Inter-American Development Bank's IndexAmericas Launched in Chile
Non-financial aspects of performance of companies, such as their sustainability practices and ethical behavior, are increasingly being considered by investors and consumers when they decide where to invest and/or what product or service to acquire. These aspects have direct impact in a company’s stance in the market, its relationship with stakeholders (including employees, customers, suppliers and, partners), and its likelihood of obtaining and maintaining its license to operate. If not handled properly, they can translate into fines, stringent regulations, and bad reputation, which end up having negative financial impact in a firm´s bottom line. Examples abound: Volkswagen’s emissions scandal, Wells Fargo’s massive account fraud, Uber’s (initial) tolerance of sexual harassment practices, and Equifax’s massive data breach, among many others.
In that context, Environmental, Social and Governance (ESG) criteria are key to determine how companies are handling these issues. There are several KPIs that measure them, including those associated to a company’s CO2 emissions, water and energy footprints, preparedness for natural disasters, and it waste management approach (the E component); to its safety and security standards and to how it manages relationships with its employees, suppliers, customers and the communities where it operates (S); and to board composition, leadership, executive pay, audits, internal control, Ethics & compliance practices (G).
In mid-March, the Santiago Center, in the context of its joint-series with the Columbia Law School’s Millstein Center for Global Markets and Corporate Ownership, teamed-up with the Inter-American Development Bank (IADB) and EY to launch, for the first time in Chile, the IndexAmericas, which assesses and recognizes the efforts of 100 publicly listed companies operating in Latin America and the Caribbean that are leading the way in terms of ESG.
Bernardo Guillamon, Manager of the IADB´s Office of Outreach and Partnerships, described the Bank’s commitment to sustainability, the reasons why they engaged in this effort, the IndexAmerica’s methodology and its results. See his presentation here. He explained that IndexAmericas, the first corporate sustainability index developed by a multilateral development bank, assesses companies based on ESG data analysis performed by Thomson Reuters and developed in partnership with S-Network Global Indexes, with Florida International University providing academic support.
Guillamon’s presentation was followed by a panel discussion chaired by EY’s CEO Cristián Levefre, which included the participation of Juan Andrés Camus, President of Santiago’s Stock Exchange; Rubén Alvarado, CEO at the Santiago Subway System Metro S.A; Axel Levêque, CEO at Engie Energía Chile; Cecilia Abati, Coca Cola’s Manager in charge of Corporate Sustainability at the Andean Region; and Karen Poniachik, the Santiago Center’s Director. The panel discussion covered issues such as why only two Chilean companies appear in the 100-best IndexAmericas ranking; what needs to be done to encourage local firms to incorporate ESG criteria in the risk maps and long-term growth strategies; and what Chilean companies were doing to advance their commitment to sustainability and ethics.