7/29/21,

New ISE 2022 Methodology

B3’s Corporate Sustainability Index (ISE) will now include priority ESG topics for each economic sector

 

ISE B3 is one of the world's first ESG indices and has been further enhanced since it was launched in 2005.

The ISE has just been revised and will now include external data on climate governance, in addition to expanding the reports and information base available to investors and companies.

“The new ISE B3 will act a catalyst for the ESG theme in Brazil by strengthening its role both as a benchmark for investors and as a guide for companies”, says Ana Buchaim, People, Marketing, Communications and Sustainability managing director at B3.

Registration for the 2022 edition of the Corporate Sustainability Index now open

Companies eligible for participation in the 2022 ISE B3 will have until September 10 to complete the online questionnaire, which now focuses on the most relevant topics for the sector within which those companies operate.

The questionnaire was designed based on a process of listening to investors, companies and specialists that started in 2017. The public consultation concluded on May 28 received 1,278 contributions that were consolidated in a version released to the market on July 20.

A preview of the ISE portfolio due to be effective next year will be released on December 1st, 2021.

 

Attuned to international standards

In its new format, ISE B3 is in line with international reporting standards of the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), and B-Lab. Another novelty is the partnership entered into with CPD and RepRisk for data provision.

CDP is a non-profit organization that maps and encourages climate management by companies listed on the world's main stock exchanges. Every year, CDP publishes a ranking of organizations that adopt best practices in climate management.

The ranking is generated from a request for information made by a few hundred international investors jointly responsible for managing around USD100 trillion worth of assets. RepRisk is one of the largest global ESG rating agencies and maintains a reputational risk index. The companies’ positioning in both tools will now be considered in the ISE B3 scope of assessment.

New questionnaire

The number of questions in the questionnaire to be answered by organizations interested in participating in the ISE B3 index was reduced by 40% on average. Many questions are not the same for all companies. For example, companies that operate in agribusiness, mining, or in the financial sector will now answer topics of greater relevance to their activities.

¿The questions are grouped into five pillars and comprise the following content:

  • Corporate governance and senior management – Business ethics, critical and systemic risk management, management of legal and regulatory issues, fundamentals of corporate sustainability management and corporate governance practices
  • Business model and innovation – Business model resilience – questions range from product lifecycle design and management, efficient supply and materials use, and sustainable finance through to supply chain management.
  • Social capital – Includes human rights issues, community relations, private social investment, corporate citizenship and data security.
  • Human capital – The focus is on employee engagement, diversity and inclusion, and also on the teams’ labor practices and health and safety.
  • Environment – In this block, environmental management policies and practices in the fields of energy, water, sewage, waste and hazardous materials, ecological impacts and air quality will be reported.
  • Climate change – The evaluation of this theme will be carried out through the companies' score in the CPD.

Selection criteria

Assets from companies that reached the first 200 positions in the Trading Index (IN) at the close of trading on July 1st, 2021 and had 50% attendance at trading sessions in the three previous portfolios (2019-2021) will be selected to make up the 2022 cycle. Also companies whose assets are not identified as penny stock (share price below BRL1.00). 

Furthermore, asset evaluation includes compliance with the following sustainability criteria:

  • ISE B3 score equal to or greater than the overall cutoff score applicable to each annual selection cycle, this year the score is 60.23 points.
  • ISE B3 questionnaire score per topic equal to or greater than 0.01 points.
  • Minimum qualitative score of 70 points.
  • Reputational risk index (RepRisk Index – Peak RRI) equal to or less than 50 points.
  • CDP-Climate score equal to or greater than “C”.
  • Positive response to questionnaire questions classified as minimum requirements for the sector.

 

Learn more

Learn how the ISE portfolios work and follow their evolution. Also learn about the new ISE calculation methodology.   

For further information, email us at iseb3@b3.com.br or call us on +55 11 3090-3039.