COP25 host Chile moves closer to mandatory ESG reporting

Chile’s financial regulator will lay a stepping stone towards mandatory ESG reporting in the coming weeks, with environmental criteria expected to take centre stage in a proposal for tighter disclosure requirements.

The Financial Market Commission (CMF) is nearing completion on a project which suggests changing the law to ramp up expectations for sustainability disclosures made in companies’ Annual Reports (link, Spanish).

CMF President Joaquín Cortez Huerta said the proposed changes would provide investors with “complete, accessible and useful information” to inform investment decisions.

He added that the environmental aspect of the work would help investors assess companies’ impacts on natural ecosystems – looking at corporate initiatives, investments and goals related to the consumption and production of resources.

He said: “Climate change has the potential to affect some players very negatively, while for others there will be opportunities created. Identifying and managing risks is what distinguishes the finance sector – and this is what we hope it will do.”

A proposal for the project is expected to go to public consultation in the coming weeks, with the commission convening private sector working groups to finalise the document.

The news comes alongside confirmation that Chile will launch its first National Financial Strategy for Climate Change in early December, when it hosts world leaders for the 25th United Nations climate change conference (COP25).It’s the latest move forward on climate disclosure in Chile, following the TCFD-inspired launch of the Public-Private Green Finance Working Group earlier this year. Headed up by Minister of Finance Felipe Larraín Bascuñán, the group is dedicated to incorporating risks and opportunities of climate change in business strategies and investment decisions.

The group includes representation from the Central Bank of Chile, the Financial Market Commission, the Chilean Pensions Supervisor, the UN Environment Programme Finance Initiative, the Santiago Stock Exchange, the British Embassy, the Inter-American Development Bank, the Chilean Mutual Funds Association, the Chilean Association of Investment Fund Administrators, the Chilean Insurance Association, the Chilean Association of Banks and Financial Institutions and the Chilean Private Pension Fund Administrators Association.

In April, the Chilean and Finnish governments announced they would co-lead the Coalition of Finance Ministers for Climate Action, which launched in April with more than 40 ministerial signatories. The group aims to respond to climate change with concrete actions in tax and budgetary planning.

In July, Bloomberg reported that government officials overseeing the $14bn Economic Stability Fund and the $10bn Pension Reserves Fund were considering allocating capital to ESG investments.

Chile closed Latin America’s first sovereign green bond in mid-June with a $1.4bn offering, followed up with a €861m issuance the next week. Both were heavily oversubscribed.