Directors that establishes and evaluates the company’s environmental and climate change strategy, and aligns management team incentives with improvements in environmental indicators.

Disclose progress on the environmental and climate change strategy to investors, considering risks, opportunities, and performance indicators.

Report ESG information according to the internationally recognized standards issued by the Sustainability Accounting Standards Board (SASB), using as a reference framework the standards issued by the Task Force on Climate-related Financial Disclosures (TCFD).

Overview of the global investments in ESG

$40.5 billion in new assets was the amount raised by sustainable funds (investment funds and ETFs) globally in the first quarter of 2020.

Mexico is the first GHG emitter in Latin America, excluding deforestation, and the second largest emitter in terms of emissions per capita, after Chile.

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(Featured image by Filip Gielda via Unsplash)

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First published in ELECONOMISTA, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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