Shortlisted for the PRI Awards 2024: System stewardship
Organisation: Trinetra Investment Management LLP
Signatory type: Investment manager
HQ country: United Kingdom
Other responsible organisations: Alsea SAB de CV and Fundación Alsea
The approach, initiative, or process
Countries in the middle-income trap, particularly in Latin America, are characterised by a persistent informal sector that employs half of the workforce and represents over a third of the gross domestic product (GDP). Informality drives socioeconomic inequality and vulnerability while reducing productivity.
Trinetra’s team has been studying the lives of people within communities in emerging markets (EMs) for a decade and a half. These ethnographic studies have led us to conclude that informality persists because the formal workplace fails to appeal to marginalised communities, particularly working mothers, caring fathers and people with disabilities.
Informal workers are often unmotivated to transition into formal employment because of the sacrifices it imposes on their core identity. While formal opportunities may exist, many opt for informality because it grants flexibility, a sense of community and a daily cash inflow. They view formal workplaces as imposing rigid schedules, standardisation and monthly payments which make it difficult to manage their cashflows.
Industries suffer the consequences directly, through high staff turnover and low talent attraction, and indirectly, via slow economic growth.
We believe that the private sector has galvanising potential to bridge economic fragmentation and to push EMs out of the middle-income trap by transforming the formal workplace. Trinetra further believes that a formal workplace that is diverse and equal and which emphasises the inclusion of different identities, including those seen in informal markets, can help reduce inequality and create decent work, contributing towards Sustainable Development Goal (SDG) 8 and particularly targets 8.3 and 8.5.
We launched an initiative during Q4 2023, the potential benefits of which we believe can extend beyond our portfolio and beyond Mexico. There are three project stages.
Collaborating with an investee company
Alsea SAB de CV (Alsea), a Mexican manager of quick-service restaurants, has over 75,000 employees. Its brands include Domino’s, Burger King and Starbucks. According to Alsea’s 2023 annual report, its highest materiality risk is talent attraction and retention.
We selected Alsea for our initiative because, as a large employer of low-skill jobs which are accessible to vulnerable and marginalised populations in urban areas, the hospitality industry has great potential for tackling informality. In Mexico, labour formalisation is a prerequisite to access benefits such as public healthcare, workers’ compensation insurance, subsidised loans, housing and pensions.
Collaborative development of fieldwork
After Alsea reviewed a written initiative proposal from Trinetra, it agreed to grant us unlimited access to its employees to conduct semi-structured interviews in a completely autonomous manner, displaying Alsea’s radical commitment to transparency with its stakeholders.
The qualitative approach helped to highlight employees’ priorities, bringing out issues they face rather than those defined by management on a survey. A human-centric attitude embraces diversity and identity. Only by understanding individual situations, the why and how (and not only the what) of people’s behaviours and preferences, can we develop an inclusive workplace.
Alsea proposed that Fundación Alsea, its charitable arm, should be actively involved in the fieldwork for the project. Fundación Alsea has two main lines of action: tackling food insecurity and promoting employability among disadvantaged groups. Its insignia programme, Va por mi Cuenta, serves nutritious meals to more than 6,000 underprivileged children in 25 community kitchens, and benefits over 2,000 families (data at December 2023).
Fundación Alsea’s collaboration has been critical to the initiative owing to their in-depth understanding of the disadvantaged groups with which they work; the same people that the initiative is looking to attract to formal employment. The Fundación is, at the same time, seen by Alsea’s employees as unbiased and independent of the company. This creates an environment of trust and freedom of speech for employees, making it easier for them to share personal and sensitive information. The aim of the fieldwork is to identify good practices and opportunities to make the formal workplace more adaptable to the employees’ needs. As a result of this work, we hope to meet the needs of informal workers in underprivileged areas in Mexico City seeking to access formal work.
Sustainable outcomes
Through the insights gleaned from this initiative, the aim is to offer feasible recommendations on making formal employment more attractive to new and existing employees, thereby avoiding the move back to the informal sector. Success can be measured by an increase in the number of applicants to Alsea and a reduction in employee turnover from the current 65% level.
Trinetra intends to share the toolset and methodology with the PRI community so that other market participants can apply it in other sectors that can further contribute towards SDG 8.
The measures to ensure transparency and involve collaboration
We collaborated with Fundación Alsea on project fieldwork coordination. We identified key urban areas based on levels of socioeconomic marginalisation and a demographic analysis of informalisation. Fundación Alsea then pinpointed the specific locations of selected brands and liaised with outlet managers to schedule interviews.
The fieldwork began with our visit to Fundación Alsea’s community kitchen in the dining centre of the movement, Comedor Santa María, where interviews were conducted with its staff. Despite similar remuneration to Alsea’s outlets, turnover at the kitchen is significantly lower, suggesting that factors like a sense of purpose and community contribute to employee retention, beyond financial compensation.
Our interviews with ten underprivileged mothers, some of whom volunteer at the kitchens and bring their children for meals, revealed a strong commitment to pro bono work. These mothers could be ideal recruits for Alsea’s brands but struggle to balance financial needs with family responsibilities. Introducing flexible work schedules could provide these mothers with a stable income without compromising their family roles.
We conducted 37 face-to-face, semi-structured interviews with Alsea’s employees, fostering an environment of trust and openness by acting as an independent third party and ensuring anonymity. This method allowed interviewees to discuss freely their lives, employment experiences and aspirations.
One example is María, an underprivileged single mother who is committed to her job at Domino’s despite significant personal adjustments. Initially, she couldn’t articulate her needs, having only known jobs that required her to adapt. After a two-hour conversation, it became clear that she valued earlier shifts, weekday work and weekly pay to better manage her cashflow.
The issue of pay frequency versus absolute pay is a common challenge for those transitioning from the informal market, where daily wages allow for immediate purchasing decisions, to the formal economy with monthly pay cycles. This transition often leads to cashflow issues, driving absenteeism as workers seek informal jobs to support their families.
The fieldwork is now complete. Following a theory of change, the research has identified several solutions addressing the causes of problems discussed in the interviews. We will assess the advantages, effectiveness, feasibility and uncertainties of each solution with Fundación Alsea before presenting suggestions to Alsea.
Before this initiative, some management teams believed that the only way to address informality and turnover was through higher wages – it was all about money. This initiative has shown that it’s not solely about financial compensation but about cultivating an organisational culture that fosters inclusivity by embracing diversity rather than pursuing standardisation.
PRI disclaimer: This case study aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. It is written by a guest contributor. Authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.
Trinetra Investment Management disclaimer: This material has been prepared by Trinetra Investment Management LLP (“Trinetra”) for information purposes only and it is not intended to be relied upon as a forecast or research. While the information herein is considered to be correct, no representation or warranty can be given on the ultimate accuracy or completeness of such information.
Unless otherwise specified, all views expressed are those of Trinetra. These views reflect current economic and market conditions, which are subject to change.
This material, or any views or opinions expressed herein, does not amount to an investment advice nor does it constitute a solicitation or a recommendation to buy, sell or invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy.
