The Value of ISE - Main Studies and Investor Perspective

Versão em inglês do estudo produzido pela equipe GVces
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The idea of creating a Corporate Sustainability Index (ISE) for B3 came up almost nine years ago, and materialized when it was launched in November 2005. Since then, the index has established itself as a key driving factor for companies seeking a business model that can contribute to sustainable development.

In 2010, when strategic goals were defined for the ISE over a five-year timeframe, the ISE's Deliberative Board (CISE), B3 and GVces committed themselves to work on raising the number of companies participating in this process, increasing the volume of invested funds and products linked to the index, and turning it into a benchmark for sustainable and responsible investments, among other committments. These goals were defined based on a series of discussions with the key ISE stakeholders and, in order to reach such goals, B3 ordered this study to expand corporate participation and enhance investor engagement.

Along this path, the benefits of taking part in this process are increasingly clear to companies.The ISE stands out among its peers since it carries a collective process for improving its main company evaluation tool, which consists of a basic questionnaire available through inquiries, public hearings, workshops or other ways of improving and revising the questionnaire. This process imparts legitimacy to the adopted methodology and better reflects society’s demands for corporate sustainability.

From a corporate perspective, the value of participating in voluntary sustainability initiatives is perceived through intangible gains afforded by such experiments, such as in reputation and experience sharing within the business community, or through tangible gains, which are still little known, but have been addressed in studies that focus on market value, the relationship between financial performance and social and environmental performance or the financial market’s response to the actions of “more sustainable” companies.

In our conviction that the companies participating in the ISE process are at the forefront of dealing with a topics so complex as sustainability, we feel there is a need for strengthening the participation of a key player in this scenario – the institutional or retail investor.

To investors, sustainability represents an opportunity as the Sustainable and Responsible Investment (SRI) market grows and substantiates a demand for companies whose activities can be sustained in the long run by reaping environmental, social and economic gains.

We note that there is still a long way to go towards strengthening and consolidating the market mechanisms capable of rendering the new economy feasible. To do so, we place our chips on engaging and approaching institutional investors to help them fulfill an agenda driven by consolidated international initiatives, such as the Principles for Responsible Investment (PRI) or, under construction, such as the Global Initiative for Sustainability Ratings (GISR).

This study has been prepared with the aim of bringing together the main research lines that seek to identify and convey the value of participating in initiatives like the ISE. This document is structured on three major fronts. On the first front, we conducted a survey to collect the main data on SRI trends in the two largest market niches: Europe and the United States, besides results from an MIT research study conducted among executives on the value of sustainability in the current market. Next, we carried out a non-exhaustive survey on academic studies that seek to identify the intangible and tangible gains achieved by companies through their participation in the ISE or related initiatives. Finally, we present the results of a survey done with major Brazilian pension funds aimed at investigating the knowledge of the ISE and how it could be used in their analysis and decision-making process.

We cannot be sure about the direction towards which the world and the international economy will be moving in the future, but surely they will be different from today, and those companies and investors better prepared for that future will reap the benefits. We still have a long way to go, but we hope to contribute to the construction of this new road leading to sustainable development.

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