Latin Finance - July/August 2011 - 42

corporate sustainability

below scores for companies in other companies take sustainability seriously,” the NYSE, for example, are forced to sectors. Cox says. “The big ones such as Vale submit a form 20F to the SEC, detailing “Telefonica Colombia excelled with [are] investing over $100 million consolidated figures for executive consistent improvements in financial data annually in this area. If we were to compensation. Although such reporting is and improving employee satisfaction consider environmentally relevant common in developed countries, LatAm results,” Cox says. “But a final score of modernizations, these investments could companies tend to remain closed with 65% is not good.” regard to management In comparison, remuneration. Performance of Largest LatAm Extractive Companies 2011 LatAm’s largest extraction Investors are likely to Brazil still leads companies tended to increase the pressure on Vale Usiminas Codelco GMexico Cemex outshine on their survey, LatAm entities not only to Brazil Brazil Chile Mexico Mexico with Brazilian mining be more transparent on company Vale reaching a sustainability initiatives, Compliance compliance grade of 86% but also to demonstrate Percentage 86% 69% 42% 34% 61% and a final score of 79%, that investments in the Performance followed by Brazilian steel sector are yielding positive concern Usiminas with cashflows. MSCI has Percentage 56% 35% 18% 34% 25% 69% and 61%. plans to rate the entire Risk Score Brazil remains the investment universe of Percentage 17% 29% 18% 27% 108% most advanced country in 8,500 companies worldwide sustainability compliance. on sustainability measures. M&E Final Score “Brazil is far ahead of “Sustainability is going to Percentage 79% 61% 46% 45% -11% the others, with Chile, increasingly drive demand Rank 1 2 3 4 5 Colombia and Mexico for equity as it becomes following,” Cox says. “The Source: Management & Excellence perceived as a fundamental top Brazilian companies indicator of effective are world class in management,” Cox adds. Performance of Largest LatAm Telecom Companies 2011 sustainability.” Meanwhile, Brazilian Colombia at the top Eight Brazilian companies that have done companies, including two Telefonica consistently well in the Colombia OI Vivo Telmex Digicel banks, are members of the survey have shown to Dow Jones Sustainability Colombia Brazil Brazil Mexico Jamaica outperform the Bovespa. Index, the only LatAm A market cap-weighted Compliance country with companies index of 27 companies Percentage 75% 59% 36% 32% 1% represented in the index. outperformed the overall Despite being the region’s Bovespa by 114% last year. Performance second-largest economy However, much of that Percentage 33% 38% 24% 16% 0% and having well-developed performance was driven by capital markets, Mexico Risk Score Vale, which accounts for lacks a single blue-chip nearly a quarter of the index Percentage 23% 41% 15% 8% 0% company represented. and generated a staggering M&E Final Score Mexican cement 86% return last year. company Cemex, for Percentage 65% 53% 47% 45% 7% Indeed, the top Brazilian example, fell short with companies are already Rank 1 2 3 4 5 -11% in sustainability, close to fulfilling all their Source: Management & Excellence due to high risk caused compliance requirements by volatility in key with the Global Reporting performance data and low performance. easily be in the billions.” Initiative, an organization which produces Volatility in its EPS over the last three The banking sector performed the best international sustainability reporting years is over 700%. Earnings per share overall, with other sectors only producing guidelines. have swung from $0.09 per share to one or two companies in the top rankings. In general, companies perform best -$0.04 per share over the last five years. Companies that have listed ADRs tend with regard to having a complete code However, it improved in areas such as to perform better in the rankings, of ethics. They tend to stumble on more work days lost, dropping to 3.2 in 2009 but overseas listings aren’t always a difficult points such as being a member of from 5.2 in 2007. guarantee of good management. the Dow Jones Sustainability Index or for “In general, only the Brazilian Companies listing their ADRs on rotating auditing firms every few years. LF

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July/August 2011

Latin Finance - July/August 2011

Table of Contents for the Digital Edition of Latin Finance - July/August 2011