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 Carlos Barrios, Director of Investor Relations and Sustainability at Bolsa de Valores de Colombia (bvc), about the exchange’s ESG evolution and its drive to encourage listed companies to embrace ESG disclosure.
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? Was there a particular event or moment that prompted a deeper integration of ESG?
At bvc, we began disclosing ESG in 2014 under the global standards for sustainability reporting (GRI), looking to be an example for our listed companies. Two years later, we started to request sustainability reports with an international standard from our issuers through bvc’s IR Recognition program.
How has the exchange’s strategy around ESG evolved?
From bvc’s perspective, sustainability with ESG criteria has evolved from purely disclosing as a corporation to encouraging market participants to have even better disclosure and investment decision-making with regards to ESG criteria.
How does ESG fit into your overall corporate strategy?
Sustainability is now a central pillar of bvc’s corporate strategy, in which we promote better disclosure, the development of sustainable products and services and equal market access to any type of companies and investors. As a corporation, bvc has been disclosing environmental management, employees and suppliers’ development, gender equality and, of course, all corporate governance issues in order to become more transparent, reliable and efficient.
Who leads ESG at your exchange?
All sustainability issues are led by our CEO, Juan Pablo Cordoba, and channeled through the IR and Sustainability teams. At bvc, we have also created an internal sustainability committee to review and analyze ESG issues. All initiatives, such as our sustainability policy and strategy, are approved by the board of directors.
What ESG areas or goals are you particularly focused on for the short and long term?
In the short term, bvc is updating its ESG corporate policies, enhancing the disclosure and becoming carbon neutral. Going forward, we aim to complete bvc’s portfolio with more sustainable products and services, like an ESG index and an ETF for the local market.
We now have 12 thematic bond issuances at bvc: five green, five social and two sustainable, totaling COP$3.4 trillion. All of the ESG-focused bonds were oversubscribed by an average of 2x, and all of them achieved AAA rated. Most recently, bvc launched SLB bonds, completing the family of these thematic bond types following the International Capital Market Association standard.
Something that I would like to highlight is the outstanding impact of those thematic issuances that have helped to support Colombia’s transition to a low-carbon-emissions and more inclusive economy:
- Green bonds: More than 300 projects in renewable energy, energy efficiency and green building have been financed.
- Social bonds: More than 40,000 projects in micro credits for women, cultural and creative industry, victims of the armed conflict and student loans.
- Sustainable bonds: 17 projects in public transportation, waste management, environmental conservation and potable water infrastructure.
In terms of the outlook for these types of issuances, we’ve seen a lot of interest not only from corporations but also from the public sector, including municipalities and state-owned companies. In general, companies are currently assessing the market conditions, looking to come back to the market soon in a more socially responsible or greener way to help with the economic recovery of Colombia after the pandemic.
Last summer, BVC and GRI issued an ESG Reporting Guide for Colombia issuers. What insights and benefits will issuers gain from the report? Have you seen issuers disclose more ESG metrics as a result?
Since July 2020, bvc has continued promoting best practices for ESG disclosure with the launch of the Colombian Securities Market Sustainability Guide that’s in conjunction with GRI.
The ESG reporting guide contemplates different levels of maturity and progress among issuers, recognizing reporting as a continuous improvement process. The guide serves as a starting point for companies that are beginning to report ESG metrics while also providing guidelines to improve reporting quality for companies that have already started disclosing data under GRI standards and have expressed interest in reporting Task Force on Climate-related Financial Disclosures (TCFD) or Sustainability Accounting Standards Board (SASB) metrics.
Colombian issuers are more likely to report and disclose more ESG metrics thanks to bvc’s IR Recognition program, which launched in 2012. Through this program, bvc, on a voluntary basis, surveys its issuers every year on aspects of corporate governance and sustainability. In 2020, bvc fostered sustainability disclosure with better environmental and social criteria. Today, the IR Recognition has:
- 33 listed companies complying with the recognition requirements
- 29 reports GRI and SDGs
- 14 are part of the Dow Jones Sustainability Index
bvc was ranked eighth among the principal global exchanges in the Corporate Knights Measuring Sustainability Disclosure: Ranking the World’s Stock Exchanges 2019 report, which was released during the World Economic Forum in Davos, Switzerland, in February 2020. We were recognized as the only Latin American Exchange in the top 10. The index evaluated 6,261 companies at 49 exchanges on quantitative indicators, including energy consumption, carbon emissions, water usage, waste management, labor aspects, and others.
In December 2020, the Colombian market was recognized once again for the level of ESG information disclosure provided by Colombian listed companies via the IR Recognition program. Together with AG Sustentable and the Swedish International Development Cooperation Agency, GRI researched ESG disclosure and sustainability in the principal Latin American capital markets, including Colombia, Chile, Peru, Mexico, and Argentina. The Colombian results stood out against the other Latin American countries in the study. More specifically:
- 70% of Colombian-listed companies report sustainability, representing the highest percentage among other Latin American countries
- 88% use GRI for reporting
- 49% integrate their sustainability report into their annual report
- 87% externally verify reports
How do you measure your ESG progress?
The progress is measured by revising KPIs disclosed in our sustainability report and benchmarking with peers. We are creating a new sustainability strategy with specific goals and KPIs.
How are you communicating your ESG story to your various stakeholders?
At bvc, we communicate our ESG story by using the sustainability report, social media and corporate presentations.
What opportunities do you see to enhance ESG data reporting and transparency?
Sooner than later, what is going to happen is the convergence of standards (GRI-SASB-TCFD) like the International Financial Reporting Standards with accounting rules. This will foster greater ESG disclosure in general.
How will your ESG goals/initiatives benefit not only the company but also impact the local capital markets?
Exchanges, because of their position in the financial system, must lead by example. All of us at bvc have been aware of that. We have established a set of initiatives and goals that impact not only our corporation but also the market to help our economy transition to becoming low carbon and more digital.
How do you think ESG will continue to evolve?
The evolution has gone from a nice-to-have to a must-have. Today it’s unthinkable for a company not to disclose, or an investor to request, ESG information because ESG risk can quickly become financial risks.