This week we are sharing some summary data using all the ESG Development Heatmaps we have produced over the past few months.
A word of caution first: we are using a pretty simplistic approach to arrive to these numbers. We are basically counting the number of companies that comply with each item in our heatmap for a given sector, and then dividing that number by the total number of companies that we analyzed in the sector. Then we average those percentages by category (ESG Strategy / ESG Communication) to get an overall average % per industry which we use as an indicator of the level of maturity the industry has in that given category.
This is clearly straight forward, and easy to understand as a methodology, but we know simplicity has a cost and in this case it has to do with not necessarily reflecting things like how much time or resources a company dedicates to ESG (maybe a company has a pretty robust strategy, but has decided not to be a signatory of the initiatives we track, and for that it has a low % which in turn punishes the industry %), or how some topics are more material for certain industries and so it’s expected more companies align with certain initiatives, or if companies in a given sector have dedicated a lot of resources to developing an ESG strategy but have other structural ESG issues which are not properly accounted for like this, or even the simple fact that %s are more affected by individual decisions in some sectors (with less companies) than in others (with more companies).
Having said that, we think we have some interesting conclusions to share, so here we go.
- The most ESG-mature sector in Mexico is Metals & Mining. Energy comes 2nd in ESG Strategy and Consumer Staples comes 2nd in ESG Communication. The least ESG-mature sector in Mexico is Commercial Services Supplies. FIBRAs are 2nd.
2. Banks and Transportation are the sectors with more updated materiality analyses in the market. Food & Beverage and Other Financials are the sectors with less (bar Commercial Services Supplies which is a 2-company sector, and neither company have done one).
3. No company in the market has publicly disclosed KPIs for ALL its material topics, nor objectives or goals for these KPIs.
4. Energy is the only sector where 100% of the companies have an ESG Committee or dedicated team. Metals & Mining comes 2nd with 80% coverage. Capital Goods and Healthcare tie in second to last place (after Commercial Services Supplies) with a 25% coverage.
5. 100% of the companies in Capital Goods, Energy, and Metals & Mining have publicly aligned with SDGs mapping their initiatives to individual goals. Only 27% of FIBRAs have done this exercise so far.
6. There is little alignment with TCFD in Mexico so far. 8 of the 15 sectors we analyzed have 0 companies reporting under TCFD’s framework. Metals & Mining (where we see the highest adoption) only has 20%.
7. This is even worse regarding Science Based Targets. 9 sectors have zero participation.
8. CDP has been somewhat more successful in penetrating the Mexican market. In Metals & Mining 60% of the companies are aligned with this initiative.
9. The UN Global Compact is also relatively more popular here. Energy has 100% participation. FIBRAs, on the other hand, only have 7% participation.
10. Information on corporate governance in Mexico is widely available; not going into the quality of this information, all companies but one have the basics covered. Information on environmental and social initiatives is scarcer, but still relatively available (again, the quality of this information may vary widely).
11. Metals & Mining again comes 1st as far as ESG reports go. Capital Goods is 2nd. FIBRAs is 2nd to last. Commercial Services Supplies is last.
12. On average, 74% of the ESG or integrated reports in Mexico align to GRI properly, 53% of these reports are externally verified, and only 10% include SASB indicators.
We clearly still see a lot of room for improvement in ESG Development in the Mexican market. Some sectors have worked harder and longer on this than others, but we believe eventually most companies will have to catch up as AFOREs (Mexican pension funds) get more serious about ESG integration and global funds increase the pressure on this front. One thing we would say for companies that feel like this will be an additional obligation with limited benefits is this: most companies we work with do find additional benefits in the process of establishing an ESG Strategy and properly communicating with their stakeholders. You will too!
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