PRI Awards 2019 case study: Performance of Latin American Investors

Project overview, objectives and why the research breaks new ground

In August 2017 GovernArt and Vigeo Eiris Chile launched a study that examined the ESG practices of leading Latin American institutional investors. The study looked at the investment strategies of 47 institutional investors across Chile, Peru, Colombia, Brazil, and Mexico, and examined how they took ESG factors into account when making decisions to invest. The comprehensiveness of their reporting on ESG matters was also analysed, as well as the level of disclosure of the rationale behind their responsible investment strategies.

GovernArt’s approach stands out on a number of levels:

• It’s the first ESG research of its kind to focus solely on Latin American institutional investors.
• The data collection process combined external analysis of publicly available material, with direct interviews with the institutional investors themselves.
• For each of the five countries analysed, the report published details of best performance from investors, common SRI strategies in use, as well as the main areas of improvement.

The ESG Study not only shed light on Latin American practices, but also gave information about ESG trends and best practice from institutional investors across the rest of the world: Amundi, Goldman Sachs Asset Management, BlackRock, Yale University, CalPERS, the Norwegian Government Pension Fund, the Canadian Pension fund and Triodos Bank, were all included. The ESG Study also has a Global Context chapter, which details all of the main SRI strategies as well as descriptions of international ESG initiatives (like PRI, UNEP FI, SIF, GSIA), as well as of local initiatives and regulations in the five countries subject to the research.

Report methodology

The methodology consisted of detailed research into Latin American institutional investors’ SRI performance. It used a two-step approach:

The first step looked at the extent to which the investor had integrated ESG into its corporate governance structure. The research focused on the level of education at board level on ESG matters, in particular regarding the long-term ESG strategy to adopt for the organisation.

The second step focused on the level of ESG integration and practices into investment strategy, according to three categories:

• Leadership: the existence, comprehensiveness and ownership of a sustainable and responsible investment policy.
• Implementation: the responsible investment practices and strategies being concretely implemented by the organisation at operational level, and to which asset classes and coverage they were applied.
• Results: The output is a global score on sustainable and responsible investment, which is the result of a rigorous process that allows the generation of meaningful findings.

How the findings have been applied and the wider benefits to investors

The ESG study shed light on SRI strategies and the responsible investment practices of key institutional investors in Latin America. It also provided guidelines on how investors can be more effective in the implementation of their strategies - by providing real examples of responsible investment practices in the region, and beyond.

The report has had two important results. First, it showed local institutional investors how to put in place an effective responsible investment strategy and, second, it showed how far behind local institutional investors are when compared to international best practice. It is hoped that the ESG study will make it much easier for local investors to adopt sustainable practices when it comes to investing in domestic markets.

After the launch of the ESG study, the number of PRI signatories in Latin America increased significantly. In the case of Chile, signatories increased from one in August 2017, to five by the end of April 2019.