Index profile

Corporate Sustainability Index (ISE)

Index family
Corporate Sustainability Index (ISE)

Principles

BM&FBOVESPA’s Corporate Sustainability Index (ISE) is designed to measure the return on a portfolio composed of shares of companies highly committed to sustainability, considering the economical, social and environmental aspects (the triple bottom line), and also general aspects, corporate governance aspects and nature of the product.

The index was a response to investors’ demand for socially responsible and sustainable investments in Brazil. After ISE’s creation, many funds were launched based on the index and dedicated to socially responsible investing (SRI).

An independent Counsel was established for ISE’s development, which is composed of the Brazilian Association of Pension Funds (ABRAPP); National Association of Investment Banks (ANBID); Association of Capital Markets Analysts and Investment Professionals (APIMEC); BM&FBOVESPA; Brazilian Institute of Corporate Governance (IBGC); Ethos Institute of Social Responsibility; Brazilian Ministry of the Environment; International Finance Corporation (IFC) and the United Nations Environment Programme (UNEP). The methodology for selecting the companies and the questionnaire were developed by the GVCes - Center for Sustainability Studies of the Business Administration School of São Paulo (FGV-EAESP).

Excluding criteria

ISE adopts the ‘positive screening’ for selecting the companies (there is no automatic exclusion), in order to give opportunity to all companies to be included in the portfolio if they improve their sustainability practices. This police meets one of ISE’s objectives, which is to stimulate the good practices in the Brazilian market.
Nevertheless, in the questionnaire there are questions which attribute a negative weight if the company’s product is prejudicial to health, the environment, etc. (in the dimension “Nature of the Product”).

Positive criteria

In order to evaluate the performance of BM&FBOVESPA listed companies about their sustainability aspects, GVCes designed a questionnaire to verify the performance of the companies which issued the 150 most liquid stocks (the eligible universe). The questionnaire considers the “triple bottom line” concept – an integrated analysis of environmental, social and economical aspects – as well as three more principles: a) general criteria (which inquires, for example, the company’s commitment to global compacts and if the company publishes social balances); b) nature of the product criteria (which inquires if the company’s product causes damages and risks to consumers health, among other issues); and c) corporate governance criteria.

The fulfilling of the questionnaire is voluntary, the questions are objective and the company must send specific documents to corroborate its answers.
The companies’ answers will be analyzed by a statistical tool called “cluster analysis”, which identifies groups of companies with similar performance and points the group with better general performance. The companies included in this group will compose ISE portfolio (which will have a maximum of 40 companies), after approval of the Board.

Methodological Rules
The eligible companies must have minimum liquidity levels, that is, their shares must be included among the 150 most liquid ones and they must have trading session presence of more than 50% considering the last twelve months.

ISE is a total return index, and is weighted by the free float of the component stock. Moreover, there is a 25% limit for the participation of one company in the portfolio.

The index is calculated in real time, and its portfolio is daily disclosed in BM&FBOVESPA’s website. It is rebalanced annually, in which occasion the companies are re-evaluated in relation to their sustainability levels. The companies that no longer meet the sustainability requirements and which are no longer among the “best in sustainability” will be excluded from the portfolio.

Research done by

GVCes – Centro de Estudos em Sustentabilidade da EAESP/FGV (Center for Sustainability Studies)

 
Funds based on the index k.a.
Finance-/tech. - support by Auto-sustainable; Zulässige Unternehmen zahlen Gebühren für den Fragebogen (sie erhalten Feedback von GVCes), Portfolio Unternehmen zahlen Gebühren für die Verwendung des ISE Logos
Benchmark Ibovespa
Company profiles www.bmfbovespa.com
 

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