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Business and social revolution

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By American ESG Group Staff

Dec 13, 2021

The waitress at this time prepares Margarita cocktails in the pool area. In a while she must mop the floors and then go downstairs to take out large bags of hotel garbage.

This work used to be done by three people, but today it is only her responsibility. She is “lucky” these days ...

when no one knows if the pandemic is going away or is coming back to stay and store owners watch every dollar and avoid dispensable hires.

She works in a five-star establishment of one of the largest Mexican hotel chains, in Playa del Carmen. She says they pay her $ 200 a month, so she discreetly asks to tip in cash. If you pay with a card, she warns, they only “give us half”.

How much social benefit does this hotel really deliver to Playa del Carmen?

In the main streets of the town it is easy to find those who openly offer drugs. How long could she hold out before giving in to someone who offers to earn some money by selling her clients additional products to her hospitality and cleaning services? Who will this worker vote for?

There is still no single way to measure social criteria in companies. They abound, because an immense wave from Europe and North America arose from the concern of those responsible for managing huge amounts of money and assets, who perceive the risks of doing nothing.

Politicians who promise to solve everything quickly win in one country and another, promising to punish the rich.

Their progress increases the risks of doing business and deteriorates the value of assets. You have to measure that risk, clearly the social raises its tone.

In this dynamic, governments, particularly in Europe, finally seem to rise above the dominance of armies of lobbyists hired by companies to enforce their intent.

Since 2015, according to agreements within the UN, environmental, social and governance commitments and criteria have emerged for companies. The acronym ESG was born from the words Environmental, Social & Governance.

As this effort pays off in votes in advanced countries, different models have emerged to measure these criteria. Each region pulled out its own ‘tape measure’ and it was frankly a global slump. Until the pandemic came with an economic crisis that changed the speed of the world.

To hit the table, the Bank for International Settlements (BIS) jumped this summer, led by Agustín Carstens, supported by the powerful Christine Lagard, president of the European Central Bank, responsible for 'printing' the euros.

The BIS seriously warned about a problem bigger than the pandemic, which is approaching via climate change and its social impact. The BIS called it a ‘green swan’.

The European Union already legislates to stop the importation of products whose manufacturers show disdain for this problem.

In parallel, a relevant institute offers courses and prepares to support convergence around a single global criterion to measure these risks.

It is the CFA Institute, UK, which traditionally certifies CFOs in accounting skills and now trains people in ESG.

The criterion that seems to dominate is that of the UN Principles for Responsible Investment, also supported by Blackrock, which now considers them to measure in which companies it invests and in which it does not.

The goal of these rules is to identify assets at risk within each company, evaluate them and price each one, in order to refine what it is worth.

Would Blackrock buy shares of the aforementioned hotel in Playa del Carmen? It is not enough that it is beautiful if the environment denotes serious risks, for example, the growth of violence that drives away visitors. If Blackrock wouldn't invest there, how much is that hotel really worth? To those risks ignored for decades, the world already puts numbers.

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