Responsible Investing in Mexican AFOREs

This week, we attended a webinar on Responsible Investing organized by the AMAFORE (the association of Mexican pension funds, or AFOREs). There, a group of representatives of pension funds, regulators, corporates, and other organizations (like the UN’s PRI) participated in several panels discussing how is responsible investing evolving in the country, what are the main challenges, shared success stories, among other things.

Here are our Top 5 Highlights from the event:

1. 38% of the AFOREs’ investments today already consider ESG criteria. This number is higher than what we thought initially it would be. Clearly, there are different levels of ESG integration that can be done, but we think this shows just how much these topics have already penetrated the Mexican financial markets.
2. There is a new sub-committee within the AMAFORE in charge of responsible investment practices. We believe this will boost ESG integration across all AFOREs over time. It will also probably help homologate what AFOREs do in terms of ESG integration.
3. The regulation for ESG integration in AFOREs (which was approved last year, and will go into full force in 2022) requires them to:
   • Publicly disclose whether they integrate ESG factors in their investment process and how they do it.
   • Use their influence to promote ESG integration in the entities in which they invest.
   • The Risk Committee must:
     • Consider ESG factors and additional ESG integration methodologies (independent from rating agencies).
     • Have a risk management and exposure policy which covers ESG factors.
   • The Investment Committee must:
     • Define an investment policy which considers ESG factors.
     • Measure the ESG performance of the vehicles in which they invest (through ratings, rankings, indices, KPIs, etc.).
4. In Europe, a survey from PwC revealed 78% of the public pension funds and 89% of the private pension funds intend to stop investing in non-ESG products over the next 24 months.
5. There are already 75 signatories of the UN’s PRI in LatAm. Together, they manage over US$470bn.

It is clear that there is still a lot of things to do in Mexico on the sustainability arena. We are happy to see that this topic has gained so much visibility, and that there are so many entities involved in making this structural change gain force here. We look forward to keep contributing to this movement by helping both investors and corporates adapt and improve their sustainability strategies.

I hope you found this interesting. As usual, if there is anything we can help you with, please reach out.

Best,

Marimar

Partner, Miranda ESG