To address the need for a broad market ESG benchmark in Mexico, S&P Dow Jones Indices (S&P DJI) and the Mexican Stock Exchange (BMV) joined forces to launch the S&P/BMV Total Mexico ESG Index. S&P DJI’s Silvia Kitchener and BMV’s Rubén Perera sat down to discuss how this innovative index captures a more complete picture of ESG in Mexico and how it could be used to address growing demand for ESG solutions in the region.
- We know that there are many types of environmental, social, and governance (ESG) indices. What is the objective of the S&P/BMV Total Mexico ESG Index?
Silvia: That is correct; there are various ESG indices with different objectives. Some indices use the “best-in-class” approach like the Dow Jones Sustainability MILA Pacific Alliance Index, which selects the top 30% of companies by sustainability score within each GICS® sector. Then, we have the S&P ESG Indices, which are designed to provide improved ESG representation while offering a risk/return profile similar to that of the underlying benchmark, as in the case of the S&P 500® ESG Index vis-à-vis the S&P 500. In a way, the S&P/BMV Total Mexico ESG Index is a hybrid of the “best-in-class” approach and the S&P ESG Indices framework.
In essence, the index seeks to represent the Mexican equity market, featuring companies with the highest sustainability scores within each GICS sector, while also seeking to improve its ESG profile and maintain a similar risk/return profile compared with the benchmark S&P/BMV Total Mexico Index.
- Why are you launching an ESG index in Mexico now?
Silvia: We’ve found that in Mexico right now, there is great appetite for information on ESG. The concept of sustainable investing has been around for quite some time—our oldest ESG indices, the Dow Jones Sustainability Indices (DJSI), go back to 1999. Since then, there has been a growing interest in ESG, and it has especially picked up in the past few years. The BMV launched a sustainable index in 2011 that helped bring the concept of sustainability to the market, but now issuers, asset managers, asset owners, and regulators are actively participating in the process. Many are looking for ESG tools that are sharper than the first generation of ESG indices. Thanks to advancements in ESG data and continued innovations in indexing, we’re able to meet this demand with an index built on deeper datasets.
- What has demand for ESG looked like in recent years, and how important do you think ESG will be moving forward?
Rubén: Demand has definitively increased in recent years. Global investors have integrated portfolios and investment strategies based around the three pillars of sustainability. Some of the largest firms have announced a series of initiatives to position sustainability at the center of their investment strategy, making it an integral piece in the construction of portfolios and risk management, so there is a change in the collective consciousness. Nowadays, not only are companies’ returns evaluated, but there is also a legitimate conscious effort to examine how companies gained their returns and the impact of their activities on our society and the environment. There is a genuine concern from companies to manage resources wisely, because that is what many investors are looking for.
Specifically, at BMV, we have a full commitment to corporate responsibility. We are a benchmark within the Mexican financial market, and we have developed various ESG initiatives including: launching the S&P/BMV IPC Sustainable Index and green, social, and sustainable bonds, creating the first sustainability guide, strengthening the financial culture, and becoming members of the UN Global Compact and Sustainable Stock Exchanges Initiative.