In partnership with Bolsa Mexicana de Valores (BMV Group), S&P Dow Jones Indices (S&P DJI) launched the S&P/BMV Total Mexico ESG Index in June 2020, providing investors an opportunity to express their views on Mexican equities with a sustainability lens. The index is designed to measure the performance of stocks within the S&P/BMV Total Mexico Index that meet sustainability criteria, and it applies exclusions based on business activities and United Nations Global Compact (UNGC) scores. Importantly, constituents are weighted by S&P Global ESG Score.Based on S&P Global’s Corporate Sustainability Assessment (CSA), the S&P Global ESG Scores are designed to measure environmental, social and governance (ESG) risk and performance factors for corporations, with a focus on financial materiality. In recent years, the CSA has been shown support by improved disclosures from Mexican companies. As shown in Exhibit 1, there was a 56% increase in survey respondents for companies headquartered in Mexico since 2019.
Moreover, the metrics measured by S&P Global Sustainable1 as part of this ESG scoring approach align with important global standards, including, for example, the recently launched Mexican Sustainable Taxonomy,¹ which seeks to classify activities that support a number of environmental and societal goals. Some of these specific corporate reporting expectations, and how they are captured by the CSA, are outlined in Exhibit 2. As part of this improvement in overall disclosure, it is possible to identify improvements in criteria-level ESG performance. First, data has improved in terms of the types of data we are able to use; for example, on issues such as waste and water. Second, corporate performance has improved since 2019 across a number of criteria such as labor practices or climate strategy.
The S&P/BMV Total Mexico ESG Index, which relies on the S&P Global ESG Scores, provides a measure of Mexican equities with an ESG lens. In looking at past performance of the index, when compared to its benchmark (the S&P/BMV Total Mexico Index), it exhibited a similar risk/return profile, and in recent years it has even shown some outperformance of the benchmark.
Given the improvements of ESG disclosures, the S&P/BMV Total Mexico ESG Index is being powered by continuously improving ESG data, taking into account material risks and opportunities for Mexican equities. Those investors looking for a measure of Mexico’s broad equities market that integrates sustainability factors may be interested to see a historically similar risk/return profile when compared to its benchmark.¹ For more information, see here: Taxonomía Sostenible de México | Secretaría de Hacienda y Crédito Público | Gobierno | gob.mx (www.gob.mx) (Spanish)More By This Author:The S&P 500 Top 20 Select Indices: A Deep Dive Into Mega-Cap Performance
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