Investments with ESG approach – Environmental, Social and Governance

Juanlanas or angel hair. Clematis haenkeana.

Investments with ESG approach (Environmental, Social and Governance)

(103-1) For Grupo Argos, managing its investments with ASG approach reflects the importance of having a complete view of its management with the creation of responsible value in the economic, social and environmental dimensions. In this way, the development of its business is accomplished by constantly seeking value for shareholders in the long term with positive balance in externalities. This approach allows material issues to be considered both in decision making and in business management. At the same time, strategic conversations are promoted that make sustainability a cross-cutting pillar of corporate planning and action.

Consolidation of the Management model of Investments with ESG approach

The investment management model with ESG approach is comprised of mechanisms that seek to connect the investment and business management with the vision of sustainable development, emphasizing the balance between dimensions and measuring externalities, where biodiversity preservation becomes backbone of long-term strategy in order to apply the best standards in environmental, social and governance issues framed in a sustainability culture.

(103-2) To ensure the transversality of sustainability, the company has a Sustainability Policy (see policy at https://www.grupoargos.com/Portals/0/Documents/sustainability-policy-grupoargos.pdf) and a Relationship Policy between linked companies (see policy at https://www.grupoargos.com/Portals/0/Documents/Policy_Relationships_Affiliated_Companies.pdf). Additionally, guidelines are defined by the boards of directors of its affiliates, which are managed from the different committees.
Grupo Argos, as strategic architect, actively leads the different committees, including the Sustainability, Risks, Conduct, Human Management and Finance committees. They not only discuss investment management and their commitment to sustainability, but also seek to facilitate inter-company knowledge transfer and collaboration to align the businesses with Grupo Argos standards.

(103-3) Below is the result of the analysis of the level of maturity of each of the businesses, with regard to the targeted level of investment management model with ESG approach.

Maturity Levels in ESG approach of strategic businesses

Grupo Argos exercises leadership to ensure that its businesses implement the best standards in sustainability, investments and business, in order to ensure that the companies continue to create strategic value for the company.

(103-2) Initiatives
Synergy

In order to consolidate the role of the holding company, a diagnosis was developed to focus the work on three main points:

  1. The role of the holding company as the driver of the corporate strategy.
  2. The implementation of a shared services center.
  3. Designing an operational supply model.
Due diligence with ESG criteria Environmental, Social and Governance

Grupo Argos conducts due diligence for mergers or acquisitions, including in the ESG criteria process, in order to make a good decision that not only reflects the true value of the business, but which also provides a complete diagnosis about the risks of the acquisition.

In 2016, the company worked on the standardization of a rigorous due diligence process for Grupo Argos, in order to identify environmental, social and governance risks in this type of operation. It also allows for the defining of measures that need to be taken to prevent and mitigate these risks.

Findings during the due diligence phases allow for planning and prioritization of the issues that should be explored in more detail either before or after the acquisition. In this way and once the purchase is made, they will provide support to Senior Management to define guidelines that will drive the new business to the sustainability standards of Grupo Argos.

Construction with affiliates

The consolidation of Grupo Argos as a matrix of investments in infrastructure has allowed advances to increase the generation of value and the economic, environmental and social balance towards stakeholders. Thus, in 2016 a project was started to define indicators and long-range goals for the conglomerate, which seeks to redefine the business models to compete strategically.

This has involved working together with the subsidiaries, which connects the strategy of Group and each subsidiary. This work allowed:

  1. for the establishment of a long-term goal in climate change which was set up to reduce direct CO2 emissions by 20% per million Colombian Pesos in revenues for 2025, having 2015 as the base year
  2. for the building of work boards with affiliates on material issues.
  3. for defining a work route in the measurement of externalities for the Argos Corporate Group.

Grupo Argos advances in the active management of its investments, promoting its efficiency and profitability, always looking for opportunities of proper rotation of capital. The management of investments and businesses will be maintained with a vision of sustainable development, maintaining high criteria and standards that facilitate the right balance between the generation of value and the social and environmental effects of the interventions.

In the short term, the implementation of a shared services center will be consolidated, seeking not only efficiencies and standardization, but also strengthening the integrity of information, improving service levels, optimizing internal control, increasing value creation and providing greater flexibility to changes in the needs of the business.
For the operational supply model, the information of common suppliers in certain categories and negotiation schemes will be uploaded in a first stage, as well as platforms that will allow more efficiency in the management.
In a later phase the integrated management of suppliers and their development will be sought, where success will be determined by developing and applying a unique relationship and negotiation.

In the short term, to consolidate the emissions reduction plan, which defines a route to quantify the contribution and the role of each business in the fulfillment of the Business Group goals.
To continue with the project of economic appraisal of externalities in order to identify, in the medium term, the positive or negative effects generated by the development of activities of Grupo Argos and its affiliates. The foregoing, in order to have tools for effective decision-making in the generation of social value and the positioning of the company as a matrix of sustainable investments.