What is a cause, business related or otherwise, that you care about, and why?

As part of the legal team of a private debt investment fund, it tends to be more important for the fund manager and investors to prioritise the speed of closing an investment, given the need to meet an investment period. During the analysis (prior to term sheet) of a potential investment, the rush to close a deal often coincides with the company’s need for funding. The challenge for our legal team is to ensure a truly thorough compliance and ESG factors analysis. This thorough analysis carries the risk of (i) losing the investment to increasingly sophisticated competitors or, even worse, (ii) closing an investment while accepting a potential ESG risk.

The real challenge lies in emphasising the importance of social, sustainable, and ultimately human aspects (especially in the chaotic world we are currently living in) over high returns. Eventually, high returns will still be achieved because the product we offer at Capital Índigo is very solid and reliable. This shift must permeate the team, the manager, the investors, and the companies we invest in. Although investors often request certain ESG conditions for fundraising, in some cases these are merely to “check the box,” which can be very frustrating. Honesty and realistic action plans should always prevail, rather than sugar-coating real situations. It is also crucial to assess the limits of our capabilities as fund managers to truly audit compliance within the companies. Additionally, it is important to understand the companies’ capabilities, as these concepts are often new to many of them.

Implementing ESG factors in medium-sized Mexican companies presents several challenges. These can be broadly categorised into regulatory, financial, organisational, and cultural challenges. Regulatory challenges include a lack of standard regulations. Since Mexico does not have a fully standardised and enforced set of ESG regulations, it becomes difficult for companies to know precisely what is expected of them. Financial challenges may include upfront investment meaning that implementing ESG initiatives often requires significant upfront expenses in areas such as technology, infrastructure, and training. Organisational challenges include the lack of in-house expertise and the complexity of aligning ESG goals with the overall business strategy.

In conclusion, external challenges such as market pressure, consumer expectations, and global supply chains can make it particularly difficult to comply with ESG standards at every stage. This is why it is crucial to recognise that the decisions we make as the legal team of a private debt investment fund in Mexico have a chain reaction, influencing the development and optimisation of companies that, in turn, generate jobs. There is a circle of shared economic responsibility among all the players in the system we live in and share.

Addressing all these challenges requires a comprehensive approach that includes investor engagement, investment in education and training, leveraging technology for data management, and potentially seeking external expertise to guide the ESG implementation process. Our legal team has been developing strategies that prioritize proper ESG growth over immediate profits. These involve a multifaceted approach that emphasizes the long-term benefits of ESG initiatives and how they can ultimately lead to sustainable profitability for everyone.

For our team, innovation always means teamwork, empathy, and honesty. It is easy to implement, requires no expenses, and leads to significant achievements. Supporting one another, sharing knowledge, and learning from both failures and successes are key to building self-confidence individually and as a team. In the end, companies are made up of people, so learning to take care of each other and understanding our own values, concerns, and causes will always help create better companies and a better future.