Patel: Game plan

Calcutta, Nov. 26: The Bombay Stock Exchange (BSE) is planning to launch an index that will track not only a company’s business performance but also its commitment to sustainable development and good governance.

Speaking to reporters at a corporate governance seminar organised by the Institute of Company Secretaries of India, BSE managing director Rajnikant Patel said, “It is in the conceptual stage and we are working on what kind of additional information we will require from companies to construct this index. The Sao Paolo stock exchange has one corporate sustainability index. But we will construct our own model.”

In Brazil, the Sao Paolo Stock Exchange (Bovespa) partnered the International Finance Corporation and the Getulio Vargas Foundation to launch a sustainability index in December 2005 involving 34 listed companies.

The market capitalisation of these 34 companies, operating in 14 sectors, is now 48.5 per cent of the market capitalisation of the main Bovespa index.

The index was constituted as part of IFC’s International Conference on Sustainable Finance in Emerging Markets. IFC and other multilateral finance agencies are now promoting the concept in other emerging markets.

At the seminar, Y.R.K. Reddy, founder of the Academy of Corporate Governance, said “The days are not far when providers of finance to companies would be more stringent on their sustainability and social responsibility reports.”

Bovespa is not the only stock exchange to have such a index.

South Africa’s Johannesburg Stock Exchange (JSE) has instituted a Social Responsibility Index in 2004.

Dow Jones has the Dow Jones Sustainability Index for US companies and the London Stock Exchange, the FTSE4 Good series.

In almost all the cases, the index constituents are asked to reply to questionnaires relating to their management practices and policies in dealing with environmental and social issues.