The Importance of Investing and the Growing Demand for Sustainability
Investing is crucial for maintaining financial stability over the medium to long term, protecting your money and savings from losing value due to macroeconomic factors like inflation. Among the popular investment options are savings accounts with fintech companies offering short-term liquidity, government debt bonds such as Cetes, and variable-yield funds in investment portfolios.
Beyond the importance of investing, a significant portion of the population prioritizes sustainable options that positively impact society and the environment. This demand for both investment and sustainability is met by ESG (Environmental, Social, and Governance) investments.
What are ESG Investments?
According to investment banking firm Actinver, ESG investments are shares in companies that positively impact the environment through resource management, socially through relationships with employees, clients, and communities, or governance through ethical policies and transparency.
ESG investments function similarly to mutual funds, but with the added requirement that companies receiving investment must meet the previously mentioned criteria. Luis Ángel Rodríguez, General Director of Asset Management at BBVA México, explains that constant evaluations are conducted on companies to ensure they meet ESG criteria.
“We assess the behavior of companies in which we have assets to ensure their sustainability and make recommendations if they fail to meet ESG criteria,” says Rodríguez, BBVA México’s director.
Though ESG funds did not have as much impact last year due to increased returns in traditional funds, Rodríguez expects growing popularity among investors for creating positive global and community impact. BBVA has approximately 3,000 million pesos in variable-income instruments, with ESG funds accounting for around 600 million pesos.
Finding an ESG Investment Fund
The National Commission for the Protection and Defense of Financial Services Users (Condusef) advises first evaluating your risk tolerance and long-term financial goals to determine if you can tolerate potential losses during certain investment periods.
In Mexico, financial institutions offering ESG funds include banks like BBVA, Banamex, Santander, and HSBC, as well as investment fund operators such as GBM, Actinver, or BlackRock. Most retirement fund administrators (Afores) also provide ESG investment options for their affiliates.
Most financial institutions offering ESG investments have a minimum investment amount, typically ranging from 1 to 100 pesos initially.
It’s essential to verify that the financial institution you’re considering for an ESG investment genuinely promotes environmental, social, and governance sustainability criteria. Some institutions may use sustainability as a marketing tactic, known as greenwashing. Always check for all necessary licenses and permits from the National Banking and Securities Commission (CNBV) and review user feedback on investment instruments.
Comparing returns, fees, instrument durations, and short-term, medium-term, and long-term liquidity options that align with your financial goals among various banks and investment fund operators is also recommended.
Key Questions and Answers
- What are ESG investments? ESG investments are shares in companies that positively impact the environment, society, and governance.
- Why should I consider ESG investments? ESG investments cater to the growing demand for sustainable options that positively impact society and the environment while maintaining financial stability.
- What should I look for when choosing an ESG investment fund? Verify the financial institution’s commitment to sustainability, check for necessary licenses and permits, review user feedback, and compare returns, fees, durations, and liquidity options.
