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by
Seneca ESG
- April 27, 2023
As part of Peru’s growing momentum towards promoting ESG practices, the development and implementation of ESG disclosure regulations has formed a key role in the country’s updated Green Finance Roadmap, as highlighted by the Peruvian Ministry of Environment (MINAM).
ESG disclosures are one of the three foundations of the sustainable finance framework that helps channel capital to green investment opportunities and enable Peru to meet its own climate and social targets.
Alongside ESG disclosures, a green finance taxonomy and investment tools, such as eco-labelling, are also important components of this framework. Currently, the green finance taxonomy is being developed in collaboration between Climate and Company, MINAM and the German Development Agency (GIZ) (1).
From a recent study conducted by Page Group [PAGE:LN], Peru is advancing significantly the promotion and adoption of ESG best practices. 17% of corporate executives surveyed by Page Group stated that their companies are already taking transformative measures towards addressing climate change, applying decent working conditions and meeting international green energy standards. Considering the current environmental challenges being faced, the building sector in Peru has taken a bold step to increase compliance with international green certifications such as Leadership in Energy and Environmental Design (LEED) and Excellence in Design for Greater Efficiencies (EDGE), which are designed to improve accuracy and transparency in measuring and reporting on a building’s consumption of resources throughout the entire construction process (2).
Green Construction Certifications
A key milestone in green construction, the Leuro business center became the first LEED Platinum building in Peru and the 5th building in Latin America to meet the highest international standards for sustainable buildings. Designed to offer a comfortable and productive work environment that meets international labor standards, Leuro exceeds the International Environmental Protection Agency (IEPA) standards, with a water consumption reduction of 39%, a 14% saving in electrical energy, and a ventilation system that improves air quality by 30% (3).
More positive, however, is the precedent Leuro sets for other construction projects across the country to follow suit in. Currently, Peru has over 277 buildings that comply with LEED certifications and with more than 206 new projects in Latin America registered to comply with LEED and EDGE, Peru, Mexico, Ecuador, and Brazil are leading the way according to the Green Business Certification Inc (GBCI) (4) (5).
Well-Being and Health
Since the pandemic, Peruvian companies have also become highly concerned about the well-being and health of employees. With a growing number of bicycle riders and users of electric mobility vehicles, companies are rapidly expanding their facilities to accommodate employees who use eco-friendly means of transport to get to and from work.
Additionally, to further advance the social metric, alternative working options such as remote and hybrid working which took off during the pandemic have now gained relevance among many industries, offering flexibility and convenience for employees of different demographics, backgrounds and genders.
Diversity, Equity and Inclusion
In the study by Page Group, Peru was also found to be a major leader in the region for advancing Diversity, Equity, and Inclusion (DEI) policies. The South American nation shows the highest levels of incorporation of these initiatives with 38.4% for gender diversity, 22.8% for employees with disabilities, 28.7% for cultural and 33.3% for religion (6).
By prioritizing sustainable initiatives, Peru has taken a significant step towards establishing itself as a regional ESG leader. It is the only country in Latin America to comply with 8 out of 9 of the criteria from the United Nation’s Sustainable Stock Exchange Initiative (SSEI) which is designed to inform corporates and investors globally about how the 266 companies listed on the Bolsa de Valores de Lima (BVL) are performing to advance sustainability in their respective markets (7).
Advancing Peru’s Sustainable Finance
In an effort to improve ESG credentials in fixed-income, in October 2021 Peru issued its first set of sustainable bonds, a USD2.25bn 12-year issue and a USD1bn 50-year issue under its new Sustainable Bond Framework (SBF). Furthermore, in early November 2021, Peru made other headlines, this time moving to the euro market with the issuance of a EUR1bn debut social bond due in November 2036, reinforcing Peru’s continued efforts to broaden its ESG investor base with the integration of European accounts (8).
The SBF seeks to provide guidance on bond issuance and has been developed with the highest market standards. In line with the International Capital Market Association (ICMA), the framework comprises 4 key pillars. These include; use of proceeds, process for project evaluation and selection, management of proceeds, and reporting and external review.
Proceeds from any green, social and sustainability linked bonds under this framework are expected to finance or refinance new or existing eligible green or social expenditures. The purpose is to promote Peru’s transition to a low-carbon, climate resilient economy and fast track its progress to adopting greater ESG actions in Latin America while advancing its achievement of the Sustainable Development Goals (SDGs).
Moreover, to improve transparency and accuracy in process evaluation and selection of eligible social expenditures the SBF has established a methodology for socioeconomic categorization. The flowchart below outlines the Sistema de Focalización de Hogares’s (SISFOH) process and criteria to identify target poor and extremely poor target beneficiaries.
The final stage on reporting and external reviews typically aims to inform investors with detailed impact reports on the composition of the bonds issued under the SBF to support better investment decision-making (9).
In private banking, Peruvian Bank BCP, a subsidiary of Credicorp, has also got involved in sustainable bonds, issuing its first international bond in the Peruvian banking system for USD30mln following the publication of its Sustainable Financing Framework (SFF) designed to work alongside the SBF.
BCP’s Sustainable Financing Framework was designed in accordance with international sustainability guidelines and was the first in Latin America to receive a “strong” rating. The move reaffirms Credicorp’s commitment to sustainability and its corporate purpose to accelerate sustainable change (10).
Peru’s commitment to advancing ESG actions and sustainable finance not only supports the country’s long-term economic growth and social development challenges but also contributes to the global efforts to address climate change and promote sustainable development. With the implementation of new frameworks and initiatives, Peru is well-positioned to continue making progress towards a more sustainable future.
Sources
https://climateandcompany.org/projects/advancing-esg-disclosure-regulation-in-peru/
https://blogs.iadb.org/sostenibilidad/en/17265/
https://stakeholders.com.pe/opinion/leed-la-certificacion-la-construccion-sostenible/
https://www.usgbc.org/projects?Country=%5B%22Peru%22%5D
https://sseinitiative.org/stock-exchange/bvl/
https://cib.bnpparibas/republic-of-peru-debuts-its-sustainable-bond-framework/
https://www.mef.gob.pe/contenidos/archivosdescarga/Peru_Sustainable_Bond_Framework.pdf
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