Chief economist Alberto Matellán explains the Inclusion Responsable Fund's methodology SEARCH ESG CLARITY
Mapfre’s Inclusion Responsable Fund invests in companies committed to labour inclusion of people with disabilities. For National Inclusion Week, chief economist at Mapfre Inversión, Alberto Matellán, talks to ESG Clarity EU about engaging with companies on disability and how the fund’s ethos came about. Can you explain the methodology behind picking out companies that are integrating disabled people into the workforce? We search for companies that have the highest commitment to people with disabilities, and not only the ones that integrate them into the workforce, although, of course, this is the main way to show such commitment. But there are others, such as, for example, research, working with specific associations or communities, or addressing specific markets.
Having said that, we have developed our own questionnaire to measure such commitment. We devoted one year to research, when, among other actions, we visited many companies across Europe to understand their relationship with the issue. Following all the documentation obtained from such visits, and interviews with different foundations and academics, we identified some 40 key variables divided among seven different thematics. We call each thematic a “pillar”.
Acknowledging that it is not easy to measure such a topic, among the seven pillars there might be some variables that get a very good score in some of them, but not in others. So, they are not easy to compare. Ultimately, we classify companies according to four levels of commitment, so that the fund would normally invest in the top two.
In the questionnaire there are both open and closed questions, as well as quantitative and qualitative ones. This is a great opportunity to engage with companies regarding this issue because open questions usually provide an excellent starting point for conversations. So, in the end, it is another way of doing our job better, which is to know better where we invest.
Do companies have this data readily available? Is it tricker with hidden disabilities? There are some key data that are always available, for example, the well-known percentage of people with disabilities in the workforce. But this is far from enough. For multinational companies the definitions of disabilities might change across countries, even within the EU. So, first we had to devote time to solve that. But mainly because that figure itself says very little.
There are many reasons why a firm might have a high rate of workers with disabilities, and not all of them show commitment. So, it is necessary to dig deeper: into the types of disabilities they have, their role in the organisation, whether they are included in promotion or education programmes, the policies implemented and their reach, and many other issues.
As an example, one of the most illustrative points is whether the policies about disabilities disclose each type of disability and suggest specific actions for each. This is very important, since, for example, mental or intellectual disabilities are, by far, much more difficult to manage than mobility disabilities. As a consequence of that, we examine not only the policies, but also the facts: are managers educated in how to manage each type of disability? What percentage of each is in the total percentage figure? And many others like that.
Going back to the question, most of the data in the questionnaire is not found in usual reports or databases, but we must search for them specifically. That usually implies engaging with the company from the very first moment. It is relatively easy to sense the degree of commitment in such interviews. You can see very clearly that some companies, in particular the people in charge of these subjects, come to the meeting with a genuine wish to show you what they do, because they’re proud to do so, and they’d love our feedback. At the same time, others feel threatened and try to give the least information possible. Of course, this is not a basis for investment, but this type of intuition has a great level of correlation with later results. I must add that fortunately, the latter type is less and less common. Regarding hidden disabilities, as far as we know, it is impossible to work with them since they are, well, hidden. We are happy to see that more and more policies try to incentivise the disclosure of disabilities that some employees might prefer to hide, or even health controls to check for them when even the employee doesn’t know. But a large part of hidden disabilities is related to mental issues, which are very difficult to diagnose and still a taboo in some contexts. So, there is much work still to be done there.
Why did you decide to include this as an ESG indicator for the MAPFRE AM Inclusion Responsable Fund? I wouldn’t say it is an ESG indicator, but a whole thematic. And also, something that has turned out to be a powerful indicator of financial performance. Actually, that was the original “a priori” investment thesis that we have managed to see in practice.
Several different reasons came together in the perfect moment, in mid-2017. Then, our investments teams were starting to define our responsible investment policies and long-term strategy. This strategy should be aligned with the culture of the company, which is very social. In fact, it was the first company in Spain to have social commitment cited in the bylaws (in 1965) and 65% of shares are owned by a not-for-profit foundation.
But in that time the so-called SRI was much less developed than currently, and was completely focused on environmental issues, in part because social data was (and is) very difficult to gather and manage. So, one of the main challenges was: how to do a proper social investment strategy with so little information and without any guidance?
At the same time, there was a personal issue, as so often happens. The daughter of one of the most senior members of the team was born with an intellectual disability. So, he proposed: why don’t we do this? That was the time to show the belief of the company in innovation and its confidence in people, as this executive with another colleague was given the time and budget to explore the issue and build the investment thesis and the methodology. Two years later the fund was up and running.
Where would you like to see improvements at firms? We are happy to see this in many areas, but the main one is awareness. At first, companies were quite shocked by our demands since they expected the typical financial or ESG request for data. Subsequently, as we have already done five waves of the questionnaire, most companies know us and our process. And we see a very clear improvement in the average levels of commitment we measure. This is an impact we don’t feel the need to measure, but it is there. At the same time, but in a very indirect manner, we’d like to show people with disabilities that their social inclusion through companies can in fact be achieved. We found many activities based in foundations or associations, which are absolutely necessary of course. But there was nothing on the other side: the labour/economic/business world. This had the unintended consequence of discouraging many people with disabilities.
Do you engage with companies on this? Can you give examples? Yes, in several ways. On one hand, the analysis and investment process demands we keep an open line with each company. This is done by our analysts in Paris, which turns out to be very expensive work in terms of cost and time. But it is the only way to conduct this kind of research.
In this context, many companies in the past four years have asked what they can do to improve and why this is important for us as investors. Although we try to answer such questions, we are not consultants, so we never give any advice other than explaining our metrics and the practices we see. At the same time, and this is important in our job as investors, we explain why we think an improvement in this issue is linked to improvements in financial or economic performance. As a result, there is an ongoing conversation with each company analysed.