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Cemex is one of the world’s leading cement and building materials manufacturers, with operations in more than 50 countries.

The cement industry is among the most emissions-intensive industries, accounting for 5% of global carbon emissions. However, it also plays an important role in cutting energy consumption in buildings through the development of sustainable products. We have engaged with Cemex to ensure that it has a sustainability strategy in place to prepare for the transition to a low-carbon economy and to promote the adoption of best international practice in corporate governance. As one of the top 10 listed companies by market capitalisation in Mexico, Cemex could set a benchmark for the market in terms of governance.

Our engagement
Since a change in the company’s leadership in 2014, when a member of the new generation of the founding family took over as chair, the dialogue with Cemex has significantly improved. This allowed us to intensify our engagement on sustainability and corporate governance at various levels in the company.

As a multinational company, with 80% of revenues coming from outside Mexico, we have encouraged Cemex to exceed the minimum regulatory requirements of Mexican law and adopt best international practice in areas such as integrated reporting, shareholder rights, board composition and board evaluation.

Changes at the company
The company has responded to our engagement in a positive way and made meaningful progress.

It has developed and published a set of policies on various sustainability issues, such as environmental management, water scarcity, human rights, health and safety, anti-bribery and anti-corruption, as well as the sustainability of its suppliers.

The quality of disclosure has also improved. The company now publishes 18 medium-term sustainability targets linked to atmospheric emissions, use of alternative fuels, the proportion of sales derived from sustainable products and materials, labour safety and responsible supply chains. It also reports on its contribution towards meeting the UN Sustainable Development Goals. In 2017, it adopted the International Integrated Reporting Framework1, which includes a statement from an independent external advisory panel on the quality of the report.

In relation to governance, the company has implemented some initiatives that brought it closer to best practice. In 2014, it set up a board committee dedicated to sustainability, which was followed in 2017 by the creation of the executive vice presidency of sustainability and operations development, reporting directly to the CEO.

We have also engaged with Cemex on the timely disclosure of board nominees ahead of its AGM, which is not a legal requirement in Mexico but a common objective for our engagements in that country. We were therefore pleased that in 2016 – for the first time – Cemex decided to disclose the names and biographical details of its board nominees with sufficient notice to allow international investors to make an informed voting decision.

We will continue to engage with Cemex on board composition and the sustainability of its supply chain. Although the board has an appropriate range of skills, it also includes long-tenured directors who cannot be considered independent according to best practice.  Moreover, the board lacks female representation and members from other countries where the company has operations. We believe the company will benefit from board refreshment aimed at increasing its diversity. We will also continue to engage on board effectiveness, encouraging the company to commission an independent external board evaluation. In our dialogue with the board secretary on this issue, our concerns were acknowledged and later conveyed to the chair. We will follow up on the nomination process for the next AGM.

Furthermore, we will follow closely the roll-out of the supplier sustainability programme, as we are concerned about the slow progress and complexity of implementing due diligence and audit procedures which are set to cover at least 55% of the global procurement spend by 2020. The company has been responsive and discussed with us the action plan to achieve this target.

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