Corporate governance, key to sustainability

Corporate governance is now one of the main factors influencing investment decisions. A company that is well managed and which has policies in place related to transparency, accountability, and equality is more likely to receive investment than one that does not.

“Corporate governance is fundamental to sustainability. Without it, it’s difficult to imagine sustainable business practices,” said Manuel Rodríguez López de Coca, head of equities at MAPFRE AM and co-manager of the MAPFRE AM Good Governance fund, during his presentation at the ‘Ideas with Value’ forum organized by El Confidencial.

Up to now, ESG funds have focused more on the environmental side of things, with the social and governance factors taking something of a back seat, but this is changing as more and more investment funds begin to pay attention.

As far as MAPFRE AM’s Good Governance fund goes, the investment strategy focuses on identifying quality companies with good corporate governance practices that are trading at reasonable prices.

The fund’s exclusion criteria, which rules out investing in any company with a track record in bribery, corruption, and labor malpractice issues, or which routes a disproportionate percentage of its revenues through tax havens, also serve as guardrails protecting against taking socially undesirable investment positions.

The head of equities explained during his intervention at ‘Ideas with Value’ that investee companies are required to “disclose accurate and relevant information” via regular publication of financial reports, disclosure of policies, and clear communication.

 

Without sacrificing profitability

Many investors are still operating under the perception that investing in ESG funds means sacrificing performance, but this is not the case, and the MAPFRE AM Good Governance is proof positive. It has returned 9.88% so far this year and is up 12.13% since its launch in 2019. Morningstar recently awarded the fund five stars for this solid performance, the highest rating awarded by the analysis firm.

The MAPFRE AM Capital Responsable fund, which invests in companies with a strategy focused on ESG criteria, is up by 5.06% so far in 2023, and the MAPFRE AM Inclusión Responsable fund, which invests in companies that are committed to promoting the well-being of people with disabilities and their integration into the workplace, has advanced 13.57% in the year to date.

 

Main exposure

The MAPFRE AM Good Governance fund has 25.2% exposure to the technology sector, 20.3% to defensive consumption, and 15.96% to health, while financial services account for 14.91% and industrials for 7.45%.

By company, Microsoft accounts for 5.19% of the total, while ASML Holding represents 4.18%. In geographical terms, the focus is principally on Europe and the United States.