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August 01, 2014
Colombian Securities Exchange Joins Sustainable Stock Exchanges Initiative
    by Robert Kropp

The stock exchange becomes the second in Latin America to join the United Nations' initiative, and commissions a report from Sustainalytics on the state of sustainable investment in the region.


Emerging markets, such as those in Latin America, could potentially provide investors with financial returns that exceed those of developed markets. More important, however, is the potential for emerging markets to leapfrog the unsustainable development characteristic of developed markets and organize themselves in sustainable ways.

Along with the potential for political unrest, a sticking point for investment in emerging markets has been the comparatively poor environmental, social, and corporate governance (ESG) disclosures of corporations headquartered in them. One way to improve corporate sustainability reporting is through mandates and recommendations of national stock exchanges; the United Nations' Sustainable Stock Exchanges Initiative (SSE) is leading the effort to improve corporate transparency and performance through increased ESG disclosure.

Until last week, Latin America had one stock exchange that is a member of the SSE. The Brazilian Stock Exchange (BM&FBOVESPA) announced in 2012 that it will recommend that its listed companies either state that they publish a regular sustainability report and where it can be accessed, or explain why they do not do so. Brazil was also one of the first emerging market countries to develop a sustainability stock index, when in 2005 the Bovespa Corporate Sustainability Index (ISE) was launched.

On July 22nd of this year, the Colombian Securities Exchange (BVC) announced that it too has joined the SSE. In addition to the two Latin American exchanges, the initiative has ten members from the US, Europe, Africa, and Asia.

“BVC recognizes the relevance of sustainability for the private sector, which is why it has proposed raising initiatives to foster the knowledge and skills needed in the market to face the challenges of sustainable and responsible investment,” CEO Juan Pablo Córdoba said. “All this, with the vision set on creating long-term value for the prosperity of Colombia and the region.”

Last year, BVC collaborated with Sustainalytics and Deloitte to form the Latin American Sustainable Investment Forum (LatinSIF).

BVC has also commissioned a report from Sustainalytics on the state of sustainable investment in Latin America. The report, entitled Sustainable and Responsible Investing: Overview of Current Practices and Direction, “is a primer on sustainable and responsible investing, an approach that is growing among Latin American investors,” according to Sustainalytics. “It provides a contextual background on SRI in other parts of the world, through interviews, and offers insights into the growing SRI market in Colombia and across Latin America. In addition to being a basic guide to RI, the report also outlines potential strategies for how sustainable and responsible investing can be implemented.”

“The report highlights areas of action for the investment community,” Alejandro Navarro of Sustainalytics said. “The aim of the report is to move capital markets towards a scenario whereby individual value creation considers and contributes to a healthier system overall.”

Earlier this year, Sustainalytics partnered with the Colombian magazine Semana Sostenible (Sustainable Week) to create the nation's first ranking of sustainable corporations. The rankings are intended “to raise awareness among investors and businesses about the growing importance of corporate environmental, social, and governance (ESG) performance among global capital markets,” Sustainalytics stated.

 

 
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