Just over four months after its launch (on Nov. 8, 2021), the S&P/BVL Peru General ESG Index experienced its first annual rebalancing, effective after the market close on the last business day of April 2022.
The S&P/BVL Peru General ESG Index is the first index of its kind in the Peruvian market, measuring the performance of Peruvian companies from the headline S&P/BVL Peru General Index that meet high standards of sustainability criteria.
The Peruvian stock exchange (BVL) recognizes and rewards companies that qualify for the S&P/BVL Peru General Index by granting them a discount on BVL and Cavali fees as an incentive to improve their S&P DJI ESG Scores.
For those who are not familiar with the methodology, we summarize it in Exhibit 1.
We start by excluding from the universe (the S&P/BVL Peru General Index) what the methodology classifies as contrary to general ESG values; then we select all companies whose S&P DJI ESG Score is equal to or greater than the universe median score. The companies are then weighted according to their float-adjusted market capitalization (FMC), subject to certain concentration limits.
The index is rebalanced once per year, effective after the market close of the last business day of April, and has a reweight after the close of the last business day of October. As of the 2022 rebalance, 17 out of 29 constituents made it into the S&P/BVL Peru General ESG Index, as three new participants were added and one was removed.
The S&P DJI ESG Score of the S&P/BVL Peru General ESG Index increased from 52.68 to 62.27, an improvement of 9.58 points; considering that the maximum attainable ESG score of the S&P/BVL Peru General Index is 95.86, the ESG realized potential was 22%.
In its short existence, the performance of the S&P/BVL Peru General ESG Index exhibited different results compared to its benchmark (see Exhibit 4).
The S&P/BVL Peru General ESG Index is designed to measure the performance of securities in the S&P/BVL Peru General Index that sustainability criteria. As sustainable investment themes garner more interest, companies that incorporate ESG considerations have the potential to benefit in terms of public perception.
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