Setting Chile on the road to a sustainable future

By: José Antonio Martínez, Chief Executive Officer, Bolsa de Santiago Aug 2021

Every day, responsible investment is gaining more relevance globally. More than a third of the world’s administrative assets are subject to environmental, social and governance (ESG) criteria, which represents an increase of more than 30 percent since 2016, according to the Harvard Business Review study “ESG Impact Is Hard to Measure – But It’s Not Impossible”.

Recent years have seen a notable increase in companies adopting the Principles for Responsible Investment (PRI). There are currently more than 50 signatories in Latin America, with the highest number in markets like Mexico, Colombia, and Chile.

The figures above reflect a growing trend in responsible investment. Today, more than ever, investors and companies are considering ESG issues in their management decisions. An ESG-informed vision can serve as the basis for sustainable development and adherence to world-class standards. In this context, I would like to share the result from our most recent ESG Investment Practices Study, which concluded that 89 percent of investors are either drafting or already have an ESG investment policy.

Index launch

In light of these global trends, at Santiago Exchange, we are proud to have introduced early this year the S&P IPSA ESG Tilted Index. The instrument we created, in conjunction with S&P Dow Jones Indices, joined the sustainability family indices that include the Dow Jones Sustainability Index Chile (launched in 2015) and Dow Jones Sustainability Index MILA (added in 2017).

These indices have attracted great market interest, both from our issuers that participated to align their ESG performance with international standards and from investors interested in sustainability-focused tools within the Chilean market. Sustainability is a strategic pillar of our purpose to inform, disseminate and promote the best ESG practices in the market and, as such, the launch of the S&P IPSA ESG Tilted Index has undoubtedly been a crucial step for Santiago Exchange.

We believe that this type of tool will help drive sustainable investment, while also facilitating ESG-focused investment decision-making for investors starting out on the path of building portfolios based on sustainability criteria. For decades, we have seen how investors build portfolios based on information provided by market indices. Therefore, adding this new indicator is a milestone in our market and in the search to project a sustainable future.

Major steps to sustainability

The good news has continued in 2021. A few months after introducing the instrument, Itaú Administradora General de Fondos S.A. launched Chile’s first ESG ETF, based precisely on the new market index – a major step on the sustainable path we have set out to follow. These projects that consider ESG criteria are fundamental to the objective of working towards sustainable and responsible investment. They are an engine that enables us to undertake concrete action in sustainability – such as the S&P IPSA ESG – which provides investors and managers with the opportunity to access funds on the Chilean stock exchange and diversify their portfolios with sophisticated, low-cost assets.

Based on some of the benchmarks for the region and the world’s most-followed countries, the S&P IPSA ESG Tilted Index tracks selection criteria based on ESG principles and weighs them with components from S&P IPSA, Chile’s main market index, to measure the performance of the largest and most liquid stocks on the Santiago Exchange. In light of the considerable growth sustainable ETFs have experienced since 2019, we firmly believe that these instruments will attract even more attention from investors and asset managers in the future.

At Santiago Exchange, our challenge is to continue working to have a deeper, and most importantly, more sustainable market in the long term. We plan to continue promoting responsible investment and incorporating more sustainable alternatives for the different market players, committing ourselves to the well-being of our youth and future generations.