Investment

Regulatory and fiduciary duties

Are institutional investors and financial intermediaries legally required to consider ESG factors when making investment decisions? Must any additional non-financial principles and objectives be considered?

In Argentina, institutional investors and financial intermediaries are not legally required by primary legislation to consider ESG factors when making investment decisions in general.

Notwithstanding, in 2019, the Comisión Nacional de Valores (CNV), the agency responsible for promotion, supervision and control of local capital markets, has enacted the Guidelines for the issuance of green, social and sustainable securities in Argentina (the Guidelines). The Guidelines constitute an interactive process that is updated and upgraded as the market diversifies. In that regard, the Guidelines aims to offer a good practices framework and parameters for the issuance of green, social and sustainable securities in respect to international standards for the purpose of criteria standardisation.

Apart from its Guidelines, CNV recognises international standards that must be considered for those kind of securities. The adoption of these practices is also recommended to obtain further global alignment with other markets, such as the Green Bond Principles, the International Climate Bonds Standard and the Climate Bonds Initiative.

Given that these types of securities do not differ from traditional financial instruments, the issuance requirements must comply with local law in this respect. Additionally, the Guidelines suggest that issuers have the following external reviews to reinforce the credibility of negotiable securities that aim to finance green and social projects: the second opinion; verification; certification; and rating.

Recently, the CNV issued Administrative Decision No. 839/20 creating a new collective investment vehicle called Solidarity Financial Trusts to complement public and private resources (mixed financial solutions) allowing domestic institutional investors to mobilise market resources towards priority purposes for the development of provincial economies and the generation of social impact.

Voluntary standards and best practices

What voluntary standards and best practices are commonly followed in your jurisdiction with regard to integrating ESG factors and other non-financial principles into investment decisions?

The most commonly followed standards and best practices in relation to the integration of ESG factors and other non-financial principles into investment decisions are the Sustainable Development Goals; the Global Reporting Initiative (GRI), Sustainable Accounting Standard Board (SASB), Principle for Responsible Investment (PRI) and the B Impact Assessment.

Measurement, reporting and disclosure

What voluntary and statutory measurement, reporting and disclosure frameworks are followed in your jurisdiction with regard to ESG and other non-financial factors?

In Argentina, there is a low level of voluntary reporting and disclosing information with regard to ESG factors since companies are not bound to consider any non-financial principles or objectives given no statutory measurement is established.

The frameworks that are used most often are the Sustainable Development Goals, the Impact Reporting and Investment Standards and the Global Reporting Initiative as well as the UN Global Compact for those companies that are signatories of the principles. Additionally, those companies that claim to or have successfully obtained the B Certification can also use the B Impact Assessment to measure and report on ESG factors as well as other non-financial factors. In this way, those companies are also incorporating the use of the SDG Action Manager developed by B Lab as well as de SDG Ambition.

With regard to those companies that are starting to identify and manage ESG factors, normally the most used framework is the International Organization Standards (ISO) 26,000.

Less commonly used voluntary impact measurements also include the Impact Reporting and Investment Standards (IRIS), the Social Return on Investment (SROI) and the Social Impact Accelerator (SIA), among others.

Additionally, there is also an incipient use of voluntary private guidelines that are aimed at specific sectors or industries such as the Sustainable Banking Principles, Principles for Responsible Investment (PRI) and Principles for Sustainable Insurance.

Ratings, indices and guidelines

What ratings, indices and guidelines are used to benchmark adherence to ESG principles and other non-financial factors in your jurisdiction?

One of the most relevant precedents in Argentina in relation to indices used to benchmark adherence to ESG principles and other non-financial factors is the Bolsas y Mercados Argentinos (BYMA)’s Sustainability Index established in 2019.

That index has a non-commercial character and seeks to identify and recognise BYMA’s listed companies for their sustainability practices, which are evaluated under four principal factors: environmental; social; corporate governance; and sustainable development (contribution to the Sustainable Development Goals).

In addition, companies in Argentina, especially those listed in international markets, use the following ratings, guidelines, and indexes:

  • the Global Compact;
  • the Impact Reporting and Investment Standards (IRIS);
  • the Sustainable Development Goals;
  • the Global Reporting Initiative;
  • the Equator Principles;
  • the Indice de Sustentabilidad Empresarial (ISE);
  • the Sustainability Accounting Standards Board (SASB);
  • the Dow Jones Sustainability Index;
  • the UNEP FI;
  • the MSCI ESG Leaders Index;
  • the FTSE4Good Index;
  • the Euronext Vigeo Index Eurozoe;
  • the CSR HUB;
  • the Thomson Reuters ESG Score;
  • S&P 500 ESG Index;
  • IndexAmericas (IDB);
  • the SP Global Index ESG; and
  • the Fitch ratings.
Incentives, benefits and financial support

Are any fiscal incentives or other benefits available in your jurisdiction to encourage institutional investors and financial intermediaries to integrate ESG and other non-financial factors into their investment decision-making?

As of the date of writing, there are no fiscal incentives or other benefits available that encourage institutional investors and financial intermediaries to integrate ESG and other non-financial factors into their investment decision-making.

Impact investing

In addition to ESG factors, what considerations and practices are commonly integrated into impact investment strategies?

Argentina’s financial market is still developing given its lack of investment infrastructure and consequently it is quite small in comparison with other markets of the region. 

Thus, the development of an impact investing market is hard, since there are foundational issues such as the market state of development for private equity and entrepreneurial funds. Despite Argentina’s financial market situation, given that our jurisdiction owns an excellent quality of entrepreneurs, impact capital has been successfully attracted, although in a segmented manner. In its majority, accordance to Argentine Impact Investment Report (2017), these has been a result of non-repayable loans or very favourable rates granted by multilateral or private organisations, without any considerable private capital investments in impact or purpose-driven companies or projects. According to a study carried out by Austral University, between 2013 and 2017, a total of US$7.4 million were invested in Argentina in impact investing. This was done by eight investors, of which three invested for the first time in 2017. The focus of investments was mainly in education and technology(fintech), and the type of financing was mainly capital equity. 

Strategic actors such as the Impact Investment Working Group for Argentina and Uruguay (which represents Argentina in the Global Steering Group on Impact Investment) and the Argentine National Advisory Board (NAB) advocate for the promotion and development for these types of investments in our country, with the intention of overcoming the market’s difficulties.

Hence, considerations and practices we have seen and expect to be integrated into future impact investment strategies correlate with the Argentine financial market conditions; impact investing market development; type of impact investors; and state of impact or purpose-driven companies and projects. In this way those methodologies and practices within an active ESG approach (‘continuous improvement and active engagement’) may include: policies (responsible investment or impact investment); guidelines and active engagement; ESG investment strategies (positive or negative screening) along the investment cycle; and due diligence processes, information reporting and disclosure.