- Signatory type: Investment manager
- HQ: Lima, Perú
- Region of operation: Latin America
- AUM: US$10.7bn (as of December 2020)
- Asset classes: Fixed income, equity, real estate, infrastructure, private debt
When did you start looking at responsible investment?
In 2018 we were in the process of designing our new Latin American Equity Fund. The Lava Jato corruption scandal that had affected the economies and markets of the region was in our minds, as and as we defined the investment approach for the new fund, the CIO, Galantino Gallo, and the lead Portfolio Manager, Santiago Arias, who had previous experience with responsible investment, decided that ESG integration would be one of the four pillars of the investment philosophy.
Why did you start exploring responsible investment?
Responsible investment helps us to improve the risk-return profile of our portfolios. After researching and talking to experts, including the PRI, we were fully aware of the benefits. Including ESG into traditional analysis allows us to reduce downside risks from poor corporate governance, environmental accidents, and social factors – are all material issues in Latin America, a region well-known for its institutional challenges, where extractive industries are a significant component of the economy and the stock market. ESG integration can also enhance returns, as it allows us to identify secular trends and new business opportunities. All of this allows us to generate superior returns for our clients, in line with our fiduciary duty.
In this process, we also realised that becoming a responsible investor was consistent with our corporate values. As we consider the global problems humanity faces, we want to be a part of the solution.
What were the initial steps you took to get started in responsible investment? Which stakeholders, internal and external, were involved? What additional steps have followed as your approach has matured?
The first step was to build the business case for responsible investment for the Asset Management
Committee. Supported by the Committee, the Head of Asset Management, and the CEO of Credicorp Capital, in 2019, ESG incorporation became a strategic initiative aligned to our corporate purpose.
The CIO led a task force to conduct a deeper analysis of how the global leading practitioners incorporated responsible investment into their operations and what resources were needed. During a trip to Europe, Galantino visited several asset managers with extensive experience in the field. He also met with PRI executives. With these insights, the task force outlined our general approach to incorporate ESG into all our processes.
Instead of developing a separate team of ESG analysts, we would build the internal capacity of our investment team, so that they could integrate ESG into their mainstream analysis and operations. We created a new position exclusively dedicated to responsible investment, which was filled in February 2020.
Our objectives in the first year were:
- publishing our Responsible Investment Policy;
- joining the PRI;
- training the investment team.
At what point did you decide to sign the Principles for Responsible Investment, and what were the key motivations for doing so? In what ways have PRI support, resources or signatory status been useful along the way?
We got familiar with the PRI operations when Eduardo Atehortua, Head of Latin America ex-Brazil, reached out to us in 2018. The benefits of becoming a signatory were also highlighted by the other asset managers visited by the CIO in 2019. Our key motivations to join the network were the access to resources and experts with both a global perspective and a growing presence in Latin America, which would allow us to mainstream responsible investment into our various regional operations simultaneously.
Before joining the PRI, we decided to start building internal capacity and resources, to prepare ourselves for the commitment. We became signatories in June 2020, after having a dedicated ESG professional join the team and publishing our Responsible Investment Policy .
As a signatory, we have gained access to a valuable body of knowledge and experts willing to share their experience. By joining a well-recognised global organization, we showcase our commitment to responsible investment to our clients and stakeholders.
What challenges (foreseen and unforeseen) did you encounter getting started in responsible investment?
There are several foreseen challenges in implementing a responsible investment approach:
- building a shared understanding of what responsible investment is for the organisation;
- training to identify the best methodologies;
- availability of ESG data and information to analyse issuers;
- resources to access all of the above, especially time, as we are designing and implementing new policies and process while still conducting our day-to-day operations.
An unforeseen challenge was forecasting how long it would take us to complete the diverse projects to improve our ESG practices. In sum, responsible investment is a continuous process of learning and advancing our capabilities and tools.
What do you know now that you would like to have known when getting started? e.g. What would advise others to consider when starting out?
After a year as a PRI signatory, we highlight three lessons.
- Responsible investment is a process of learning by doing. There is no one-size-fits-all way to implement the approach. It is a road of continuous learning. We may benefit from the experiece of others, but it is necessary to adapt that wisdom to our context, considering our capacities, resources, and the state of our markets.
- Make the most of the collaboration spaces with other signatories from the country and regional networks. Together we learn more, and we can better face the challenges of our industry (for instance, information limitations).
- Aim for progress rather than perfection. The road may seem overwhelming sometimes, but we need to find joy in the short-term results as we build our way to high ambitions for the medium and long term.
What positive results – e.g. for your organisation, your clients, your beneficiaries – has your responsible investment approach had?
While it has not been long since we began formalising our responsible investing practices, we have started to see many positive effects.
The approach has allowed us to improve our analysis, taking a more comprehensive perspective of risks and opportunities. Our team is better prepared to consider trends and changes that inform our investment theses. Also, having an ongoing conversation with the team around responsible investing and sustainability allows us to align our personal and corporate values. This alignment keeps us motivated and engaged, which is critical for attracting and retaining professional talent in the asset management industry.
In terms of benefits for our clients, we have seen very positive results in our Latin American equity strategy, where ESG integration has been one of its pillars since the fund’s creation in 2018. In our fixed income strategies, the focus on governance issues has proven crucial to avoid downside risks.
We continue to work to extend the application of this approach into the other asset classes that we manage.
This series tells signatories’ stories of getting started in responsible investment, looking at why they started and offering tips for doing so that others can learn from.