By Daniela Laurel

Last week, we began with an investigation of how different geographies are engaged in Responsible Investment and Sustainable Finance practice. We kicked off with Europe and North America and today we continue with this series, focusing on Latin America before moving on to Africa and then ending with Asia Pacific. Reiterating an earlier caveat, we cannot generalize how an entire nation or population behaves and simply try our best to spot some cultural trends that stand out as we recognize that society plays a role in shaping Responsible Investment (RI) practices.

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Latin America is seeing tremendous growth and boasts highly developed stock markets such as Mexico’s BMV, Brazil’s B3, the Chilean Santiago Stock Exchange, and the Colombian Stock Exchange. However, the region is not without its problems. Argentina (which nationalized its local pension funds in 2008) and Venezuela experience a lack of investor confidence due to their economic and political instability, producing a less favorable investment environment in general and less developed sustainable finance markets, in particular.

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Mexico is one of the largest economies in the world and yet its sustainability investing market is very nascent, with the first “Green Funds” launched only in 2006. But unlike European funds which target the integration of sustainability in the selection process and try as much as possible to create a “business case” for sustainability, such funds in Mexico began with a philanthropic dimension or a characteristic of donating some of its proceeds to social purposes such as environmental conservation projects and educational scholarships. This donation component is something that goes against many European concepts of fiduciary duty, the idea that an investment manager has a responsibility to return money to investors and not impose her or his own ethical modes of decision making.

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Until today, savings in Mexico are mainly held by local commercial banks, with pension and investment funds accounting for only 8% and 7% of national savings respectively, though the retirement system has undergone quite some restructuring which led to a surge in managed funds. And so, unlike Europe, sustainability investing is thus done by private equity players or the so-called Impact Investors.

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