Mexican Stock Exchange launches the world’s third sustainability index

Mexican Stock Exchange launches the world’s third sustainability index

Mexico’s stock exchange recently announced the launch of its new sustainability index, which in addition to the FTSE4Good Index and the Dow Jones Sustainability Index, is only the third of its kind in the world. With a total stock value of $450 billion, Bolsa Mexicana de Valores (BMV), is the second largest financial exchange in Latin America.

In a video interview with MexicoToday, BMV president Luiz Tellez said that, “The Sustainability Index puts the Mexican Stock Exchange at the level of the most important exchanges in the world.” Through participation in the sustainability index, member firms will also help support Mexico’s commitment to reduce its greenhouse gas emissions by 30 percent by 2020.

BMV selected EIRIS and it’s Mexican partner, Ecovalores, to develop the methodology and assessment framework for the new index. In addition to the FTSE4Good Index Series and the Johannesburg Stock Exchange’s Socially Responsible Investment (SRI) Index, this is the third index for which EIRIS will be designing a framework.

Members were selected from among the 70 most traded stocks on the BMV exchange. The Mexican Sustainability Index currently includes 23 companies including Alfa, Cemex, Coca-Cola FEMSA, Mexican airport operator Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., known as OMA, Kimberly-Clark de Mexico, TV Azteca, and Wal-Mart Mexico.

Together with South Anahuac University, a Mexican educational leader which participated in the building of the index, EIRIS and Ecovalores will also evaluate the environmental, social and corporate governance (ESG) performance of Mexican companies and determine which of them meet the sustainability requirements to be listed on the index.

Companies will be assessed based on their performance, impact, and responses to emerging ESG issues. These issues include climate change, human rights, reporting, and policies and systems to counter bribery. The companies are assessed on a variety of industry-appropriate metrics that are then weighted according to the sector the company belongs to. Only companies that scored in the top 50 percent of more than 3,000 international companies are eligible for inclusion in the index. As part of the qualification process, member firms will also have to comply with international standards set by the United Nations, the World Bank, ISO14000 and others.

In 2009, a report from the World Federation of Exchanges (WFE) identified climate change and the transition to a low-carbon economy as key forces driving sustainability into the priorities of mainstream investment. Peter Webster, Executive Director of EIRIS, said, “Stock exchanges around the world—particularly those in emerging markets—are embracing the view that they have a key role to play in promoting sustainability and greater disclosure by their listed companies.” It will be interesting to see if other exchanges follow BMV’s lead by launching their own sustainability indexes.