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ESG Integration in Afore XXI Banorte

This week I want to share the notes from a conversation I had with Gaby Luna, who in addition to leading the ESG effort within Afore XXI Banorte, is also the coordinator of the ESG investment subcommittee within AMAFORE (the association of pension funds, Afores, in Mexico). The idea of this conversation was to understand to what degree this Afore (which was the first to become a PRI signatory in Mexico) integrates ESG factors into their investment process, and what they are looking for from issuers going forward.


How much do you integrate ESG issues into your investment process?

The integration of environmental, social, and corporate governance factors in our process is embodied in the Investment Policies approved by both the Investment Committee and the Board of Directors. Afore XXI Banorte has already been considering sustainability factors in the portfolio for many years, first through investments in platforms such as Certificados de Capital de Desarrollo (CKDs, Development Capital Certificates) that had impacts on environmental or social issues through the projects financed, and then when we became signatories of the UN Principles for Responsible Investment, PRI, in 2017, this was done much more thoroughly. In order to come up with a strategy that covered our entire investment portfolio, we analyzed best practices in European funds and, combining this with the PRI guidelines, we began to integrate into the investment process the analysis of socio-environmental impacts of our investments (governance issues have always been analyzed). Currently each investment proposal presented to the Investment Committee also includes ESG ratings (ranking) and an ESG risk analysis identifying the main areas of opportunity in the project/vehicle. To do this the financial analysts work in conjunction with the ESG analysts. Both teams are considered part of the investments team.

Initially we noticed that there was a significant lack of information on the topic in the market and therefore a questionnaire was developed in 2018, and MSCI was hired as the ESG data provider. Currently we use information from both sources, and with that, the full analysis is delivered to the Committee. The questionnaire in 2020 already had a response rate of 95% for the issuers that are in the XXI Banorte portfolio.

Additionally, once an investment is approved, as part of what was defined in the ESG risk analysis, we work on establishing formal commitments with the companies to incorporate topics such as ESG transparency/indicators, socio-environmental management systems establishment, gender diversity indicators, or Board effectiveness and independence monitoring. All this is agreed to be accomplished within certain periods of time.

ESG issues are not yet considered a deal breaker, or a reason to sell a position, but they will gradually become more relevant in our considerations. For now, the focus is to reconcile and find a middle ground with the issuers.

To strengthen the message, we have partnered with investor organizations such as Climate Action 100+ and the Consejo Consultivo de Finanzas Verdes (CCFV, Green Finance Advisory Council in Mexico). We believe this will help send a unified message to companies to improve their practices.

As a group, all Afores are already working through AMAFORE to comply with the regulatory requirement which comes in place next January to integrate ESG in all our risks and investments analyses. We have worked on methodologies (standardizing questionnaires by asset class by sector, regulatory compliance), training (approaching large asset managers to find best practices in the industry), collective engagement (active holding processes acting as a guild), among other things.


Do you have plans to do even more in the future?

ESG is not a fad, it is here to stay. The next step should be in the process of active engagement, where we must follow up on all the commitments agreed upon for the investment.

We also want to achieve that in the future companies seek to publicly disclose the ESG commitments and indicators involved in their management processes, including (as much as possible) through their public offering memos.


What would you say are the Top 3 ESG issues that you are looking for issuers to manage well?

  1. Climate change – used to be preventative, now it’s urgent.
  2. Diversity and inclusion – gender equality.
  3. Independence of board members on the board of directors.


It is clear that Afore XXI Banorte is quite mature in terms of its ESG integration process (relative to other Afores). They are not only considering ESG an initial factor in the pre-investment analysis, but also a matter to think about when they interact with issuers in all the other phases of the investment cycle. In 2022, when ESG integration will be done in all Afores to comply with new regulation, it is likely we will not see this level of integration in all of them at first. But certainly, having examples of best practices in the industry, we would expect investors in Mexico to move in that direction over time.

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.



CEO, Miranda ESG

Contacts at Miranda Partners

Damian Fraser
Miranda Partners

Marimar Torreblanca
Miranda ESG