However, there are relevant advances in recent months. Two non-binding instruments (also referred to as soft law) that are very useful for those companies interested in developing an ESG strategy, defining objectives and initiatives, as well as designing measurement systems and information disclosure processes on these topics. I am referring to the Sustainable Taxonomy of Mexico and the ESG Approved Questionnaire for Issuers.
The Sustainable Taxonomy of Mexico It was published by the federal government in March 2023, as a result of joint work by more than 200 experts from different sectors, coordinated by the Undersecretary of Finance and Public Credit (SHCP), led by Gabriel Yorio. This taxonomy establishes criteria and classification schemes to assess whether an asset, economic activity or investment project has an impact on environmental, social and sustainability objectives. Its main objective is to promote investment in economic activities that contribute to closing socioeconomic gaps and protecting the environment. At the same time, it helps provide certainty to financial market participants and prevent greenwashing. It takes as a frame of reference the Paris Agreement on Climate Change and the UN 2030 Agenda for Sustainable Development.
He ESG Approved Questionnaire for Issuers , issued by the Amafore (Mexican Association of Retirement Fund Administrators) in August 2022, which addresses environmental, social and corporate governance aspects, with the aim of achieving a comprehensive evaluation of the performance of companies in these areas. It has 217 points and even when it is aimed at companies with listed securities in which the Afores invest, it is a useful guide for those private companies interested in designing, strengthening or evaluating the soundness of their ESG strategy.
In addition to these national instruments, there are foreign provisions that we should not ignore, as they will have a significant impact on the configuration of ESG regulation at a global level, including that of our country. Additionally, these provisions will be applicable to certain companies that operate in Mexico, either because they are subsidiaries or suppliers of companies subject to foreign law.
The first is the European Directive on Corporate Sustainability Reporting (CSRD), approved in November 2022, which establishes that annual reports must incorporate information on sustainability and various topics related to ESG and such information must be treated with the same rigor as that of financial character. The directive is applicable to companies listed on stock exchanges and also to large companies with operations in the European Union, according to annual sales metrics, asset value and number of employees. The CSRD will begin to be required from the annual reports of the year 2024.
The second is the draft European Supply Chain Due Diligence Law which aims to ensure that companies in the European Union diligently manage social and environmental impact throughout their value chain, including direct and indirect suppliers. The project was adopted by the European Council in December 2022 and is expected to be approved by the European Parliament this May. Once approved, Member States will have two years to adopt the directive into their national legislation and countries with their own laws on this matter (eg Germany, France and the Netherlands) will have to adjust their existing legislation.