Integration of ESG risks, a challenge for investments

The biggest challenge to integrate the focus on environmental, social and corporate governance (ESG) in investments is the lack of open information and transparency that companies are disclosing to the market, despite the fact that this is a key factor and that is gaining relevance for decision-making, said Jaspreet Duhra, Global Head of ESG Indices at S&P Indices.

During her participation in the 2021 Digital Meeting, organized by the Mexican Association of Retirement Fund Administrators (Amafore), the specialist recognized that although the disclosure of information continues to be a challenge, a change is already beginning to be noticed in the reports of companies, this when compared to the last 20 years, since they have been developing indexes with an ESG focus.

“Maybe it is not yet in the public domain, we began to invite companies to provide this information and the more questions we ask the more we will close the gap,” he said.

In the same forum, Margaret Dorn, senior director of ESG for North America at S&P Dow Jones, highlighted that in the case of Mexico the challenge is not different from that observed in other countries.

“The challenges that Mexico faces are very similar to those of other countries and regions that are trying to integrate ESG into the core of their investment frameworks. But particularly, a challenge for investment managers is analyzing a lot of information in a short time. It’s like drinking water from a high-pressure hose that keeps changing direction, ”explained Dorn.

He stressed that the country is beginning to notice a greater need for investors to receive information from companies that is more digestible and reliable.

He even recalled that by early 2022, the Retirement Fund Administrators (Afores) have the mandate to incorporate environmental, social and corporate governance considerations in all their investment strategies. “With this new mandate comes a challenge for other institutions to integrate it into their investment strategies,” he added.

The specialists commented that ESG data is a tool that helps investors determine how well equipped companies are to face the risks that climate change implies in their businesses.

They recommended that investors not only depend on the information available or that comes by itself from the companies, but they should also investigate further to stay one step ahead.

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