Sustainable development: the Santiago exchange's agenda

Published by: José Antonio Martínez, Chief Executive Officer, Bolsa de Santiago May 2019

To generate value in the present day, a company must go beyond recording positive financial figures. Financial figures are merely a reflection of good comprehensive management and investors know this. Businesses around the world are now expected to undertake projects that are not only economically feasible, but that also add value for investors and to the community in order to face the future in a sustainable manner. This vision is shared by society as a whole, the various agents of the financial system and, of course, exchanges.

In this context, sustainable development is a framework that exchanges can use to act and facilitate change. In an increasingly challenging environment, exchanges work to respond adequately to the various stakeholders who require new financial instruments, as well as savings and investment options, favouring robust trading platforms at a lower cost and a strong investor base.

There is another factor involved: to compete in an increasingly interactive environment demands the perspective of a global competitor. This is part of the strategic vision at Santiago Stock Exchange, Chile’s principal exchange. With innovation as a cornerstone, we have undertaken several initiatives in the areas of technology and sustainability. Our objective is to create a deep, diverse market that offers ample opportunities for financing and investment.

We hold a prominent place in Latin America. According to International Monetary Fund statistics, the Exchange ranked first in terms of GDP/market capitalisation in 2018 on the Integrated Latin American Market (MILA), which includes exchanges in Chile, Colombia, Mexico and Peru. Likewise, it led in the area of equity funding (IPO and capital increases), with a total of US$5.2 billion, and was first in trading debt instruments at the regional level. In terms of amounts traded in shares, the daily average number of trades of more than US$190 million made Santiago Exchange the third largest exchange in Latin America.

The transformation of the Chilean business world is evident. In a market that demands that businesses grow and generate value for their shareholders and stakeholders by integrating ESG (environmental, social and corporate governance) matters, we have taken on a role of promoting best practices and international standards in these areas.

Therefore, we generated Yale University’s SS Index with ESG Compass, through which we offer Chilean companies listed on the exchange an exclusive analysis of their own stakeholders’ perceptions of their ESG practices. We have also worked with EY to publish La Voz del Mercado, a survey of Chilean and international market agents’ perceptions of the corporate governance and sustainability practices of the main Chilean companies. Furthermore, we have partnerships with several local and international organisations to give classes, seminars and workshops on ESG, Investor Relations and Human Rights matters. We have promoted and drafted recommendations for transparency for our issuers and guidelines on how to promote, report and invest in a sustainable and responsible manner.

In keeping with global trends, we worked with S&P to launch the Dow Jones Sustainability Index Chile and the Dow Jones Sustainability MILA Pacific Alliance Index. In 2018, the exchange launched new Green and Social Bonds, with six successful placements to date. The resources from these are used to fund environmental and/or social impact projects. This last initiative earned us recognition at the fourth Climate Bonds Initiative's Annual Green Bond Pioneer Awards (GBPA) this year. This entity recognises organisations, institutions and governments that are taking the initiative to mobilise green funding in order to create and attract green investments and, at the same time, build confidence in the market.

The Santiago Exchange is a member of the World Federation of Exchanges, and takes part in its Sustainability Working Group, a platform that enables exchanges to share knowledge and best practice on the promotion of sustainability and the development of environmental, social and corporate governance matters.

Our efforts are designed to create a transparent, open, dynamic and competitive market with excellent products and services for our customers. This is even more essential in a country like Chile, which seeks to become a financial centre that attracts international investors and issuers. To do so, the exchange must be innovative and should focus on generating new and attractive investment opportunities, as well as optimising its liquidity and businesses.

In that same vein, we have expanded our role as a technology company. In 2018, we were the first stock exchange in Latin America to launch a system for short sales and securities lending, which was developed using Blockchain technology. This year, we will make Optimus, a new administrative system for managing operations for securities brokers, available to our customers. Developed with SAP Hana database technology, the system will make the operating and business flow more agile and simple.

Finally, we have put ourselves in the world’s eye through our partnership with S&P Dow Jones for generating, calculating and trading our stock indices. We have made profound changes to the trading systems, including the addition of closing and volatility auctions, anonymous market, automatic suspension of operations in the event of drastic changes in price and auctions for low-liquidity shares, all of which meet the highest international standards.

Our objective is to support the business growth of current and future customers, expand the market and contribute to the growth of the economy, the market and the country as a whole in order to make Chile a more attractive place for local and international investors.