Social concern for sustainable economic development has led investors to require more ESG information to determine where their interests will be best protected. The regulations, for their part, have not been left behind and have adapted to this new panorama. It is in this context that the Chilean Financial Market Commission (CMF) published the General Standard 461, which incorporates sustainability and corporate governance issues in the organizations' Annual Report.
The proposal ensures that issuers of securities provide investors with all the information that would be considered important for investment decisions; forcing issuers of securities and certain special corporations to provide more information regarding their corporate governance and strategic definitions. How this corporate governance incorporates different environmental, social, and human rights aspects.
From Efforts to Concrete Results
The indirect goal that the new regulation seeks is to translate the efforts of companies into concrete results by promoting reportability under ESG criteria as management, control, and continuous improvement tool in ESG matters; preventing it from being seen as a task to be accomplished.
The changes are precise and indicate the minimum contents that an Annual Report must contain; among them the incorporation of the purpose of the company, the materiality, and the strategic pillars that lead it, the management of the Corporate Governments, the Management of Risks, Stakeholders and the standardized indicators by industry.
The fact that corporate governance itself is the entity responsible for preparing and disseminating this information contributes to improving its resilience by aligning the entity's strategy with the expectations and needs of shareholders and investors, financial clients, and other stakeholders.
The CMF emphasizes that rigorous control will be carried out so that the information for investors is of high quality and above all useful. At the level of directors, it highlights the responsibility of dictating the guidelines, setting objectives, and identifying the priorities of these matters within the organization. In terms of management, he emphasizes that they are the ones who will manage and must seek and allocate the necessary and sufficient resources to be able to meet the objectives.
Another highly demanding element is the sufficiency of the information provided, a factor subject to fines. The delivery of information regarding:
- Indicators of regulatory compliance in matters related to clients, workers, the environment, free competition, and others.
- Sustainability Indicators according to the type of industry that corresponds to the company, in accordance with international standards.
The obligation to abide by the regulations is in accordance with a schedule according to the type of institution and the number of consolidated assets. In any case, every issuer may voluntarily report its Annual Report in accordance with the new regulations from the date of issuance of the same.
- Public limited companies with consolidated assets that exceed 20 million UF, for the year 2022, which must be reported in March 2023
- Public limited companies with one million UF in consolidated assets for the year 2023, which must be reported in March 2024; and
- Banks, insurance companies, stock exchanges, product exchanges, securities deposit and custody companies, management companies of financial instruments clearing and settlement systems, general fund administrators, and the rest of the entities registered in the Registry of Values from the fiscal year 2024, which must be reported in March 2025.
All Latin American countries and the world are moving in the same direction; so, it is essential that organizations, whether mandatory or voluntary, adapt to the requirements that are emerging.
In these circumstances, organizations can incorporate technology that allows them to easily monitor the management of both environmental compliance and specific regulations; and to be in control of what happens with the communities or stakeholders in the areas of influence of their operations.
The challenge is not to act in accordance with the regulations, the real challenge lies in doing it in an orderly and systematized way to be able to carry out traceability and transparency of the information in order to give it its best use.