The environmental, social and governance (ESG) movement has rapidly grown, from an increase in ESG reporting to the expansion of sustainability-focused bonds. At Nasdaq, we recognize this Era of Impact, as forward-looking companies leverage ESG to unlock the opportunities of tomorrow.
We spoke with Julieta Artal, head of Corporate Governance and Sustainability at BYMA, about the exchange’s ESG initiatives and increased interest in ESG amid the pandemic.
Over the past several years, ESG has moved into the mainstream, especially as more companies embrace stakeholder capitalism and investors express greater interest in socially responsible investing. When did the exchange first start considering and incorporating ESG?
BYMA is the result of the demutualization of Merval, its predecessor company. From the very first moment – before we were incorporated – we decided that ESG was a core competency and a strategic pillar for us to build the new exchange and modernize the capital market. We had analyzed that it was a key movement that was growing amongst investors. Since 2016, we have been working on the development of products that consider sustainability in listed issuers as well as our own governance, transparency and disclosure.
Was there a particular event or moment that prompted a deeper integration of ESG?
With the launch of our Corporate Governance Panel and the Sustainability Index, we defined the importance of BYMA in promoting ESG in listed companies. These initiatives and some additional ones we developed over time have allowed us to align ourselves with the region and other stock exchanges globally.
BYMA’s Corporate Governance Panel is an initiative focused on observing best corporate governance practices by different companies. Since unveiling this initiative, how have listed companies responded?
Since we launched this initiative, the issuers have begun to improve and adopt certain practices required by the Panel. Today, we have five listed companies as part of the Panel, and we see a growing interest from companies that are gradually incorporating improvements in order to comply with the requirements in the short term.
How has the exchange’s strategy around ESG evolved?
The overall strategy hasn’t changed. We are executing the different milestones as envisioned since 2016. However, we have seen increased interest since the pandemic. This interest confirmed that this aspect would be a critical part of the local capital market.
How does ESG fit into your overall corporate strategy?
Since we considered ESG one of our strategic pillars early on, we always believed that we needed to guide by example. As such, we have made ESG transversal to our company. Financial education and the promotion of ESG products, as well as digitization of our services and the protection of the environment, have been issues at the core of the business.
Who leads ESG at your exchange?
The company structure has a Corporate Governance Committee integrated with members of the board of directors, and we have a sustainability area that is in charge of both internal management as well as the development of products that promote best practices in this area.
In late 2018, BYMA and Inter-American Development Bank launched the Sustainability Index. As ESG has become more mainstream, how has the index performed? And can you describe the evaluation criteria to be included in this index?
The index assesses issuers' performance on several fronts: environmental, social, corporate governance, and contribution to sustainable development goals. The coverage of ESG information is carried out by Refinitiv, which provides objective ratings based on publicly accessible sources. The index is rebalanced annually.
Trends that we have observed are an increase both in the number of sustainability reports or integrated reports as well as scores achieved.
What ESG areas or goals are you particularly focused on for the short and long term?
In the short term, we expect to have more companies on the Corporate Governance Panel and more green, social and sustainable bonds listed. In the long term, we expect to continue promoting financial education, attracting more small- and medium-sized enterprises (SMEs) to the capital market and more diversity on the exchange and on listed companies.
How do you measure your ESG progress?
We measure our progress through different indicators. The first group refers to how much impact we have on the market, so we measure how many companies are part of the Corporate Governance Panel, have issued green, social and sustainability bonds, or how many SMEs have been accessing to capital market through our platforms. The second group of indicators has to do with our own company, for example, diversity, use of natural resources and digital developments that reduce the use of paper.
How are you communicating your ESG story to your various stakeholders?
We communicate through our website, our annual report, and our sustainability report. We also have newsletters that we send via email to participants to disclose launches and the state of different products. Our leadership has been recognized by various entities and is invited to a significant number of events related to ESG products in the capital market. Some notable examples include roundtables organized by the regulator and by local universities.
What opportunities do you see to enhance ESG data reporting and transparency?
As an issuer, BYMA has its own sustainable reports aligned to GRI standards.
As an exchange, we have included ESG reporting in our listing rules so that companies that have sustainable or integrated reports must inform the exchange. We will use this opportunity to look at the different reports and suggest changes so that year over year, the transparency can increase. We follow up on the information, which is considered a key input for the sustainability index.
How will your ESG goals/initiatives benefit not only the company but also impact the local capital markets?
The pandemic certainly has made more companies approach the capital market to understand ESG initiatives to begin to adjust or accelerate what they were doing. Based on this growing commitment, we have a strategic alliance and growing communication aligned with our regulator, which also works actively to promote sustainability.
How do you think ESG will continue to evolve?
We believe that this trend is here to stay. We have seen that boardrooms are feeling this as an obligation, not only because of their shareholders but because their consumers are expecting it. The ecosystem is aligned, and companies are improving, but a significant amount of work and education is necessary to achieve further advancement and alignment in the region.