The economic costs associated with climate change are affecting the criteria that move the financial marketplace. A study conducted by the NGO Germanwatch has found that over the past 20 years, Chile has spent over 9 billion dollars to address the consequences of climate disasters, 46% of which has been spent since 2016. This means that investing in sustainable projects is no longer just an environmental issue, it is also an economic challenge.
Sustainable investing for the future
“Companies are increasingly filtering for green projects (...). If they fail to do so, their future assets may be severely impaired, return on investment can be very low, and they may lose out to depreciation. It is relevant for companies that make investments to stay aware of these issues, because this is now one of the key factors for the long term,” stated David Falcón, Sustainability Director at Deloitte Chile, speaking at the talk cycle “Learning About Climate Change”, organized by Enel Chile as part of the company’s efforts to provide education about this new outlook that balances business activities, the environment, and society.
Falcon noted that in January 2019, the World Economic Forum released a list of the top five probable risks facing the planet: three of them were linked to environmental factors. Indeed, the first three items on the list are “extreme climatic events,” “failure in mitigation and adaptation to climate change” and “natural disasters”.
In the face of this situation, a number of investment options have been on offer for years in Europe and the United States to provide long-term sustainable return on investment, focusing not only on companies’ economic performance but also on their environmental, social, and governance impacts, with projects that are compatible with the current context of social changes, climate change, greater connectivity, and digitalization.
Falcon did not mince his words about this paradigm shift: “Many projects that used to be thought of as traditional and offering highly attractive return on investment are now looking like a feast for today in exchange for famine tomorrow.”
The evaluation system of listed companies
Mechanisms exist that allow investors to identify companies listed on stock exchanges that operate sustainable business strategies. Sustainability indexes have become benchmarks for markets and investors aware of the importance of generating value for all interest groups, putting their money behind companies that combine economic success with sustainable development in their processes. Leading sustainability indexes include: DJSI, FTSE4Good, MSCI, Sustainalytics, and Vigeo.
Dow Jones Sustainability Index (DJSI): stock market index made up of the top-performing companies in terms of sustainability (“Best in Class”), measured through an exhaustive annual evaluation by the sustainable investments specialist, RobecoSAM, which assesses more than 4,700 large companies listed in the most important stock markets in the world, and the “Best in Class” are included in the different indices. Enel Chile is currently listed in the DJSI Chile, DJSI MILA Pacific Alliance and DJSI Emerging Markets, and along with Enel Americas are the only Chilean electric companies included in the three indices.
The Sustainability Yearbook: a publication prepared from an annual sustainability performance assessment by RobecoSAM, which includes companies scoring among the top 15% of their industry. In 2020 and for the first time ever, Enel Chile was recognized in this exclusive publication, reflecting the company's excellent performance in terms of sustainability and ranking in the bronze class category, which includes companies in the top 5-10% of the ranking. This makes it the only Chilean electric company, along with Enel Americas, to be recognized in the gold, silver or bronze class.
FTSE4Good Index Series: created in 2001 by the global index company FTSE Russell and belongs to the London Stock Exchange Group, for the purpose of aiding investment in sustainable companies. FTSE4Good includes over 300 indicators on 14 different topics which are analyzed twice a year and grouped into three main pillars: environmental, social and corporate governance. The FTSE Russell methodology is solely based on public information, which demands a high level of transparency of the companies. Enel Chile has been recognized in the categories of “Emerging Markets Index” and “Latin America Index”.
Vigeo Eiris: evaluates the integration of social, environmental and corporate governance factors within organizations and their strategies, operations and management, with a focus on promoting economic performance, responsible investment and the creation of sustainable value. Enel Chile has been included in the Best EM Performers ranking since December 2017. It should be noted that Vigeo Eiris has no stock market index for the Latin American markets.
MSCI: Important service provider and support for the financial community in order to better understand the key risk and return factors to facilitate financial decision-making. Enel Chile received an A rating in the latest review, forming part of the different stock market indices offered by MSCI and participating in several ESG indices.
Sustainalytics: a global leader in Environment, Social and Governance (ESG) research and ratings, used by the top global investors in order to incorporate companies’ ESG performance in their investment processes.
Other certifications and indexes can also be used to gauge a company’s permanent policies for ensuring a sustainable and responsible long-term business plan. These are some of the corporate policy recognitions and certifications earned by Enel Chile:
Criminal Risk Prevention Model (MPRP) Certification - Certifying Agency: ICR Chile, Risk Classification: evaluates the functioning of the company’s crime prevention model, which seeks to prevent and detect the crimes of bribery, financing of terrorism, money laundering, and receipt of illegal earnings in any regard linked to third parties, in compliance with Chilean Law 20,393. All Enel Group companies in Chile, including Enel Chile, Enel Generación Chile, Enel Distribución Chile, Enel Green Power Chile, and all subsidiaries, have received this certification each of the past six years, with the latest certification standing for a two-year duration - the longest possible under Chilean law - until December 29, 2020, thus confirming the maturity of the compliance system implemented at Enel Group companies in the country.
ISO 37001 Certification – Certifying Agency: RINA: this is the International Organization for Standardization’s bribery prevention management system standard. The system’s objective is to prevent, detect, and combat undue influence, bribery, and corruption, and to promote culture of ethics, transparency and compliance amongst employees and all interested parties. Enel Chile and Enel Generación Chile were the country’s first two power companies to achieve certification for their bribery prevention management systems in December 2018, with certification for the maximum duration of three years. Meanwhile, Enel Distribución Chile and its subsidiary Eléctrica Colina, achieved this certification in December 2019, becoming the first energy distribution companies to obtain it.
3rd Annual Generación Empresarial – Diario Financiero Awards “For Commitment to Integrity”: this is an award issued by Fundación Generación Empresarial (FGE) and Diario Financiero, in recognition of companies that have shown commitment to the systematic promotion of ethical practices and corporate best practices, both internally and externally. In its third year (2019), the awards highlighted the implementation of measurable policies by Enel Chile and Enel Américas, naming these companies amongst the highest-placed in the ranking.
Here you can find out more about Enel Chile’s actions and commitments in the field of Sustainability.
Here you can find out more about the business strategy of Enel Chile and its subsidiaries.