PEMEX and CFE: Most at Risk Regarding ESG CriteriaBy Anamary Olivas | Thu, 06/16/2022 - 18:55
PEMEX, followed by CFE, were rated as 2022’s global companies most at risk for non-compliance with environmental, social and governance (ESG) benchmarks, according to the research institute México Evalúa. The ranking, supported by the firm Sustainalytics, measures the adoption and compliance of ethical practices that contribute to the environment and social issues.
ESG ratings provide analytical tools that help the financial sector to make more informed investment decisions. They provide a transparency that is highly required in markets that have traditionally been shaped by profitability, but can no longer develop further without considering these criteria.
PEMEX had a risk rating of 64.1 points in May 2022, which represented a setback, since it held 57.5 points in 2021. Ana Lilia Moreno, Coordinator, the Competition and Regulation Program of México Evalúa, assured that this score puts PEMEX in a less competitive, attractive and reliable position in the eyes of investors and stakeholders. Experts warn that if the NOC does not get up to date regarding ESG issues, it may be pushed out of debt markets, which would be detrimental for the state-oil company’s need for refinancing debts.
The Mexican think tank explained that the lack of compliance with ESG within PEMEX is in part because the company's leadership does not see compliance as a worthwhile investment yet. Hence, at the beginning of the current administration, the budget for ESG factors was cut. Additionally, there is no clear internal accountability of in the NOC’s sustainability reports.
In the case of CFE, the state electric utility’s performance was of 57.5 points, ranking as the penultimate most-at-risk company in the electricity sector, only surpassed by the Ugandan-South African Eskom Holdings. CFE’s lack of information, transparency and sustainability reports cemented the score. The electricity company is not releasing any sustainability reports, making it difficult for investors to trust their practices, especially regarding greenhouse gas emissions.
While ESG metrics are not mandatory, they are now essential for measuring risk regarding how sustainable a company is. Aligning business models to sustainability should be a top priority for every company to survive in a market with an ever-increasing awareness of sustainability’s importance. PEMEX and CFE must now upgrade their policies to reduce their negative impact on the environment and on neighboring communities, experts argue.