Listed Latin American companies are lagging behind their peers in other world regions when it comes to their sustainability performance, RobecoSAM’s progress report for five major Latin American countries shows. The regional underperformance is also reflected in the low percentage of Latin American companies qualifying for inclusion in the Dow Jones Sustainability Indices and must be addressed if Latin America is to succeed in attracting inflows from sustainability-oriented investors.
RobecoSAM’s progress report for Latin America covering the five major countries of Brazil, Chile, Colombia, Mexico and Peru provides an overview of local listed companies’ performance on environmental, social and governance issues, based on their participation in RobecoSAM’s annual Corporate Sustainability Assessment (CSA). The aim is to provide insights into the current level of sustainability management in Latin America and highlight strengths and opportunities for improvement.
The results of the 2018 CSA show that Latin America scored lowest among all regions in terms of companies’ sustainability management. Of the 240 companies in Brazil, Chile, Colombia, Mexico and Peru that were invited to participate in the 2018 CSA, 38% completed the assessment. The remaining assessed universe was evaluated on the basis of publicly available information.
Colombian businesses were found to be the region’s clear sustainability leaders, both in terms of their overall score and at the dimension and criteria levels, followed by companies in Brazil. Chile, Mexico and Peru showed a much lower average performance, although results for Chile and Mexico are diluted by the relatively larger universe in these markets, which represent nearly 75% of the regional universe.
RobecoSAM’s progress report identifies a large gap between active CSA participants and companies assessed solely on the basis of publicly available information. Overall, active participants were found to be more advanced in terms of the integration of sustainability criteria into their decision-making and management structures. In fact, in the larger universes such as Chile, these companies’ average is essentially on par with the global average. Here, the lower average score for the universe as a whole is due to a significant number of companies that are doing little to adopt a more sustainability-oriented approach and/or have little or no transparency on their environmental, social and governance performance.
The report concludes that, in countries with a large universe of companies such as Chile and Mexico, the focus must be on improving laggards’ average performance and ensuring transparency on key sustainability issues. In countries with smaller markets such as Peru and Colombia, the challenge is to provide exposure to investors although companies have a smaller capitalization.
Overall, Latin America faces the challenge of advancing companies’ integration of sustainability criteria and, in particular, addressing the significant gap between the leading minority and the lagging majority. Closing this gap will require a concerted multi-stakeholder effort involving the companies themselves, local stock exchanges as well as investors.