The new Corporate Sustainability Index (ISE), which comprises shares issued by companies recognized for their high level of commitment to sustainability and social responsibility, will enter into effect on December 1 st , 2008. The rebalance of the index includes assets of Celesc, Duratex, Odontoprev, TIM, Telemar, and Unibanco, while assets from Aracruz, CCR Rodovias, Copel, Iochpe-Maxion, Petrobras, and WEG have been excluded from the index.
The new portfolio will be valid until November 30 th , 2009, and contains 38 shares issued by 30 companies that represent a market capitalization of BRL372 billion. This amount corresponds to 30.7% of the total market capitalization of the 394 companies listed on the Exchange, which on November 21 st, 2008, totaled BRL 1.21 trillion. The previous ISE portfolio contained 40 shares issued by 32 companies from 13 different sectors, which represented at the time BRL 927 billion in market value or 39.6% of BM&FBOVESPA's total market capitalization.
The participants of the new ISE portfolio were selected from among the 51 companies that responded to the questionnaire developed by the Center for Sustainability Studies (GVCes) at the Getúlio Vargas Foundation São Paulo School of Business Administration (FGV-EAESP). The questionnaire was sent to the 137 listed companies of BM&FBOVESPA that issue the 150 most liquid shares in the Exchange. The new index is composed of shares of the following listed companies:
AES TIETE | DURATEX | ODONTOPREV |
BRADESCO | ELETROBRAS | PERDIGAO S/A |
BANCO DO BRASIL | ELETROPAULO | SABESP |
BRASKEM | EMBRAER | SADIA S/A |
CELESC | ENERGIAS BR | SUZANO PAPEL |
CEMIG | GERDAU | TELEMAR |
CESP | GERDAU MET | TIM PART S/A |
COELCE | ITAUBANCO | TRACTEBEL |
CPFL ENERGIA | LIGHT S/A | UNIBANCO |
DASA | NATURA | V C P |
Concept and Methodology
Created in 2005, the ISE was formulated on the basis of the international Triple Bottom Line (TBL) concept, which performs an integrated assessment of environmental, social and economic-financial elements. Another three indicators were added to the TBL principles: corporate governance, general characteristics and nature of product.
The economic-financial, social and environmental dimensions of companies were posed in the questionnaire on the basis of four sets of criteria: Policies (indicators of commitment); Management (plans, programs, targets and monitoring); Performance (performance indicators); and Legal Compliance (compliance with norms and regulations in such areas as the environmental, labor, competition, consumer, etc).
The Deliberative Board of the ISE consists of the following organizations: BM&FBOVESPA, ABRAPP (Brazilian Association of Pension Funds), ANBID (National Association of Investment Banks), APIMEC (Association of Capital Market Analysts and Investment Professionals), IBGC (Brazilian Institute of Corporate Governance), IFC (International Finance Corporation), Ethos Institute of Social Responsibility, United Nations Environmental Program (UNEP) and the Brazilian Ministry of the Environment.
ISE at BM&FBOVESPA
The ISE is designed to measure the return on a portfolio composed of shares of companies highly committed to social responsibility and corporate sustainability, and also to promote good practices in the Brazilian corporate environment. It is calculated by BM&FBOVESPA in real time during regular trading hours, taking into consideration the prices of the last trades carried out in the cash market. These stocks are selected from among the Exchange's most actively traded securities in terms of liquidity and weighted according to the market value of the outstanding shares.
The index is rebalanced annually based on the following criteria:
Inclusion Criteria
a) Must be ranked among the top 150 shares most traded in the twelve months prior to review.
b) Must be traded in at least 50% of the sessions in the twelve months prior to starting the portfolio.
c) Must be in compliance with sustainability criteria assessed in the annual questionnaire.
Exclusion Criteria
a) If the issuing company is being subjected to judicial recovery or bankruptcy.
b) If a public offer leads to the withdrawal from circulation of a significant portion of the company's free float.
c) If any event significantly alters the sustainability and social responsibility levels of a company, the ISE Board may consider excluding it.
d) If the company does not meet sustainability criteria assessed in the questionnaire for the annual review.