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FERNANDO MATTAR BEYRUTI
ITAÚ ASSET MANAGEMENT
CEO of Leading Institution in Responsible Investment – Brazil
1.How the responsible investment issues are formally addressed in your role as CEO?
Itaú Unibanco’s sustainability governance comprises all levels of the organization. As such, the ESG dimensions are integral to the investment process in Itaú Asset Management. All investment decisions have the risks and opportunities related to the responsible investment dimensions analyzed and weighted. We have 100% coverage on the Brazilian equity market, and engage the issuers on a one-to-one basis. Furthermore, we responsibly exert voting rights in the invested companies. We also seek to nurture this culture on the sell-side institutions, favoring the research that addresses these issues.
2.Indicate which of the following three areas of the responsible investment of your invested portfolio, in your opinion, is the most important
Corporate governance
3.In your role as CEO, could you describe in particular a project that has led and highlighted by its positive impact, whether in the Environmental, Social or Corporate Governance (ASG) in the last 12 months?
We developed an internal corporate governance rating that contributes to the equity and credit investment processes. The rating is now being used by portfolio managers and analysts as a tool to better understand investee companies’ governance risks and opportunities. The ratings are also useful to measure a portfolio total governance score against its benchmark. This information can provide portfolio managers with additional insights on their portfolios. Additionally, companies in the bottom quartile of the ranking will be engaged and incentivized to adopt higher corporate governance standards as well as increased transparency regarding its practices.
4.Please indicate how you will lead in the next 12 months, from the identification of the risks and opportunities of Environmental, Social and Corporate Governance (ASG) factors, the measurement of the corporate sustainability performance of the companies included in your investment portfolio.
As managers of our clients’ assets, we have a duty to base our investments on a comprehensive understanding of all risks and opportunities that result from our decisions. We consider ESG issues to the extent that they can materially affect the value of assets where we invest. Our approach to Responsible Investment helps us achieve our fiduciary duties, creating value for our customers by providing returns better adjusted to their risk profiles. The ESG Integration Method of Itaú Asset Management incorporates these variables into our fundamental equity valuation model, by analyzing ESG impacts on cash flow and the cost of capital. The objective is to adjust individual target stock prices and to anticipate events that result in value creation or destruction. This approach provides flexibility to our portfolio managers, who use the ESG valuation inputs to varying degrees, according to their specific strategies and mandates. Our methodology addresses various themes of sustainability in the dimensions of environment, society and corporate governance. As examples we understand the impact of customer, supplier, community and employee relations, waste, effluents, emissions, water, energy and materials, biodiversity and land use, and climate change. Among the topics that have assumed more and more relevance are climate change and Sustainable Development Goals (SDGs). We have strongly worked to understand the impact of climate change on our business, measuring risks and opportunities, and our contribution to the achievement of SDGs. In addition, we are prepared to internalize market trends and sustainability throughout our responsible investment process, through our governance structure, as is the case of impact investing, a topic that has been the subject of study and discussion internally.
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