This chapter summarises the outline of each chapter in the report and provides an overview of the respondents’ profile to two original OECD surveys on corporate sustainability practices: (1) survey on sustainability practices of listed companies in Latin America and (2) survey on sustainability practices of asset managers in Latin America.
Sustainability Policies and Practices for Corporate Governance in Latin America
Corporate Governance
1. Introduction
Abstract
This report is the final output of a project that involved the OECD and the capital markets regulators of Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, and Peru. It presents the main trends and issues related to sustainability and corporate governance in these countries and globally. Through key policy recommendations, its objective is to support the development of the region's frameworks for disclosure, the responsibilities of company boards of directors, and shareholder rights in alignment with the G20/OECD Principles of Corporate Governance (G20/OECD Principles). The jurisdictions whose frameworks and markets are covered in this report include the seven Latin American countries mentioned above, as well as the People’s Republic of China (China), France, India, Japan, Spain, the United Kingdom, and the United States. Wherever relevant, information on the European Union’s regulatory frameworks is also provided.
This report presents and analyses three primary sources of information. First, two OECD original surveys with listed companies and asset managers investing in Latin America. Second, the new OECD Corporate Sustainability dataset, which compiles information on the sustainability practices of listed companies in 68 markets globally, including the seven mentioned Latin American countries and major markets in all regions. Third, an up‑to‑date comprehensive account of how the fourteen jurisdictions covered in this report regulate sustainability‑related matters for listed companies. This first chapter informs how the surveys and dataset have been developed, as well as the representativeness of survey respondents and companies included in the dataset.
Chapter 2 provides an overview of the capital markets and the investor landscape in Latin America. The chapter then presents the shareholders of Latin American listed companies and the ownership concentration at the company level. Finally, it summarises recent developments in green, social and sustainability (GSS) corporate bond issuance and investment funds labelled as or focusing on sustainability issues.
Chapter 3 offers an overview of the main practices and preferences for disclosure and assurance of sustainability information among Latin American asset managers and companies, and in selected jurisdictions. It then considers the demand for mandatory disclosure and the adoption of a single accounting and reporting sustainability standard.
Chapter 4 focuses on the main challenges regulators and policy makers face concerning sustainability matters that companies cover in their reports. Considering different perspectives, it analyses data that may guide regulators and other organisations in prioritising which sustainability matters to concentrate their resources on.
Chapter 5 discusses the legal frameworks for the responsibility of boards of directors, including fiduciary duties, Business Judgement Rule and corporation's purpose in Latin America and in selected jurisdictions. The chapter also portrays the perceptions of asset managers and companies in Latin America about the possibility of trade‑offs between shareholder value and societal or environmental benefits, as well as practices related to executive compensation plans and board committees.
Chapter 6 assesses the different forms of engagement between shareholders and companies in Latin America, including dialogue with directors and voting in shareholders’ meetings. The chapter also covers the leading trends in disclosure and targets related to greenhouse gases (GHG) emissions.
Chapter 7 highlights the rules and recent developments related to corporate governance frameworks across twelve jurisdictions and the European Union. It includes the relevant regulation and key issues for sustainability disclosure, third party assurance, and proportionality.
Chapter 8 presents eight key policy recommendations to serve as an initial agenda for discussion in the region, including in the OECD‑Latin America Roundtable on Corporate Governance.
This report is succinct and aimed at an audience of practitioners who are already familiar with the basic concepts related to corporate sustainability. Readers who are not versed in the main legal, economic and accounting discussions related to corporate sustainability may benefit from accessing the OECD report Climate Change and Corporate Governance (OECD, 2022[1]), which complements this more practice‑oriented report.
Readers interested in corporate sustainability may also want to consult the OECD Guidelines for Multinational Enterprises (OECD, 2011[2]), which are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide non-binding principles and standards for responsible business conduct in a global context consistent with applicable laws and internationally recognised standards.
1.1. The OECD surveys on sustainability practices in Latin America
Two OECD surveys conducted on sustainability practices in Latin America inform the analysis and key policy recommendations presented in this report:
1. Survey on sustainability practices of listed companies in Latin America.
2. Survey on sustainability practices of asset managers in Latin America.
While the following chapters present the aggregate survey results for all the seven selected Latin American countries, survey responses by country are staged in Annex C of this report.
1.1.1. Survey on Sustainability Practices of Listed Companies in Latin America
The capital markets regulators of Argentina, Chile, Colombia, Costa Rica, and Peru sent an online questionnaire hosted on an OECD webpage to all listed companies in their registries in June 2022. The questionnaire was available in English and Spanish, with a deadline to be filled by early August 2022. Likewise, the OECD shared the link to the questionnaire with listed companies in Colombia and Mexico, whose contact information was publicly available and provided by the regulator, respectively. Likewise, the following organisations have supported this project by sharing the link to the questionnaire with listed companies and asset managers associated with them:
Argentina: Institute for Business Development of Argentina (IDEA).
Colombia: Colombian Institute of Corporate Governance (ICGC), International Finance Corporation (IFC) and CESA’s Corporate Governance Studies Centre (CEGC).
Mexico: National College of Independent Professional Business Advisors (CNCPIE), Mexican Association of Pension Fund Administrators (AMAFORE), and Mexican Stock Exchange (BMV).
The results of this survey were complemented with the responses to a similar survey conducted by the OECD between late 2021 and early 2022 with listed companies in Brazil, whose results were presented in the report Sustainability Policies and Practices for Corporate Governance in Brazil (OECD, 2022[3]). In the case of Brazil, the Brazilian Association of Public Companies (ABRASCA) shared the link to the questionnaire with its associates.
The joint efforts of all the previously mentioned organisations resulted in 275 responses to the survey, which are summarised per country in Figure 1.1. The companies that answered the survey were divided into two groups for the analysis presented in this report. The first group includes companies in each country's most‑often used large capitalisation index. The second group consists of all other (smaller) companies with listed equity and all unlisted companies. This segmentation allows comparing practices and perspectives in companies of similar size and capacity to comply with regulations and investors’ requests.
Figure 1.1. Profile of respondents to the survey on sustainability practices of listed companies in Latin America
Notes:
1 S&P MERVA, IBOVESPA, S&P/CLX IPSA, MSCI COLCAP, IACR, MEXBOL, and S&P/BVL Peru General are the most often used large‑cap indexes in Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, and Peru respectively. These indexes included 221 companies in July 2022.
2 Market capitalisation amounts are as of the end of 2021.
3 For industry distribution, companies were classified into the eleven sectors used by SASB Standards to group companies based on shared sustainability risks and opportunities.
Source: OECD Survey on Sustainability Practices of Listed Companies in Latin America, Refinitiv.
Eighty‑five respondent companies are classified into the group of large companies, and their market capitalisation totalled USD 606 billion in December 2021. This represents 44% of the total market capitalisation in the large capitalisation indexes in the seven countries. Among the remaining 190 companies, 130 have issued shares that are publicly traded, and the remaining 60 do not currently have any publicly traded equity securities (some of these have issued debt securities in public markets).
The industry distribution of respondents is broadly comparable to all companies that publicly trade their equity in the seven Latin American respondent countries. The industries financials (22%), extractives and minerals processing (22%), food and beverage (12%), infrastructure (11%) and consumer goods (10%) are the most representative industries among all listed companies in Latin America by market capitalisation. The sample of respondents has some overrepresentation of extractives and minerals processing (+15%), as well as of technology and communications (+7%), and underrepresentation of the food and beverage (-6%) and consumer goods (-6%) industries.
1.1.2. Survey on Sustainability Practices of Asset Managers in Latin America
The national capital markets regulators also sent an online questionnaire hosted on an OECD webpage to all asset managers in their registries in Argentina, Chile, Colombia, Costa Rica, and Peru in June 2022. The questionnaire was available in English and Spanish, with a deadline to be filled out by early August 2022. Likewise, the OECD shared the link to the questionnaire with asset managers headquartered in Colombia and Mexico, whose contact information was publicly available and provided by the regulator, respectively. The results of this survey were complemented with the results of the survey conducted by the OECD between late 2021 and early 2022 with asset managers investing in Brazil, whose results were included in the report Sustainability Policies and Practices for Corporate Governance in Brazil (OECD, 2022[3]). In the case of Brazil, the Brazilian Financial and Capital Markets Association (ANBIMA) shared the link to the questionnaire with its associates.
The joint efforts of the OECD and the national capital markets regulators, as well as the support of the eight abovementioned organisations from Argentina, Brazil, Colombia and Mexico, resulted in 521 responses from asset managers headquartered in the seven selected Latin American jurisdictions and 11 based abroad. Respondents declared to have USD 1 359 billion of assets under management (AUM) invested in Latin America as of the end of 2021, including fixed income, alternative investments, and equity (USD 1 329 billion of AUM for managers based in the seven Latin American countries and USD 30 billion for the non‑domestic). A double counting may exist in the total value of AUM declared by respondents as some asset managers may invest in funds managed by others. Notwithstanding, the total AUM represents three‑quarters of the USD 1 800 billion AUM of all investment funds managed by firms headquartered in Latin America in 2021, according to one estimate (Boston Consulting Group, 2022[4]). This demonstrates that the respondents represent a significant majority of asset managers headquartered in these jurisdictions, being Brazil the region's largest market with USD 1 000 billion worth of managed assets. Additionally, respondents had approximately USD 185 billion in equity investments as of the end of 2021, representing 12% of the total market capitalisation of companies that have their equity publicly traded in Latin America.
Asset managers who answered the survey were divided into three groups: large, medium, and small. Those with more than USD 1 billion of AUM are considered “large”, while asset managers with AUM between USD 50 million and USD 1 billion of AUM are considered “medium”. Those with less than USD 50 million of AUM are considered “small” asset managers. This segmentation allows comparing practices and perspectives of asset managers of similar size and capacity in terms of technology and human resources to analyse information about the companies in which they invest.
Figure 1.2. Profile of respondents to the survey on sustainability practices of asset managers investing in Latin America
Note: In the survey questionnaire, asset managers could answer or leave the questions about their AUM and portfolio distribution unanswered.
Source: OECD Survey on Sustainability Practices of Asset Managers in Latin America.
1.2. The OECD Corporate Sustainability dataset
The OECD has developed a dataset to compare the main trends and features of corporate sustainability at the global level. This dataset contains information, for instance, on whether companies disclose sustainability information, the accounting standard used in their reports, the existence of assurance by an independent third party, the existence of a committee responsible for sustainability matters, GHG emission reduction targets and executive remuneration linked to sustainability factors. It includes records for up to 13 800 listed companies with a total of USD 113 trillion market capitalisation listed on 83 markets in 2021, although the coverage may vary depending on the selected matter. The dataset also contains information on corporate green, social and sustainability (GSS) bonds issuances from 2013 to 2022 across 71 markets globally. The primary sources of information are Refinitiv and Bloomberg.
This dataset has been complemented by a Natural Language Processing (NPL) analysis of unstructured information on sustainability reports from 143 large listed companies in Argentina, Brazil, Chile, Colombia, Mexico, Peru, the United Kingdom, and the United States. The NPL analysis has been developed by Miklos Vasarhelyi from Rutgers University (United States), Ricardo Lopes Cardoso from Getulio Vargas Foundation (Brazil) and their teams, namely: Felipe Pedroso, Lanxin Jiang, Ludwig Berdejo, Meehyun Kim, Nichole Li, Steven Katz, and Yu Gu. Their analysis has made possible the collection of information on, among other issues, the level of assurance of a sustainability report and whether the assurance covers the whole (or only a part of the) sustainability report.