Written by Leon Lanis, Paralegal
Chile’s Finance Commission (the CMF) is campaigning to successfully supervise the impact of companies in the aspects of Environmental, Social and Corporate (ESG) issues in a push to minimise the negative impact of the markets on these issues.
As part of this, since 2019 the CMF has been implementing regulations which require additional reporting requirements for companies, including the maintenance of records of compliance in areas of corporate governance and environmental issues. In this post, we will analyse the requirements set by the CMF.
In its basis, the report must include the general aspects of the company and its strategy (both long, medium and short term) for sustainable operations. At a basic level, the report must at least contain:
- Entity’s profile: mission, vision, corporate purposes, etc
- Corporate governance and risk management frameworks: including the composition and role of the board of directors or its equivalent, practices and sustainability risks (especially those related to climate change)
- Strategy: objectives, timeframes and investment plans
- Personnel indicators and policies: diversity, gender pay gap, job security, workplace and sexual harassment, training and other benefits
- Business model: industry sector, stakeholders, properties, subsidiaries and associates
- Supplier management: payment policies, indicators and supplier assessments
- Regulatory compliance indicators: matters related to customers, workers and environment, antitrust, amongst others
- Sustainability indicators: depending of the type of industry, ad also in accordance with international standards
Companies may submit their Annual Reports voluntarily in accordance with the new regulations as of the fiscal year 2022-2023. A timeline is in place to assist with the introduction of the mandatory submission of reports. This includes the following dates:
- For Open Stock Corporations with a total consolidation of assets exceeding UF 20 Million: the new standards apply as of December 31, 2022, and the Report must be submitted by March 2023
- For Open Stock Corporations with total consolidated assets exceeding UF 1 million: the new standards apply as of December 31st, 2023
- For Special Corporations enrolled in the Commission’s Securities Registry: the new standards apply as of December 31st, 2024 and must submit their Reports by 2025
Beyond the need for regulatory compliance, the thorough adoption of ESG considerations and guidelines presents a myriad of benefits for any company. It may enhance reputation, accelerate economic growth through value creation and increase shareholder satisfaction.
The management and propagation of ESG guidelines and criteria continues as an integral and growing part of the Chilean market, and the new regulatory requirements reflect his. Continuing social, environmental, and economic crises have reminded both regulators and investors of the importance of not ignoring these factors and of actively seeking to promote compliance with global standards. If you need help to reconsider your company’s ESG compliance and profile, get in touch with our experienced team today.