Sao Paulo/ Washington DC, December 1,
2005. - Brazil’s new stock market indicator, the Business Sustainability
Index (ISE), was launched by Bovespa at the start of today’s trading session.
The index, the first of its kind in Latin America, was developed by the
Center for Sustainability Studies at the Getúlio Vargas Foundation (FGV-EAESP),
with financial support from the International Finance Corporation, the
private sector arm of the World Bank Group.
The index includes 28 local companies listed on the Sao Paulo Stock Exchange
and will track not only their economic and financial performance, but also
their corporate governance and environmental and social performance. The
new index was announced as the centerpiece of IFC's International Conference
on Sustainable Finance in Emerging Markets, in Sao Paulo.
Assaad Jabre, IFC’s Acting Executive Vice President, said during the launch
that the index “is a validation of the many companies that recognize the
depth of the value proposition inherent in environmental and social responsibility.”
He added, “More and more companies in the emerging markets recognize that,
to be competitive and efficient, they have to go to the markets. And when
they take that step, they discover that the markets want more information,
more transparency. And they want higher standards on environmental issues,
social issues, and corporate governance. This index will help position
Brazilian companies at the cutting edge of these trends.”
A sustainability index serves two purposes: it informs potential investors
about the sustainability of listed companies' operations, and in doing
so it encourages listed companies to focus more on environmental, social,
and corporate governance concerns. An index can thus help a country's
business community understand how attention to sustainability is good for
The Bovespa Sustainability Index is part of a trend to integrate sustainability
into lending and investment in emerging markets—a trend widely supported
by Brazil's private sector and one that IFC is promoting worldwide. Other
developing countries are looking to launch a sustainability index, with
Brazil's index expected to serve as a model. The financing to develop
the methodology for the ISE came from IFC’s Sustainable Financial Markets
To view the Index initial portfolio, please click on the following link:
Methodology and selection process
Participants in the initial portfolio were chosen from among 63 firms that
answered a questionnaire designed by the Center for Sustainability Studies.
The center has developed the methodology for the sustainability index
and sent the questionnaire to 121 of the 150 firms whose shares are most
traded on the Bovespa. The index will be revised annually and weighted
by a free float (the number of shares circulating on the market) of the
firms comprising it.
The index was designed on the basis of the international “triple bottom
line” concept, which makes a comprehensive valuation of firms in terms
of the economic and financial, social, and environmental dimensions. Corporate
governance criteria and indicators have been added to triple bottom line
principles, following the example of the Johannesburg stock exchange index.
The questionnaire sent to firms assesses the economic/financial, social,
and environmental dimensions of their operations, using four sets of criteria:
political (indicators of commitment); management (plans, programs, targets,
and monitoring); performance indicators; and legal compliance (evaluating
compliance with competition, consumer, labor, environmental, and other
The ISE Board consists of the Brazilian Private Pension Fund Association
(ABRAPP), the Association of Capital Market Investment Analysts and Professionals
(APIMEC), the National Association of Investment Banks (ANBID), the São
Paulo Stock Exchange (BOVESPSA), the Brazilian Institute of Corporate Governance
(IBGC), the Ethos Institute of Business and Social Responsibility, the
International Finance Corporation (IFC), and the Ministry of the Environment.
ISE in Bovespa
The new index will reflect the return earned on a portfolio of shares issued
by the best performers on all dimensions of business sustainability. It
is intended to serve as a benchmark for socially responsible investment
and to foster good practices in the Brazilian business world. The
ISE will be calculated continuously throughout the trading session, using
the prices of the latest spot-market trades. Shares included in the index
are selected from those most heavily traded on the Bovespa in terms of
liquidity, weighted in the portfolio by the market value of assets available
The index will be revised annually on the basis of the following procedures
Criteria for inclusion
· The shares must be among the 150 most traded
over the 12 months prior to the revaluation.
· Shares must have been traded in at least 50
percent of all trading sessions in the 12 months prior to formation of
· Companies must satisfy the sustainability
criteria specified in the annual questionnaire.
Criteria for exclusion
· If, during the lifetime of the portfolio,
the issuing firm goes into judicial receivership or bankruptcy, its shares
will be removed from the ISE portfolio. In the event of a public offering
resulting in a significant portion of shares being withdrawn from circulation
on the market, the firm will again be removed from the portfolio. In either
case, the necessary adjustments will be made to ensure continuity of the
· If, during the lifetime of the portfolio,
an event occurs that significantly alters a share’s levels of sustainability
and social responsibility, the ISE Board may decide to remove the firm
from the portfolio.
· If, at the time of the annual review, the
share fails to satisfy the sustainability criteria specified in the questionnaire,
the firm will be removed from the portfolio.
The International Finance Corporation, the private sector arm of the World
Bank Group, promotes sustainable private sector investment in developing
and transition countries, helping to reduce poverty and improve people’s
lives. IFC finances private sector investments, mobilizes capital in the
international financial markets, helps clients improve social and environmental
sustainability, and provides technical assistance and advice to governments
and businesses. Its 178 member countries provide its share capital and
collectively determine its policies.
From its founding in 1956 through FY05, IFC has committed more than $49
billion of its own funds and arranged $24 billion in syndications for 3,319
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY05 was $19.3 billion for its own account and $5.3 billion held
for participants in loan syndications. For more information, visit www.ifc.org.
For more information:
International Finance Corporation (IFC)
IFC’s Sustainable Financial Markets Facility
Bovespa Press Office in Sao Paulo, Brazil
Telephone: + 55 11 3233 2372 /2093/2025/2498
Center for Sustainability Studies – GVces
Getulio Vargas Foundation / FGV-EAESP