Petrobras, Assaí and slaughterhouses leave the Stock Exchange’s sustainability index; see new wallet

The B3, Brazilian Stock Exchange, announced last Wednesday (1) the preview of the portfolio for 2022 of the ISE (Corporate Sustainability Index), which brings together companies with good environmental, social and corporate governance practices.

Companies with historical environmental problems and that are part of the current version of the index, such as Petrobras, the Assaí supermarket and the Marfrig and Minerva Foods slaughterhouses, were left out of the new selection.

In all, 17 shares were removed from the index (see full list below), but not all of them signify the company’s exclusion. In some cases —such as Bradesco and Itaú—, the common shares left, but the preferred ones were kept.

According to B3, companies may have left the portfolio for two reasons: because they did not apply for selection or because they did not meet the established criteria. However, details about each circumstance were not available.

In July this year, the Exchange announced changes to the ISE methodology, which now incorporates international ESG criteria (an acronym for environmental, social and governance principles).

One of them is the CDP (Carbon Disclosure Project), an initiative that assesses policies related to climate change. To be part of the index, companies must have a grade higher than C.

Another novelty is the use of RepRisk, which indicates a company’s reputational risk. In this case the score must be equal to or less than 50 points.

The performance of each organization has not yet been published, but that information will be available starting next year — including the rating of those that have not been selected for the portfolio.

Although B3 does not confirm the reason for each exclusion, some companies said they have given up on participating in the new selection. This is the case with Petrobras.

The company is part of the current sustainability index portfolio, despite social and environmental concerns. In addition to being a producer of fossil fuels —considered one of the main villains of the climate crisis—, the oil company recently released a new investment plan that ignores the energy transition and the production of renewables.

“Due to the change in the ISE’s assessment methodology, Petrobras chose not to participate in the selection,” he said in a note.

Another company that is currently part of the index, but did not participate in the new selection, is Assaí.

The wholesaler network said it is in the 2021 ISE portfolio because it was a subsidiary of GPA (Companhia Brasileira de Distribuição), but with the spin-off of the companies, in March of this year, the shares were untied.

“Assaí did not undergo the ISE this year [para carteira de 2022] because the questionnaire was for the year 2020. Thus, its evidence and its history were not yet as an independent company, but as a subsidiary”, he stated in a note.

In August of this year, Assaí had its ESG schedule questioned, when a black man was forced to take off his clothes inside a supermarket unit in Limeira (SP) to prove that he was not stealing any product.

At the time, analysts said the case indicated how far ESG was far from being practiced in the corporate world.

Considered one of the main sustainability benchmarks in the financial market, the ISE is also not immune to criticisms about deforestation. Two of the three largest meat exporters in Brazil, Minerva Foods and Marfrig, are part of the current version of the index.

In December 2020, the British NGO Global Witness said that the two meatpackers had bought cattle from illegally logging farms. At the time, the companies denied the irregularities.

Minerva Foods did not comment on the index’s departure, but said it continues to make efforts in the agribusiness value chain, especially in combating illegal deforestation and climate change.

“A priority theme for the company is to guarantee the end of illegal deforestation in the entire supply chain in South America by 2030”, he stated in a statement.

Marfrig said it was surprised by B3’s decision to exclude the company from the ISE.

“In the last year, the company recorded numerous auditable advances in its ESG practices. Even so, due to changes in criteria adopted for the formation of the current portfolio, it was out of the index,” he said in a note.

Regarding initiatives against deforestation, Marfrig highlights that it signed a public commitment in 2019 and has been implementing a series of actions.

“One of them is the monitoring of 30 million hectares in the Amazon region, via satellite and in real time.”

With more rigorous methodology, the new ISE has fewer ESG questions, but some still remain. One of them is related to Braskem’s entry into the 2022 portfolio.

The petrochemical company has a poor assessment in the MSCI, one of the main ESG rating systems in the market, which points out the company’s weaknesses in matters such as corporate governance and toxic emissions.

In addition, the new participant is linked to an environmental disaster in Maceió, which affected approximately 57 thousand people. In January 2018, Braskem’s rock salt exploration caused the soil to sink in several neighborhoods in the capital of Alagoas.

About the case, the company stated in August that it works “in janitorial and security support in the affected regions” and that it acquired seismological monitoring equipment. “Measures for compensation for environmental impacts and compensation for collective damages are also planned,” he stated in a note.

B3 was asked about Braskem’s entry into the ISE portfolio, but said it does not comment on specific cases.

See the new ISE portfolio (Corporate Sustainability Index)

Participants

• AES Brasil
• American
• Bradesco
• Bank of Brazil
• Braskem
• BRF
• BTG Actual
• CCR
• Cemig
• Heaven
• Copel
• Cosan
• CPFL Energy
• Dexco
• EcoRodovias
• BR Energies
• Fleury
• Natura Group
• Itaúsa
• Itaú Unibanco
• Klabin
• Light
• Renner Stores
• Move
• MRV
• Sugar Loaf
• RaiaDrogasil
• course
• Santander
• Suzano
• Phone Brazil
• Tim
• Vibrate
• path

entered

• Braskem
• RaiaDrogasil
• course

went out

• assai
• Bradesco*
• Cemig*
• Copel*
• Eletrobras
• Engie
• Getnet
• Itaú Unibanco*
• American stores
• M. Dias Branco
• Marfrig
• Minerva
• neoenergy
• Petrobras

*Only common shares came out