BTG Pactual Chile blazes trail in ESG investment training stakes

ESG is no longer a buzz term, it’s a reality. Financing and investment decisions are being increasingly colored by adherence to environmental, social and governance criteria.

In a nutshell, the jury has returned its verdict: ESG is good for bottom lines and good for reputations.

Against this backdrop, a growing segment of the mainstream investor community is seeking greater clarity on how companies perform with respect to ESG issues.

The ESG sphere is on a learning curve. Executives at companies and investment firm are building associated knowledge and processes amid a wider global push to standardize terminology and practices, in order to support greater clarity and comparability.

Latin American investment bank BTG Pactual is among those building its ESG muscles. The asset management division of the company’s Chilean unit recently announced it was offering its executives an industry training scheme – the Certificate in ESG Investing – offered by the CFA Society UK, a professional membership body representing some 11,000 investment executives in the UK.

To find out more and to get a sense of the bigger picture, BNamericas spoke with Andrés Navarrete, portfolio manager at BTG Pactual Asset Management in Chile.

BNamericas: BTG Pactual has become the first asset manager in Chile to implement the Certificate in ESG Investing offered by the CFA Society of the UK. What were the main drivers behind this decision to offer this course to your executives?

Navarrete: The main motivation is to be able to stay at the forefront in the implementation of ESG factors in our investment process and in our portfolios. BTG Pactual has a strong commitment to the sustainability of its operation. It has been a [UN-supported Principles for Responsible Investment] PRI signatory since 2015; in Chile we launched the first and only mutual fund of Chilean stocks with an ESG focus; in Brazil we launched the first equity ETF with an ESG focus, among other measures that have been, and will be, implemented.

BNamericas: ESG is a fairly new topic for almost everyone in the financial services arena in Latin America, but it's rapidly consolidating. What tools or sources have asset managers used in the region so far to navigate these new waters/carry out their work in this area?

Navarrete: It is indeed a new issue, but progress is being made year after year. In the beginning we relied heavily on ESG research services from external providers – in our case MSCI ESG Research and Vigeo Eiris – but over time, companies began to increase their level of transparency in their annual integrated reports, which, together with the establishment of sustainability divisions, has made it possible to improve the ESG vision of companies. Another level of progress that has been achieved is the definition of the key variables to observe; the materiality map, initiatives such as [global sustainability standards organizations] GRI and SASB, among others, have supported consolidation in this regard. 

The latest advance that we have observed is increased transparency of the different ESG ratings firms with respect to their different scoring/ratings for companies. This new information allows progress in the consolidation of a common market vision on the sustainability of a company’s operations.

BNamericas: Do you think that having a team trained in the area of ESG, given the growing need of investors to create more sustainable investment portfolios, will help in attracting new clients, etc.?

Navarrete: The focus on sustainability will allow us to anticipate trends that will develop in the coming years and thus create portfolios with better risk-return ratios for our clients. In our belief and experience, this focus on sustainability will allow us to reach new types of customers. For example, our fund with an ESG focus [BTG Pactual ESG Acciones Chilenas], experienced growth of 49% in 2020 and this year it's already grown 41%.

BNamericas: How likely is it that other local asset managers will follow in your footsteps, that is, implement formal training?

Navarrete: I think it's quite likely. The prestige of the CFA Institute, the scope and depth of the topics covered in this certificate will convince other managers to implement this certification.