Latin Finance - January/February 2012 - 62

brazil sustainability index

The Sustainability Defense
by Staff Reporters

T

he M&E LatinFinance Sustainability Stars Index Brazil continues to outgun the country’s Ibovespa benchmark, putting in its best monthly run ever last December and proving itself to be a good hedge against last year’s down market. In December, it outperformed the Ibovespa by 26.35% and can boast a similar, albeit less stellar, performance over the prior seven months. This comes after a minor yearly rebalancing in the index involving the replacement of Banco do Brasil with Bovespa – a change that came into effect in January. “We have a lot of banks in the index, but Banco do Brasil was by far the weakest one in terms of our scoring scheme,” says William Cox, managing director at M&A. The other banks in the index – BicBanco, Itaú and Bradesco – took top spot in a variety of categories. Bradesco, for instance, got the best sustainability compliance and risk scores in December, while Itaú received the best management strength score. “Itaú and Bradesco are so close,” says Cox. “I think competition furthers their meticulousness in trying to use better management in all areas.” Overall banks were some of the weakest performers in 2011, though Bradesco eked out a 1.52% gain. Banco do Brasil, however, slipped a 20.23% against much stronger performances among other companies in the index. Energy distributor Ultrapar jumped 51.2%, payment processor Redecard leapt 47.5% and wireless operator TIM climbed 36.5%. Strong performances among those star stocks was negated somewhat by the poor showing of other companies in the index. For instance, paper concern Fibria and petrochemical firm Braskem respectively fell 46.1% and 35.1%. Nevertheless, the M&E LF Index has proven to be a buffer against down markets, performing best when stocks

The M&E LF Sustainability Index has proven to be a useful buffer against down markets, putting in its best performance last December.
are weakest. Brazilian markets had a particularly poor year in 2011, with the Ibovespa slipping an uncomfortable 14.75%. The M&E LF Index, on the other hand, dropped just 2.45% and outran the Bovespa’s own sustainability index, the ISE, which fell 2.58%. somewhat surprising given the M&E LF Index comprises just 18 companies, but its tendency to avoid what Cox calls “heavy” stocks like Petrobras may have helped. “We don’t have the diversification effect of the Ibovespa and the ISE, which has 40 companies,” says Cox. “Yet our volatility is lower.” While the M&E Performance of M&E Index vs Ibovespa Outperforming the benchmark in a down market LF Index goes a long way in proving 120 shareholders favor companies 110 that invest in sustainability, 100 corporates themselves are still 90 struggling to find ways to justify this expense. Many CFOs 80 are still seeking a metric that would 70 quantify a return on sustainability. What Cox calls a type of ROS. So far, however, such Source: Management & Excellence SA efforts have failed to produce results. “They are seeking to move [such In strong markets, however, the index investments] from a qualitative distinction lagged somewhat. Between December to a quantitative one,” says Cox. “People 2009 and 2011, the M&E LF index have to understand where free cash flow returned a healthy 9.1%, but failed to comes from. It comes from these internal keep up with the Ibovespa, which was up management processes.” 17.25% over that period. A more substantial rebalancing will Still, volatility on the M&E LF Index likely occur in June when M&E has access decreased significantly in 2011 to 4% to year-end financials. “That will be a versus a cumulative 6% since December 2009. Using the same monthly tabulation, major reshuffling,” says Cox. “We will insist on onsite audits and make sure we the Ibovespa’s volatility increased to get all the potential data.” LF 7.7% from 7.38%, Cox says. This is
Dec-2009 Jan-2010 Feb-2010 Mar-2010 Apr-2010 May-2010 Jun-2010 Jul-2010 Aug-2010 Sep-2010 Oct-2010 Nov-2010 Dec-2010 Jan-2011 Feb-2011 Mar-2011 Apr-2011 May-2011 Jun-2011 Jul-2011 Aug-2011 Sep-2011 Oct-2011 Nov-2011 Dec-2011

62 LatinFinance

January/February 2012



Latin Finance - January/February 2012

Table of Contents for the Digital Edition of Latin Finance - January/February 2012

Latin Finance - January/February 2012
Contents
Latam-India Trade
Subnational Finance
Deals of the Year
A US Shop Takes a Leadership Role
Toppling the Competition
Swiss Bank Keeps Top Spot
Fast Food Victory
Daring E&P Debut
Complex Pan-Regional Asset Sale
A First for Mexican Project Financing
A New Quasi-Sovereign Benchmark
Creating a Niche
Legal Lead
Brazil Debt
Project Finance
Brazil Sustainability Index
Latin Finance - January/February 2012 - Latin Finance - January/February 2012
Latin Finance - January/February 2012 - Cover2
Latin Finance - January/February 2012 - 1
Latin Finance - January/February 2012 - Contents
Latin Finance - January/February 2012 - 3
Latin Finance - January/February 2012 - 4
Latin Finance - January/February 2012 - 5
Latin Finance - January/February 2012 - 6
Latin Finance - January/February 2012 - 7
Latin Finance - January/February 2012 - 8
Latin Finance - January/February 2012 - 9
Latin Finance - January/February 2012 - 10
Latin Finance - January/February 2012 - 11
Latin Finance - January/February 2012 - 12
Latin Finance - January/February 2012 - 13
Latin Finance - January/February 2012 - Latam-India Trade
Latin Finance - January/February 2012 - 15
Latin Finance - January/February 2012 - 16
Latin Finance - January/February 2012 - 17
Latin Finance - January/February 2012 - 18
Latin Finance - January/February 2012 - 19
Latin Finance - January/February 2012 - Subnational Finance
Latin Finance - January/February 2012 - 21
Latin Finance - January/February 2012 - 22
Latin Finance - January/February 2012 - Deals of the Year
Latin Finance - January/February 2012 - A US Shop Takes a Leadership Role
Latin Finance - January/February 2012 - 25
Latin Finance - January/February 2012 - Toppling the Competition
Latin Finance - January/February 2012 - 27
Latin Finance - January/February 2012 - 28
Latin Finance - January/February 2012 - 29
Latin Finance - January/February 2012 - Swiss Bank Keeps Top Spot
Latin Finance - January/February 2012 - 31
Latin Finance - January/February 2012 - 32
Latin Finance - January/February 2012 - 33
Latin Finance - January/February 2012 - Fast Food Victory
Latin Finance - January/February 2012 - 35
Latin Finance - January/February 2012 - 36
Latin Finance - January/February 2012 - 37
Latin Finance - January/February 2012 - Daring E&P Debut
Latin Finance - January/February 2012 - 39
Latin Finance - January/February 2012 - 40
Latin Finance - January/February 2012 - 41
Latin Finance - January/February 2012 - 42
Latin Finance - January/February 2012 - Complex Pan-Regional Asset Sale
Latin Finance - January/February 2012 - 44
Latin Finance - January/February 2012 - 45
Latin Finance - January/February 2012 - 46
Latin Finance - January/February 2012 - 47
Latin Finance - January/February 2012 - A First for Mexican Project Financing
Latin Finance - January/February 2012 - 49
Latin Finance - January/February 2012 - A New Quasi-Sovereign Benchmark
Latin Finance - January/February 2012 - 51
Latin Finance - January/February 2012 - Creating a Niche
Latin Finance - January/February 2012 - 53
Latin Finance - January/February 2012 - Legal Lead
Latin Finance - January/February 2012 - 55
Latin Finance - January/February 2012 - 56
Latin Finance - January/February 2012 - Brazil Debt
Latin Finance - January/February 2012 - Project Finance
Latin Finance - January/February 2012 - 59
Latin Finance - January/February 2012 - 60
Latin Finance - January/February 2012 - 61
Latin Finance - January/February 2012 - Brazil Sustainability Index
Latin Finance - January/February 2012 - 63
Latin Finance - January/February 2012 - 64
Latin Finance - January/February 2012 - Cover3
Latin Finance - January/February 2012 - Cover4
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