This week we are sharing 10 key results from the survey we conducted in the PE industry to gauge the level of ESG integration in funds investing in the Mexican market. We collected responses from 29 funds in total, which together add up to near US$12 billion in AUMs. We understand there may be a bias to answer our survey in funds that are already doing some level of ESG integration (funds who have done nothing maybe do not want to disclose it), but we still believe it is interesting to read some of these charts. We want to thank all the participants! Your contributions were appreciated.
- 93% of the respondents say they integrate ESG factors (at least sometimes) when defining the fund’s strategy. 66% do it all the time.
- ESG integration is highest in Growth Equity funds and lowest in VC funds. Real Assets funds are in the middle.
- ESG integration during the fund’s strategy definition is highest in the funds with AUMs above US$500m and lowest in funds with AUMS below US$150m. In the due diligence phase and when communicating with their investors, this is reversed, and smaller funds consider ESG factors more than larger funds.
- Funds are more comfortable considering G factors, then S factors, and lastly E factors when designing their strategies or doing the due diligence for an investment. The same goes for communication.
- Only 24% of the respondents have gone through a formal materiality analysis, and another 24% is in the process of going through it. 21% do not know what a materiality analysis is. Real Assets funds are the least prone to do materiality analyses, even though no Real Assets fund answered it is not familiar with the concept.
- Formal KPIs adoption in the industry is also relatively low at the fund level with only 34% of the respondents having KPIs in place to measure their ESG strategies. On individual investments this increases to 66%.
- The adoption of international ESG initiatives is still a work in process. UN PRI has the highest participation rate (41%) and the UN Global Compact the lowest (0%).
- 72% of the respondents believe integrating ESG factors increases returns on their investments, and 83% of them believe it makes raising capital easier.
- 52% of the funds believe the lack of resources is to blame for not being able to do more about ESG. 34% of them believe it is the lack of time.
- 72% of the respondents are either satisfied or very satisfied with the level of ESG information they are disclosing at the fund level.
Source for all data and charts: Survey conducted to 29 Mexican PE Firms by Miranda ESG
According to Preqin, 54% of the world’s private equity AUMs have an ESG mandate. In LatAm this number is 44%. Assuming our numbers are biased upwards for the reasons we discussed before, and given Mexico is a US$60bn in AUMs market (and thus we were only able to survey ~20% of it), the Mexican PE industry could be even below the regional average. As AFOREs are integrating ESG factors more actively in the coming years, PE funds that want to raise money from them in the future (through CKDs or CERPIs) will have to up their ESG game. This is also aligned with the consensus view from our survey that COVID-19 will speed up ESG integration in the PE industry.
I hope you found this interesting. As usual, if there is anything we can help you with, please reach out.
Partner, Miranda ESG
Contacts in Miranda Partners