Let's start by counting two events that happened recently. At the beginning of the year, Exxon Mobile saw Engine 1, a fund that promotes environmental improvements, at its annual shareholder meeting, and three major fund managers, BlackRock, Vanguard and State Street, promoted that two seats on its board of directors be occupied by independent directors. With this change in the board of directors, the US oil company seeks to promote strategies from its board of directors to address more seriously the climate crisis and the transition to clean energy.
Another similar case was that of the other major oil company, Chevron. In this other oil company, shareholders also voted at their annual meeting for the company to diversify its business towards renewable energy, reduce its own greenhouse gas emissions, and take into account in its plans to reduce the emissions of its customers who consume its products. 1
These two events are examples of a tendency on the part of investors who care about addressing the planet's environmental problems, and which has led to changes in large corporations, mainly in the energy sector, which was once difficult to influence 2. Where previously the usual actors were environmental groups that pressured large companies, others such as Blackrock, the largest fund manager in the world, have now joined their cause, along with new players in the financial field such as Engine 1 3, a recently created fund.
These events have a connection with the growing strength of the millennial generation, which is playing a more prominent role in the economy, hand in hand with greater awareness of the environmental crisis we are facing. Millennials are increasingly pushing for concepts such as environmental and social responsibility to be something that companies and corporations must have if they want to maintain their revenues. 4 These millennials are already entering their maturity as investors in their 30s and 40s, and at the same time they are demanding that their investments have that vision. The markets are responding and large investment funds such as Blackrock or Vanguard have chosen to meet this demand and include it in their own work policies.
As a result, we have a greater demand for green investment, where exchange-traded index funds (ETFs) are established to manage portfolios of shares of companies in the areas of renewable energy, electric cars, better use and savings of water or to reduce pollution.
These ETFs that are listed on the stock market manage billions of dollars, as is the case of Blackrock 5, which has an entire line of investment with a vision of environmental sustainability, mainly in relation to climate change. This is not exclusive to large international funds such as the one mentioned above. In Mexico, in June 2020, the Mexican Stock Exchange launched its S&P/BMV Total Mexico ESG (acronym in English for Environmental, Social and Governance Responsibility) index with 29 companies listed on the Mexican Stock Exchange and that also comply with the ESG standard. 6
On the other hand, there is a silent movement that is currently developing and that could potentially also have great repercussions in the medium and long term in the area of environmental investment activism. This same generational change is what has driven greater digital transformation in the field of investment with digital applications of fintech (investment technologies). Digital trading apps for stocks, bonds, ETFs and other instruments have lowered barriers to entry for people to invest directly in the capital market. Digital investment platforms eliminate financial advisors who charge for their service, along with opening low-cost investment options in various financial instruments.
Some of the results of this are that small investors with very little capital can buy a piece of stock or an ETF that manages shares of companies in the solar energy sector, for a very low cost and with almost zero fees for financial intermediation services.
With this, the universe of people who can participate as investors has been expanding. Some of these international platforms are Robinhood or Etoro. In Mexico, we have our own versions on digital platforms such as Flink 7, GBM plus or Kuspit, where you can invest starting amounts of 30 pesos in different investment options both in Mexico and internationally. 8
Combining both events: greater weight in the investment market of the millennial generation and the facilitation to acquire investment instruments through digital transformation through fintech, we now have a new front to seek to advance an environmental improvement that will tend to grow in the coming years. These same platforms are already promoting a sustainable investment approach for clients. For example, in April of this year, Etoro 9 launched a campaign to celebrate Earth Day by acquiring investment instruments related to sustainability, mainly in relation to climate change.
Exxon and Chevron are part of this process that is just beginning. As more investors are able to enter the market, a movement of the type of responsible consumption, but now applied to investment, can be generated to influence companies and large corporations in this way. The massification of the investment market, by reducing barriers to entry and democratizing investment in the capital market, will expose companies more to this type of pressure to improve on environmental and social issues. Mexican companies seeking to attract or retain investment should increasingly consider this as part of their strategies for permanence and future growth.
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