The Past, Present and Future of ESG: The Transcript

Our panellists were:

– Gabriela Herculano, CEO & Co-Founder, iClima, UK
– Claudia Álvarez Troncoso, Managing Partner at Etikamente G|E|C, Dominican Republic
– Nicole Phinopoulou, Lawyer & Legal Advisor, Cyprus

Introductory Remarks

Mateo Jarrin Cuvi: Welcome everyone to AGRC’s latest webinar. This is part of our webinar series which we do once every two months. We’d like to do it more often so we’re going to try to ramp that up for everyone.

Today we’re discussing ESG issue—environmental, sustainability or social, and governance—with three esteemed guests who come from all over the world. I will let them introduce themselves in a little bit after I get through some of the admin issues that I’d like to discuss. If you guys have any questions as you’re listening to our panellists, make sure to drop the question in the chat or in the Q&A and I will try to incorporate those questions into the discussion. I will be moderating the discussion on behalf of AGRC. Also, we are recording the webinar so hopefully we’ll have a transcript and recording on YouTube and elsewhere within the next two weeks give or take, so you can stay tuned for that too.

So, without further ado, I’m going to ask Nicole to please introduce herself first and then I’ll we’ll jump into our webinar for which we have five good questions to discuss among our panellists.

Nicole Phinopoulou: Thank you Mateo. Good afternoon. Hello Gabriela, hello Claudia. The good thing of the Internet is we are all connected. Hello and good afternoon to all our audience. My name is Nicole Phinopoulou, I’m a lawyer, banking and financial services specialized, and during the last eight years, I’m fully involved in ESG, sustainability and sustainable finance initiatives. Personally, I’m a full supporter of the idea and trainings and hopefully we can support and give some insights. If you want, we can connect on LinkedIn or answer any questions or any queries, hopefully we can help in this webinar.

Gabriela Herculano: Good afternoon. I am calling from London, England. I am CEO and co-founder of iClima Earth, a green fintech. We started this venture about two years ago very much motivated by the idea that the products in the financial space and ETFs, which are exchange-traded funds, were not telling the relevant story of how to mitigate climate change and innovation, so that’s how we are part of this ESG trend. We don’t use ESG scorecards, we’ll get into that in much more detail later, but we were very much motivated by the idea that we need to start applying and quantifying and relying on tangible metrics as opposed to black boxes. I think it’s one of the main things that I would like to discuss in more detail today. So, a final point is about what we do; we have developed equity benchmarks, again because we thought that the whole industry was not telling the story that we think is very relevant. So, we developed these benchmarks ourselves, they are published and calculated by Solactive, a very reputable German benchmark administrator, and then with that we vertically integrated and we launched the exchange-traded funds that track our own equity benchmarks. We launched the first two funds, the first one is a decarbonization enablers ETF, it’s a UCITS, which means that it’s suitable for European investors and we launched that in December last year, we’re live in quite a few exchanges across Europe. And then the second fund tells the story of the decentralization of our grid, local energy that’s being produced at the point of consumption. Those of you lucky enough to be Cyprus really know what that means, right? To use that solar rooftop for your own electricity needs, to satisfy your own needs with what is called behind the meter generation at the point of consumption. So that was our second launch in Europe and then we launched in July both funds at the New York stock exchange, so we’re now also live in the U.S. So, I have some observations in terms of where we are on the ESG space in Europe and where we are in the US and, spoiler alert, there’s a striking gap, which is something that I think we’ll cover in more detail later as well.

Claudia Alvarez Troncoso: Hello everybody. Good morning for me, I’m on the other side of the planet, which is the Caribbean, and good afternoon to all of you on the European side. My name is Claudia Alvarez, I am a lawyer by a profession but more than 20 years on the compliance and sustainability side. I come from the social, corporate governance and ethics part of ESG. I’m also a member of the Board for our Dominican chapter for Transparency International, and I also work with our government with regulations and norms that need to be updated or new ones that need to be emitted to be aligned with all these aspects of international ESG norms. And from the anti-corruption side, which is something that I will speak about, how ESG is necessary to move on these issues also for better transparency. So, I’m coming from that side of ESG.

What is ESG? What does it entail? How did it come to the attention of today’s business room?

Gabriela Herculano: Well, we’ve been we’ve been looking at the space for quite some time, but I have to say that those that are real movers and shakers, they’ve been doing this for really a long time, 15 years plus, so in a way it kind of feels like it’s a new development but there’s been a lot of advocates that for a very long time since the 90s have been proposing a way for us to measure sustainability, have a way to quantify or hold companies accountable, have very clear metrics to be able to vet the companies that are doing well and those that are not doing enough. So, it’s kind of like the idea of the carrot and the stick.

So, it has evolved across many years, very much as a tool I think to make companies accountable for their actions: Do you have water contamination issues, how are you treating your employees, how transparent are you, what about climate change related emission figures. So, a comprehensive set of indicators that would allow us to look at companies, not just from the pure financial metrics of revenue, EBIDTA, margins, net income, growth, profitability, that endless pursuit of more of more free cash flow generation. How you’re doing that matters in a great deal and then came the idea, my business school in particular, I went to Wharton, we’re very big believers in that there is that extra return that comes from companies that are very strong on ESG for a variety of different reasons. But the general idea is that you’re better managed, that you have better principles and therefore you’re more sustainable and you will produce higher cash flow for a longer period and lower risks. So, the idea of using ESG also as a proxy for delivery risk on desirable outcomes. So, the whole industry developed from kind of like a weighted average of all these different goals and aspirations and tools, and then more recently in the last three or four years, a plethora of different data providers started attempting to quantify and have a way to compare companies across different industries. And that’s how this ESG scorecard phenomena has developed and then products, by products I mean financial products, funds, were built with the idea of, “Oh, let me represent the companies that score really high according to data provider A, B or C,” and that’s I think very much where we are right now on the ESG bringing the past to the present, and the criticisms that we’re as an industry hearing rightly so we’ll get into the present later on. But I think it’s been this evolution of ESG as a final product but also as a tool, as an end and as a means, and that’s why it’s a very powerful notion because it’s both, it’s the means to an end and it’s the end in itself, but we have some issues to fix, so we’ll get into that later.

Nicole Phinopoulou: I would like to complete on what Gabriela mentioned. Exactly, ESG is a notion, it’s not something new. It hasn’t always been around, at least very actively, but now it’s becoming more active especially when people and when governments are more involved after the UN 2030 Agreement in Paris. And there’s also the 17 sustainable development goals. But I will take a step further back from what Gabriela already said, it’s because must sort of look at the jurisdiction where each has evolved because we don’t have to forget that ESG stands for environmental, social, governance, which is the factors, so it’s factors and criteria, that are used to measure sustainability, it’s a bigger umbrella. ESG is the good way and it’s one of the tools, and I will agree totally with Gabriela, it’s part of the tools that you must consider as each government and each business to come across and how to have on its own a sustainability development goal, doesn’t mean you have to have the 17 under the UN 2030 but it’s up to you internally risk management governance. Not risk management only for the financial, the good thing with financial is because at least it started at EU level it started across but at EU level because you have now 16 or 17 member states, there is a uniform regulation that at least asks the asset manager who have the products, who have the money in a way, to consider this, to include it in their sustainability reports and they have to make reports out of this. So, it’s a way to make them think about ESG and to consider them when assessing towards their clients and towards where they invest funds and where funds are invested. And hopefully it doesn’t mean I agree again with Gabriela and I think Claudia may also, it doesn’t mean that because it’s water contamination, it’s not because it’s climate change, it’s 17 different goals, and each business has to consider where they are investing, where they’re doing impactful investments, to mean something, and what it means to themselves, and what it means to their business, their organization. It’s both an internal and external exercise for all businesses and they have them, it’s okay, we have a way to go, but it’s there, it’s here and it will stay. So, people must understand what ESG means and that they are factors and tools, there’s no tick the box, there’s no IFRS standards, there’s no GRI standards, so it’s about brains. It’s about people thinking about the future and the future generations, and it’s not charity, it’s not only charity, it’s part of it, charity is only part of it.

Claudia Alvarez Troncoso: As Gabriela said, it it’s like different issues that were isolated and now they’re being seen as one thing. And I think Nicole hit it right in the bull’s eye, this is something that are risk factors to be measured, these are tools that you will need to use in your company for enterprise risk measurements, and to be aware of what’s going on, not only what you’re doing, in what area your company is transacting, third parties also. As this will be maturing from every year on, this is something that will not go away as Nicole said. It has also been something that different areas, control departments or control areas in different companies, especially those that are in regulated aspects of the business and have been dealing with in one way or another, be it from ABC or anti-bribery corruption, and then risk manage for anything, in AML, regulatory compliance or whatever now, ESG is in this aspect also with the risk measurements. So, it’s not going away, and I think that it’s been in the last two or three years, it’s been an issue that’s been arising because of all that’s been going on in the world due to human rights issues. I think that’s one of the things that have been accelerating ESG and of course the environment and how it’s getting worse every year and the need for all governments in all countries to be aware of it and, as Nicole said, it’s not something that is just go out and like clean the oceans or plant a tree or donations or charity or whatever, it’s way more than that. Sustainability for the company, for everything that surrounds the company, all of the chain that goes in the business and for the people that are inside the company, for the all the third parties that the companies touch, and of course for future generations to have the same or better future and resources that we have now because this is a finite and we need to work towards it being an infinite a so that everyone can have an access to it. And of course, the financial aspect is important, and I think it’s important that the financial banking and investments have become aware of it and have been pushing it because it’s not all just a return for the investments or return for the shareholder, you must return to the planet, to the society, so we need to learn about all of this. And I think that Latin America has ways to go still, we don’t have any regulations or norms regarding ESG, we have norms regarding regulatory compliance in certain aspects and we have AML and we have aspects for anti-bribery and corruption, not all of our countries, but still ESG needs to be something of more importance of an issue with human rights, with diversity, with integrity, and of course the corporate governance needs to be more mature. We have some little steps that have been taken in Latin American countries but still ways to go.

What is the top reason for a company to consider ESG?

Nicole Phinopoulou: Governance. For me the first is governance. It helps you see the risk management in governance and to assess the whole situation, where are you going. And when I’m talking about governance, I’m not talking of compliance. Not only the regulation that exists, not only the fact that you must do some things because you must do them because of law, because of statutory issues. It’s a mindset, it’s ethical. Governance comes down to ethics, so it’s about the people, it’s about how they think and how you go forward. Because you may do something today that is right but tomorrow something changes, so you must have the governance, the mentality to be able to adapt to the change. So personally, as one thing for me, it’s governance and everything adds up. Even finance is governance, it’s not only corporate governance in the meaning of compliance, it’s generally the concept of governance personally for me.

Gabriela Herculano: I hear Nicole but for us is environmental. Climate change supersedes everything and it has to be E because whether you are doing less harm looking at your own carbon footprint and the way you produce something or the way you provide a service, you have a carbon footprint, you use resources that are finite that belong to the planet and you need to be accountable for that, or whether you provide a solution, which is the companies that we’re representing, the companies that are really providing a way for us to move away from the business as usual, which is fossil fuel based and high emissions but low emissions or even zero emissions. If you are providing a solution, well then let’s quantify how valuable and relevant that solution is because there is a race, we’re running out of time and it’s very important that we keep the eye on the ball on what is relevant. So, whether it’s because you’re problem-solving great things or whether you’re trying to do less harm so you’re the user of the solutions, we need tangible quantifiable metrics on environmental points.

Claudia Alvarez Troncoso: My take is a combination, but I come from the S and the G sides of the ESG. I totally think that, as Nicole said, ethics is a very important thing and all of it is a mindset, and I think that’s going to drive every other decision that’s being made by the companies. And of course, the support needed, and the pressure needed by the civil society and the society to make governments know what the necessary things are to do and for the changes to be made and for the loss to be emitted, that is important. I think that ethics and the way of the mindset, of course, reputation is very big on this and that will drive also into the financial side of the business. It makes total financial sense to go into using ESG metrics, it’s going to be something that will attract more business, it’s going to be more ethical business, more responsible business and, of course, sustainable in the future. It’s not a no-brainer, of course you must learn about this, you must change your mindset and see it, not only that you’re going to win X amount of money but what other intangible return you’re going to get and how you’re going to impact lives and that’s I think the best thing of all of this.

How has the COVID 19 pandemic impacted ESG and ESG practices these days?

Claudia Alvarez Troncoso: Sure, I think that, just as we have mentioned in my last answer, it just makes financial sense. And the COVID pandemic has made all the companies around the world have to pivot and the way that they do business. So, we are now using more Internet, we’re working from home or from a distance, the chain of supplies has changed and we’re going to see the impact starting at the end of this year and next year. So, we must think that there are external risks that we have no control over and that we have no foresight on this issue, specifically on the pandemic of COVID. No one was looking at it even though the World Economic Forum did have that risk as a possibility, but no one was really in looking on that side. So, to be sustainable, COVID has showed us that there are different ways to do business and that we must be more in tune with all the risks going on the social aspects especially. COVID has told us that we are vulnerable and that our businesses are vulnerable too and that we need to listen to our employees, we need to listen to our consumers, that there are human rights aspects that have been impacted too with health, of course, financial freedom, the economies of lots of people and countries have gone into troubles. The freedom to go outside, to move from one space to another or from one country to another, and so I think that’s a big hit that COVID has taught us, and this is the planet that we live in and then we must take care of it if we’re going to go also to the part of the environment. I’m sure Gabriela is going to speak on that more. So, I think that aspect of to be in tune, that we are diverse, that we need to learn to work with another, to live with one another even though we have different thoughts and ways of thinking. So, I think that’s what COVID has brought on the ESG side.

Gabriela Herculano: COVID was a very dramatic example for the deniers that are still out there and, for example, in the US there are quite a few of those, of how this is no doubt a man-made problem. Because we stopped our economies from running business as usual and we stopped the coal fire power plants, we stopped the natural gas fire power plants, because we closed the industries and we closed the malls, and that demand for energy just suddenly disappeared. And we saw what happened. Greenhouse gas emissions dropped for a short period of time, but they drop materially so that’s man-made. So, let’s not mix carbon dioxide with carbon monoxide but also pollution, which is not a greenhouse gas but carbon monoxide. Even China, Beijing, you’ve seen the pictures of the beautiful blue skies right, so that I think was a shocking striking image to all of us, the seven billion people on the planet that, my gosh, we’re really in this race to continue to produce things in a very unsustainable way and we’re destroying the planet in the process. So, I think that stopping that continuous chase for higher GDP made us see that we’re damaging the planet, it was so in front of us. We could see images of parks in Thailand that suddenly within five or six months without having people go there, the plastic waste went away, vegetation came back to life.

I mean we’re destroying the planet and I think COVID showed to us, but it also showed to Claudia’s point that there are alternatives that are there for us to use to the benefit of a higher kind of lifestyle, improvements, and to the benefit of the planet. And telepresence is one of them. We follow the findings of Project Drawdown, telepresence is a solution, the study was done between 2014 and 2017 and back then we’re like what is telepresence, what are they talking about. It’s like you know the Jetsons, the future of the robots, it sounded so impossible, how are we to communicate, no, I have to jump on a plane and shake people’s hands. Well, guess what? No because, you know, we launched the business without ever meeting our partners in the U.S. and in Europe, we just recently met them in person for the first time and we got a lot of stuff done. We have almost 200 million under management all through Zoom. So, that also is evidence that there are many solutions that are out there, and we need to look at what is relevant, scale them up and do better and use the ESG metrics as a way for us to have that roadmap. This is where we are, we can quantify, we can analyse what we’re doing that is right, what we’re doing that is wrong, and have a very clear set of goals for how to get there and use ESG as that road map. I think in a way as Winston Churchill said and when you live in England you have to quote Churchill every day, “Don’t ever let a crisis go to waste.” This was of course a pandemic, a very sad thing, thousands of people died, I grew up in Brazil, it was hard to watch the news for all the loss of life, but let’s learn out of this. And I think we can see that; we can really make an impact on the planet if we just try hard and ESG gives us the tools.

Nicole Phinopoulou: Personally, I’m very happy to share exactly what Claudia and what Gabriela have shared. Just another perspective from my side is because, okay, I’m happy to be a financial banking lawyer in an EU country and having everything to be developed under the European Green Deal and everything. Though, still as to Cyprus, because I know people are from Cyprus, we’re still a small jurisdiction and unfortunately, we’re doing baby steps. We may be doing ESG and without realizing it people and big business are doing ESG in a different way but without realizing it they’re getting there. The pandemic changed the way people were doing, the business is doing, they find solutions. And what I come down is not about ESG, it’s about wanting to find viable solutions that they may interest to everybody, that have impactful outcome and that means something. I mean, you must find the solution in a good way. I mean, people I think with the pandemic they realize that personally it’s like, okay, we’re in a war zone if you think about. So, we must find the solutions and I agree with Gabriela when she said, and Gabriela the good thing and this is what I like about her, in her industry she’s ahead, I mean in the industry she is, they’re only a bit ahead, you must find solutions. The good thing because the environment and pandemic show us exactly starting from the climate and the environment is number one, because it’s where we all live. So, you must protect the environment, the environment is everything, it’s not only the climate, it’s everything. And then also you must see how you will get out of this to do investments, to find people come around, and to work around having a solution. So, it’s good thing that you have many jurisdictions getting involved and sharing views, knowing people, what they did, how they are doing it, how they’re addressing it. It doesn’t mean that because London is doing it Cyprus will do it the same, or it’s like it’s done in the US but at least you get the ideas, and you can exchange views.

And the good thing now with the disruption of what’s happening with the Internet, you come closer to people, you find a way. I agree exactly what Gabriela said before, you must get into a plane and go and meet people and everything. See now? We are four people across the globe and we’re sharing ideas and views and it’s here. So, ESG through the pandemic, a lot of people may have not understood that they were applying ESG, so it’s the culture, it’s the governance and you need commitment in everything, even to get solutions, I mean to get the platforms, get the fintech, the sustainable funds, we need solutions. So, I think we’re getting there but we can discuss it later, this is what’s coming up and what’s already in place, step by step we will get there.

How is ESG being handled in your jurisdiction? Is there anything that is happening in your jurisdiction that might be of interest to the greater global ESG world?

Nicole Phinopoulou: After the pandemic, as part of the European Union, we are lucky enough to be part of the Economic Resilience Initiative Fund, which is funding coming from Europe to support side effects of the pandemic in the economy. One of the major things that we must address now as Cyprus and EU member states is to update and enhance some of our laws and regulations and to get people to be involved more in ESG factors. Funding must follow and add the pieces of the puzzle. As Cyprus though because we have, especially for finance, I was talking about finance being a financial lawyer, we’re ahead on many things that is on the finance side. We have applied, for example, the sustainable finance and the disclosures regulations, we started from the SFDR, the sustainable finance disclosure regulations, which is applied now from 2021. One of our major regulators, which is the Cyprus Securities and Exchange Commission (CySEC), which I happen to be part of it, has published a guidance on this and the investment fund managers must come out and they must address ESG factors about the asset management, which is the finance. So, there are steps, and they are moving. So, I’m not that hardcore in terms of regulatory compliance because there’s money, there are costs, but it gives you guidance and we have the guidance. There’s a lot of way to go because of the Resilience Fund because we must add up some of the laws, but I think every jurisdiction, every country must do this. Being part of the European Union gives a bigger picture which gives you a bigger understanding how to aim to address the UN 2030 agenda, which the European Union has come first to address under the European Green Deal. So, the big industries and smaller industries are coming out and looking for solutions like fintech, like other ways on how to get involved in their business, in their sustainability business plan, also circular economy, it’s one big part as a model following that and it’s getting there. I mean, we have in our jurisdiction, we are not London, we are not the US, but we are in a good way, and we are going there. And I think the regulators are on board on this, starting first from CySEC, which is the same as the SEC in the US and the FSA in London. So, money talks and they must go ahead if they want to stay in the business, in the industry. Not like a carrot and a stick but it’s there. They’re there, they’re very into the taxonomy regulation, the disclosure regulation, the non-financial matrix must have matrix and to be able to quantify where investments are going, they must consider. So, I believe we’re in a good way. We’re a little behind than the US and the UK, but we’re in a good way, we’re on a good track.

Gabriela Herculano: A few very important points. One is that I think the EU is leading on the ESG space, there is no doubt about that. ESG is broadening, that’s a very first point that I would like to highlight. ESG is broadening. We have our indices licensed in Asia, there is interest there. It’s not a concept that China has embraced, China is all about the innovation part of things, a bit sceptical overall on ESG, and the US is catching up with the new administration, so that I think it’s the big picture. Europe is leading.

Nicole will be happy to hear that our two funds are article 9 funds so in the UK and in Europe. Unfortunately, Brexit took place. EU is on the map no doubt. So, the funds must be very specific about whether they have a tangible environmental impact. So, this is the regulator saying that we have a problem let’s address it, the problem is green washing, we have an issue with taxonomy, even amongst us who are big believers, use ESG and are part of the industry, we don’t sometimes use the same terms, the same definitions. So, we need to address that. These ESG scorecards are something that must be addressed because it’s like a credit rating, there’s consensus on how those metrics need to be quantified, the same thing will eventually have to evolve on the ESG scorecards. If you speak to the data providers, and we spoke to them all, ISS, Sustainalytics, MSCI, Arabesque, Trucost, all of them with a lot of fantastic minds doing a lot of work, but if you ask to see, we always ask to see Tesla’s ratings, there’s no consensus, they’re literally all over the map. So, we need to address that, and the regulator is on top of it, saying we need to do better. The consumers and the investors deserve better, so tidying the language and making sure that we elevate the funds, we must state your purpose, state your metric, state your impact, how do you go about doing things or do you negatively screen. So broadly speaking when we think about ESG’s in terms of funds, you talk about funds that exclude and focus on innovation, us, that’s exactly what we do. We completely exclude, there’s no E&P, absolutely no tolerance for coal fire power plants. So, we exclude these activities, and we look for the companies that are innovating, mitigating climate change. And you have on the other side of the spectrum, the funds that include and hope to transform. That’s the carrot and the stick, the shaming if you will, so “Oh, look here, Amazon, Google, Microsoft, the great corporate citizens, they score so high, look at the laggers, let’s hope they do better.” There are merits in that approach, there’s a lot of great people trying to bring more change with that kind of approach. So, what the regulators want is more transparency, we need to be more specific about what we need and what we’re all doing and what we’re bringing to market.

My final point is the US following suit, as you see in June, they closed this public hearing where they went to all stockholders and asked them what your views on disclosures are, what are your views on climate change indicators, or the companies having to report more metrics like EU taxonomy that companies will have to report accordingly. So, the US is looking to what is being done in Europe and engaging the local players in the US and as we know the US is a very big market, whatever they do the world hears, so I think we’re on the right track.

Claudia Alvarez Troncoso: I think that on the governance side, Latin America is way behind. Maybe some countries do have some incentives, but with the whole ESG having the norms and laws that makes these companies have metrics and to quantify with the ESG scorecard, no. They would have some aspects, all very much concentrated on issues for corruption, which is a main issue for all Latin America and all the focus is going there, narcotics, AML, bribery, so that’s I think the focus of many of the companies and of the governments. And of course, some kinds of norms for the environmental side but it’s not obligatory unless you are in a company or a corporation that deals and directly impacts the environment like tourism, but the norms and the laws are not there and that is a big issue. There are regulated companies on the regulated side that may have a regulator that will be asking some issues, but still mainly on the governance side, not the social part, but maybe only on the labour side, which of course the labour code needs to be updated, but the environmental side is very much lacking.

There needs to be more cross-wide regulations for all companies, even though if they’re not regulated, so we need that especially if you’re going to have to do business, that’s maybe an incentive or a way to do business with the government directly, that may be one way on it and other incentives for these companies to be more innovative. That doesn’t mean that there are not entrepreneurs and companies making innovation on these issues, that have this mindset, especially the young people going into business and entrepreneurship, so they know about this and they’re very socially adept that they’re trying to force that. Of course, the civil society coming from the S side of ESG, trying to push that and, of course, to protect the environment. But we are in Latin America, as I see it, very dispersed and we need to be more concentrated and unified, follow maybe what the EU has done and then have those laws and norms that will make us go forward on this aspect. So that’s what I see on the Latin American side.

Where do you see ESG heading towards during the next decade or so?

Claudia Alvarez Troncoso: As was said by Nicole at the beginning of this presentation, this is not going away, so you must deal with it. It’s a metric and how you’re going to quantify all this, take it and lead with it, it totally makes business sense to do it financially, of course. And the companies that will be truly resilient in the coming years are those that will rethink their business models. This is a way to do it, this is a beginning of a map to do that, to think of this in a more sustainable way, in a more ample view of all of this, and bring all the experiences into it. Think for the future, not only what you’re going to gain out financially, to be a better corporate citizen, how you’re going to impact the lives of everyone in the whole supply chain, in society, think of that integrated from the beginning of the process, how you’re going to think about that service or that product that you’re going to have and how it’s going to impact the climate, and the rising levels of social consciousness is going to pull this all the way through, and it’s going to come up and it’s going to have its consequences, and you’re going to find yourself if you don’t have ESG on your mindset, you’re going to find yourself without a business. Of course, if a country doesn’t see this in the future, it’s going to lag and, in the future, I see consequences as we have maybe international sanctions or whatever that could be a way for making it a more integral or more competitive in a global way of seeing the things. Maybe that’s going to come through and, of course, if you have international investors and you don’t have ESG and you don’t have those metrics and you don’t have those reports, you’re not going to have those investments of course, and it’s going to cost you way much to have access to international funding.

Nicole Phinopoulou: I really believe this is something that we will see grow more rapidly now because it is not something new but unfortunately it became new for some areas and some jurisdictions. Also, what I can see, and we have seen happening in big companies like asset managers, BlackRock or even ExxonMobil, you will see the bigger investors, they will not just let it go, they will investigate you, they will review, they will know all the policies, so ESG is a general thing. So, each organization must see it, look at governance, and see all the ESGs, and decide where they want to go, how they want to invest, I’m saying everything.

Also, the other thing I totally agree with Claudia is that it also depends on the governments, there will be a competition between the governments, this depends on less advanced or developed countries but usually you may see examples, I’ve seen from governments that you don’t expect. For example, in Internet level things, I have seen ESG ahead from India, I didn’t believe that for the Internet. You see Thailand, you see Maldives, for example. I have worked on funds on the environmental side, they’re independent but interconnected. It’s not going away, it’s a big thing.

I agree with Claudia that it might not be now, but sanctions are coming, and they will not come in the two years, probably they will come in the decades. But then also is the competition between the jurisdictions. Sanctions is the carrot and the stick. I don’t believe that you must wait for sanctions to do something, but if it’s something that must be done, it must be done. So, it depends on each jurisdiction and each government and how they want to address each thing. That’s why I’m coming back, it’s different if you see Latin America and the more general US America, and then it’s different in South Africa and Asia, or you see China that goes for innovation, and you see other jurisdictions go for environment. Still, they are all in the ESG so it’s there. You just must identify, and the funding is a big thing. So, I have to see the whole picture and to find solutions, and I agree with both Gabriela and Claudia, but you need to segregate each thing and then to have a very good executive committee or a management team to see the whole picture of a company, not to be isolated, but the bigger picture has to be unified and identified where they are and where they want to go and then add the puzzle.

Gabriela Herculano: So ESG is broadening. We have a conviction on that, so three to five years from now it’s going to be universal. We also have conviction on that now again, in the financial sector in particular, when you look at products, ESG is kind of used to describe a theme. So, you have all sorts of funds and then you have the ESG funds as if they were just a fraction of all existing funds. In five years, ESG will permeate everything; all the funds will have to have that ESG metric. We think that the direction of travel is clear in the US following the lead of the EU, we’re on the right path, so that means that no investor, no company, no fund will be able to put something forward that does not have the sustainability, the ESG, all those very relevant frameworks incorporated. So, we’re hopeful the future is bright, and I think that companies that are heavy emitters, companies that have very poor governance, they will be under tremendous scrutiny, rightly so. There will be destruction, which climate change is part of that, there will be tremendous opportunities, there are abundant risks everywhere, and there will be a lot of losers, there will be companies that will not make it, rightly so. That’s capital markets being a source of change and being a source of good, you have terrible sustainability standards, a very bad product that the world really doesn’t need any more, you either reinvent yourself or you’re going to go belly up. As we’ve seen happen from the likes of Kodak or Blockbuster, companies that had very solid business models that disappeared because the world evolved. So, that’s something that we talk to our investors a lot, be very mindful of all the risks. And this ESG screening is extremely relevant to look for risks in all the companies that some people associate with fossil fuel, that some investors continue to find interesting. We’re going through a rotation this year, so a lot of growth names have sold off, a lot of best performing stocks or some exploration and production companies like Marathon Oil is one of the best performing stocks in the S&P 500. I question that strategy, I can understand why we’re going through this rotation, but if you’re going down that path, there are so many risks. So, again, ESG is here to stay and will be used as a tool more and more, and then companies will be scrutinized under those lenses, rightly so, so we’re hopeful.

Mateo Jarrin Cuvi: Excellent, thank you very much Gabriela. One thing that just kind of struck me right now is we looked at ESG from the company’s perspective and we didn’t really touch upon it from a consumer or customer perspective in terms of why it is important to the consumer, to the current kind of young professionals who are looking to buy things or join companies or to invest in certain companies. So, that could be a topic for a whole other webinar where you could look at it from that perspective too, so that’s interesting to me.

Claudia Alvarez Troncoso: I think that I did touch on that point a little bit. It’s like they are very socially aware, they are pushing this innovation side, and they want to have things done differently. Of course, the part of only concentrating on the financial aspects and not being aware of other issues that need to be talked about like human rights, social, environmental aspects, having a governance that is conscious of their employees and of these shareholders that are very much in tune and go into a company and make it aware of what’s going on or to just practically get themselves on the boards to move these companies in what they think is the right direction. More active shareholders, that’s going to be one of the aspects and we’re going to see more in the future.

Nicole Phinopoulou: I totally support you on this because you see the new generation, even if you see the basics, what their options are to study, and they are looking into studying for sustainability, to understand that consumers have a long say, it’s the social part. It’s also about how they interact and what they’re looking for, and the thing is they know more than probably what we know, you see the change, it’s in the society.