ESG Viewpoint:
B3 S.A.
# RepRisk interviews Cesar Sanches, Head of Sustainability at B3 S.A.
# April 2023
1. RepRisk: Please provide some details about your specific role at B3 S.A. and the work that you and your team do.
Cesar Sanches: As Head of Sustainability, I am responsible for monitoring ESG megatrends to identify risks and opportunities related to our business. We are committed to adopting and advancing ESG best practices as well as developing ground-breaking solutions in the sustainable finance space.
To that end, our strategy includes three cornerstones. The first one is the adoption of ESG best practices including a robust management system to monitor our performance. The sustainability department works with multidisciplinary teams across the company to identify opportunities for continuous improvement related to ESG aspects. Furthermore, we oversee several projects, activities, and events to improve stakeholder engagement and raise awareness of key issues such as climate change, diversity, inequality, governance, etc.
The second cornerstone is to promote ESG best practices. B3 plays a very important role in galvanizing stakeholders into action. We encourage knowledge sharing with a focus on reporting and best practices to support all stakeholders on their ESG journey.
The third cornerstone is related to ESG products and services. We aim to strengthen our offering to help our clients achieve their strategic goals. To this end, we have developed a portfolio of innovative products and services to facilitate the flow of sustainable capital at scale towards opportunities in line with the Global Goals including ESG-related indices, ESG bonds, decarbonization credits (CBIOs), and so on.
2. RR: B3 S.A. recently launched a new methodology that considers the ESG risk score of companies in the B3 Corporate Sustainability Index (ISE B3), as well as their exposure to each of RepRisk’s 28 ESG Issues. Why do you believe such a high level of transparency is important?
CS: In 2021, we completed the revision of the ISE B3 methodology which included a broad public consultation process. Our goal was to have a more efficient, transparent, and independent methodology.
The new ISE B3 methodology is simpler and more relevant. Companies are asked to answer a specific set of questions depending on their industry and related materiality. Moreover, the new methodology includes a climate change dimension and employs the CDP score to assess companies’ environmental disclosures and performance.
Another important change is the adoption of the Peak RepRisk Index (RRI) for risk assessment, a proxy for the overall reputational risk exposure related to ESG issues of a company.
Using independent data providers such as RepRisk meets investors’ demands for a more consistent, sophisticated, impartial, and transparent methodology.
Now, companies with a Peak RRI greater than 50 points (i.e., high risk exposure) will not be included in the index.
3. RR: Why did you choose RepRisk data for the new ISE B3, or what is the benefit that you believe RepRisk data adds to the algorithm?
CS: As the ESG industry matures, institutional investors are finding an increasingly diverse universe of external research sources. Advancements in natural language processing, machine learning, and artificial intelligence make it possible to collect, analyze, and interpret large amounts of unstructured data from public sources, moving beyond ESG disclosures and reporting.
Hence, we chose to use RepRisk because of its unique ESG risk assessment approach that combines artificial and human intelligence for scale and depth of their dataset as well as daily-updated information.
Screening vast amounts of public sources and stakeholders (i.e., media, blogs, government bodies, regulators, etc.), RepRisk covers both private and public companies in 23 languages, including Portuguese, which allowed us to devise a more robust and transparent methodology for the ISE B3.