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 transmitted by the National Commission of the Retirement Savings System (Consar) to the Retirement Savings Fund Administrators (Afores).
As of January 2022, the Afores must incorporate sustainable criteria into their methodologies and prioritize environmental, social and governance investments (ASG or ESG in English) in their portfolios, as well as push within the public companies in which they have representation to comply with sustainable principles. “There have to be strong ESG policies. It is dangerous if (the Afores) put something lax in their methodology ”, says Octavio Ballinas, financial vice president of Consar. “We have to be the bad guy in the movie.”
The road, as we see it in the oil industry, will be uphill. A no lesser sample that reflects the challenge faced by the largest investors in the country in this change of thought 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 into 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 a mystery for their savers and regulators.
“There are a couple that had made progress on their own initiative, but the rest of the sector do not have (the ESG criteria),” says Ballinas. The official even points out that the new regulation was not out of controversy. The Afores “did not want us to impose these obligations on them and that is why the circular has a transitory period (which gives them time to incorporate ESG factors in 2022)”.
However, the Mexican Association of Afores insists that the union is moving “very quickly” 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 Álvaro Melendez, technical vice president of Amafore.
To understand how the regulator could evaluate these factors as of 2022, here is a hypothetical example that the Consar executive outlined: if an Afore invests in a passive instrument (that replicates the behavior of an index) called ASG, but does not have an methodology and does not use evaluations from an independent firm on sustainable assets, the Afore would be sanctioned.
“The ESG issue cannot go for passive investment. We are going to set the standard. If I analyze your methodology and see that it is hesitant, I will fine you ”, warns Ballinas. The minimum fines start at 87,000 pesos for each portfolio (there are 10 portfolios for each Afore), according to Consar data.
The truth is that since the publication of the regulatory change, the Amafore chose to create an investment subcommittee of ASG. Currently, the association that brings together nine Afores establishes minimum standards for sustainable investments, similar tools and methodologies, and outlines a work path to adopt the ESG criteria.
“We have tried to self-regulate beyond what is required by regulation and try to have the best international practices on the subject,” says Melendez. The first goal that Consar envisions for 2024 is that about a third of the global capital portfolio – which represents 40% of the total portfolio – of the investment companies of the Afores already has ESG criteria. “It is something that we think will happen organically. We are not planning to set a limit, ”says Ballinas.
