We traveled to Mexico City to meet a small number of large and influential Mexican companies, including Walmart de México, América Móvil, FEMSA and Grupo Lala. We also had the opportunity to meet with the Mexican Stock Exchange, which has been actively working to promote better ESG practices among listed companies.
The country seemed in a state of collective bliss 100 days after Andrés Manuel López Obrador (AMLO) came into office vowing to transform Mexico. Despite some controversial moves to make good on his promises for change, he continues to have high levels of popularity. However, companies and investors are more apprehensive that the president’s policies, including those related to energy and labor, could have an adverse effect on competitiveness.
ESG in action
We found that the evolving political environment has not negatively impacted companies’ responses to growing public awareness around a number of environmental and social issues. In fact, we would argue it has turbocharged those responses, particularly when it comes to corruption, air pollution, plastics and inequality. While the policy context to address these issues remains relatively weak, all the companies we met asserted that the long-term success of their businesses depends on addressing material environmental and social risks and opportunities head on.
Governance is also an area companies continue to focus on, and the notion that good governance practices are critical to success is widely held. However, as is the case in a lot of emerging markets, governance is largely seen as a compliance exercise – i.e. follow the letter of the law rather than its spirit. A generational transfer of power among the business elites has started to take place. This, together with the perceived urgency for change brought upon by AMLO’s rise to power, could help set the stage for a change in mindset that could in turn lead to more open and diverse boards, better transparency and stronger internal controls.