Leading in an Era of Impact: Inside Bolsa Mexicana de Valores’ Decade-long Journey to Build Sustainable Finance in Mexico
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 Luis René Ramón, director of Financial Planning, Investor Relations and ESG Bolsa Mexicana de Valores, and Nalleli Barajas, deputy director of ESG at Bolsa Mexicana de Valores, to get their insights on the exchange’s ESG journey and their goals for the future.
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?
Bolsa Mexicana de Valores (BMV) began to incorporate ESG initiatives over a decade ago with the launch of “IPC Sustentable,” the first ESG Index in Mexico and the second in Latin America. Since then, BMV has been one of the leading promoters of financial awareness and sustainable finance in Mexico. The chart below outlines our journey towards sustainability.
Was there a particular event or moment that prompted a deeper integration of ESG?
There wasn’t a particular event, but we have always supported sustainability efforts through strong engagement and collaboration with financial regulators, issuers, investors, market intermediaries and academia, to name a few. Strategic alliances have played a crucial role in understanding the ESG global landscape and incorporating best practices in Mexico—from founding Mexico’s first carbon trading platform and opening a stock market museum to incorporating labeled bonds to BMV’s product offering and strengthening and promoting governance.
How has the exchange’s strategy around ESG evolved?
BMV, being a central point of contact for issuers, investors, and market intermediaries, is a vital institution that serves as an engine in the Mexican economy’s transition toward sustainable development. Our strategy has evolved from building the infrastructure and processes necessary to foster ESG practices toward developing capabilities and actively engaging with stakeholders. In 2020, BMV developed a materiality analysis to define a sustainability plan and model going forward.
BMV’s sustainability model:
How does ESG fit into your overall corporate strategy?
ESG is a core strategic mandate and an integral part of BMV’s strategy to create sustainable value for Mexico and deliver long-term growth. We perceive sustainability not as an area but as a fundamental aspect in everything we do.
Who leads ESG at your exchange?
BMV’s ESG agenda is reviewed and authorized by the CEO and the board of directors. All initiatives are coordinated by the sustainability department within the Investor Relations Office. Additionally, BMV has a sustainability working group with the heads of key departments that meets on a monthly basis.
Last summer, BMV and S&P introduced a new ESG index. Since then, how have investors reacted, and how has the index performed?
Investors welcomed with open arms the implementation of a new ESG index, which has outperformed the main index (IPC).
Do you have any plans to launch additional ESG-related products?
We are developing a platform that will allow issuers to report and communicate ESG data more transparently and effectively to different stakeholders. Our goal is to deliver ESG and financial data in the same format.
What ESG areas or goals are you particularly focused on for the short and long term?
Our ESG goals are three-fold:
1. Increase the development of ESG markets by:
- Increasing the number of ESG securities by supporting qualified green or social enterprises in obtaining financing.
- Contributing to the development of consensus around a global and local sustainability taxonomy.
- Building ESG capabilities and training sessions.
- Introducing value-added services, such as the development of an ESG data platform and information sharing.
2. Strengthen financial awareness through:
- Webinars, infographics, lectures, social media, blog, podcasts, website, etc.
- Exchange school and training sessions.
- Exchange Museum.
3. Set the example by:
- Strengthening governance at all levels in the company through policies and procedures.
- Identifying ESG risks and generate mitigation mechanisms.
- Aligning our ESG reporting to environmental and sustainability standards.
- Collaborating with other financial market participants to develop products and services.
How do you measure your ESG progress?
Currently, we measure our ESG progress through KPIs, which are reviewed quarterly with the Sustainability Working Group. Additionally, we track BMV’s rating by several global and local ESG assessment firms. Starting 2022, ESG metrics will be incorporated in the annual performance evaluation of senior management and the Sustainability Working Group will report to a designated board member.
Which of the UN’s 17 Sustainable Development Goals (SDGs) are you working toward?
- SDG 4 - Quality education. We strengthen financial awareness in Mexico.
- SDG 5 – Gender equality. We ensure the full and effective participation of women and equal leadership opportunities at all organizational levels. Additionally, we encourage both public and private companies to disclose their equality efforts on their websites and annual reports.
- SDG 8 – Decent work and economic growth. We enable the growth and sustainable development of Mexico through our products and services, foster new markets and support entrepreneurship, creativity and innovation.
- SDG 12 – Responsible production and consumption. We encourage listed companies to adopt sustainable practices and incorporate sustainability information in their reports.
- SDG 13 – Climate action. Development of green markets, carbon financial platform and capability creation for public and private companies.
Additionally, BMV’s environmental strategy has five action points:
- Energy efficiency
- Water conservation
- Waste management
- Carbon neutrality
- Setting an example for the market
- SDG 17 – Alliances to achieve goals. We have strategic alliances to collaborate and achieve sustainable and transparent markets, such as the SSE initiative, FIAB (Sustainability Group), UN Global Compact, Sustainability Committee with issuers, industry associations, etc.
How are you communicating your ESG story to your various stakeholders?
We communicate our ESG strategy through BMV’s website, integrated annual reports, quarterly conference calls, specialized forums, press releases, and social media.
What opportunities do you see to enhance ESG data reporting and transparency?
Investors need access to quality information about how companies manage material ESG risks and seize opportunities to make informed investment decisions. BMV has implemented voluntary disclosure of BMV’s sustainability guide (as phase one) and offers several ESG courses throughout the year, as well as coaching. Furthermore, BMV is developing an ESG reporting platform to offer issuers a comprehensive view of their own ESG data, as well as data from peers. This tool will help investors assess ESG risks and opportunities. One big opportunity to enhance ESG data reporting and ensure greater transparency is to consolidate ESG international standards and adapt them to local circumstances.
How will your ESG goals/initiatives benefit not only the company but also impact the local capital markets?
BMV creates sustainable value for Mexico by recognizing the importance of integrating long-term ESG objectives into financial markets. Our role is fostering and promoting the development of a Mexican sustainable financial system and create a path towards low greenhouse gas emissions and transition towards an inclusive, financially aware society and sustainable economy. Since 2016, local issuers have listed 57 billion dollars, or 24 labeled bonds (nine green, 14 sustainable and one social), through BMV’s platform.
How do you think ESG will continue to evolve?
Exchanges will continue creating markets and products that support the scaling-up of sustainable finance. BMV is leading by example by incorporating ESG disclosure into our own sustainability reporting, monitoring KPI’s at every level of the organization and educating staff about sustainability opportunities and risks. BMV will continue working together with our peers through the World Federation of Exchanges, the Sustainable Stock Exchanges and United Nations’ Sustainable Development Goals and Global Compact to name a few. The next step is to collaborate with rating agencies to consolidate standards and make them local.