ESG 2024 Comparisons

Progress in Chile’s ESG landscape has not advanced as quickly as previously anticipated, with much of the regulatory agenda in 2024 being dominated by the implementation of the new Economic Crimes Law. This law came into effect for companies on 1 September 2024 and requires businesses to prioritise compliance and governance reforms, overshadowing other planned ESG initiatives.

Environmental

On the environmental front, the government has proposed a new bill to reform the Environmental Impact Assessment System (SEIA). This reform aims to strengthen the Director of the Environmental Assessment Authority, reduce delays in the SEIA and improve community engagement through early and expanded participation. The bill also proposes to centralise decision-making in more specialised roles, ensuring that the evaluation is led by technical experts rather than politically appointed bodies (such as the Environmental Evaluation Commission and the Committee of Ministers), granting more authority to the Regional Directorates of the Environmental Assessment Service (SEA).

Another key development is the enactment of Law No 21,600, which established the Biodiversity and Protected Areas Service. This new agency consolidates the management of terrestrial and marine protected areas, focusing on the conservation of Chile’s rich biodiversity. In October 2023, Chile officially launched the Emissions Compensation System for the Green Tax (SCE), a new mechanism aimed at reducing greenhouse gas emissions through a compensation market based on emission reduction certificates. The SCE is expected to significantly advance environmental policy and support Chile’s transition towards a greener and more sustainable economy.

Social

Two major labour laws were enacted in 2024:

• the 40-Hour Workweek Law (Law No 21,561) aims to gradually reduce the standard workweek from 45 to 40 hours by 2028, promoting better work-life balance; and
• Law No 21,643 (known as Ley Karin, named after a victim of workplace harassment) strengthens protections against workplace harassment and violence, forcing companies to implement protocols to address psychosocial risks and mental health issues.

It is also worth noting the SEIA reform bill, which among other things underscores the importance of fostering community engagement and ensuring transparency with local stakeholders. Despite these advances, the anticipated human rights due diligence bill has not moved forward as expected, leaving a gap in corporate responsibility for human rights impacts, especially within supply chains.

Governance

The Economic Crimes Law (Law No 21,595) has been the most impactful governance-related development, significantly expanding corporate liability for governance and environmental offences, among others. This law requires companies to update their Crime Prevention Models to include ESG-related risks, and introduces severe penalties for non-compliance. On the other hand, the Commission for the Financial Market (CMF) is reconsidering the enforcement timeline for its General Standard No 461 (NCG 461), which mandates ESG disclosures for listed companies. The CMF is evaluating a more gradual implementation strategy, including extended deadlines and simplified reporting requirements for special and relatively smaller listed joint stock companies.

In the broader context of digital governance, Chile has also advanced its regulatory framework with the introduction of a bill to regulate artificial intelligence (AI). This bill, aligned with UNESCO’s recommendations, aims to ensure ethical AI use by categorising systems based on risk and establishing principles such as transparency and human oversight. In addition, the recently enacted Framework Law on Cybersecurity and Critical Information Infrastructure has established stricter cybersecurity standards, making Chile a leader in digital governance in Latin America. These legislative efforts are accompanied by ongoing reforms to the Personal Data Protection Law, further embedding data privacy and digital ethics within the ESG governance pillar.

Moreover, during the past year, Chile has seen a notable increase in the availability of ESG reporting services that are supported by AI technology. These services leverage advanced data processing and analytical capabilities to automate and enhance ESG disclosures, making it easier for companies to meet compliance requirements and deliver transparent, data-driven reports. Nonetheless, companies run the risk of reducing the focus on substantive, material issues, potentially turning compliance into a superficial “box-checking” exercise driven by algorithms, rather than fostering genuine stakeholder engagement and ethical business practices.

Overall, while Chile’s ESG framework is evolving, corporate governance reforms have dominated the agenda, with environmental and social updates progressing more slowly. However, recent advancements in AI regulation and cybersecurity are positioning Chile at the forefront of digital governance in the region.

In 2024, Chile has experienced a tightening of environmental regulations and oversight, reflecting an increased focus on sustainability and climate considerations, particularly following the implementation of the new Methodological Guide for the Consideration of Climate Change in the SEIA in November 2023, which establishes clear criteria for assessing climate risks and resilience. However, the most significant development in this area is the proposed reform to the SEIA, which aims to integrate climate change factors into project evaluations and enhance the efficiency of the environmental licensing process. This reform emphasises early community participation and strengthens the technical rigour of evaluations by transferring greater authority to the Regional Directorates of the SEA. The changes are intended to streamline decision-making, reduce delays and ensure that environmental reviews are grounded in technical expertise rather than political considerations.

Despite the recent tightening of environmental regulations, there is growing frustration over the increasing bureaucracy in obtaining permits, making it difficult to advance new projects. A clear example is the case of a large power generation company that was unable to initiate the process of obtaining its Environmental Qualification Resolution (RCA) for a desalinated water recirculation system using advanced “pump storage” technology due to heightened scrutiny by a regional SEA office. This project, aimed at improving energy efficiency and sustainability, has stalled due to complex regulatory requirements, highlighting the challenges high-impact projects face in navigating Chile's evolving environmental standards.

Meanwhile, the mining sector – especially lithium extraction – and the green hydrogen industry are emerging as key drivers of Chile’s economic growth, closely tied to the global push for green energy as companies strive to meet climate change and decarbonisation targets. These industries are increasingly subject to stricter regulatory oversight, particularly regarding water usage, emissions and their impact on local communities. As environmental compliance becomes a critical factor for future project development, these sectors are not only meeting local legal demands but are also preparing to adhere to heightened ESG standards from the EU, driven by pressure from international trade partners as their products enter global markets.

Overall, Chile’s environmental landscape in 2024 is characterised by an openness to a broader consideration of environmental impacts, incorporating aspects such as climate change and biodiversity, along with increased global oversight and a focus on aligning with international sustainability standards. These changes are significantly affecting the feasibility of high-impact industrial projects, as companies must navigate evolving regulations and demonstrate compliance with both local and global environmental criteria to move forward.

In 2024, social trends in Chile have been shaped by substantial labour reforms aimed at strengthening employee protections and improving workplace conditions. A key legislative update is the enactment of the Law on the Prevention, Investigation and Sanctioning of Workplace Harassment, Sexual Harassment and Workplace Violence (Law No 21,643, commonly known as Ley Karin). This law came into effect in August 2024 and mandates that companies establish robust protocols to handle cases of workplace harassment and violence, and ensure a respectful and safe work environment. The law also expands the oversight capabilities of labour authorities, including the Labour Directorate and the Superintendence of Social Security, to investigate and enforce compliance more effectively.

Another major social reform is the implementation of the 40-Hour Workweek Law (Law No 21,561), which gradually reduces the maximum weekly working hours from 45 to 40 by 2028. This law aims to improve work-life balance and aligns with international trends focused on enhancing employee well-being. It introduces flexibility in work arrangements, such as the option for a four-day workweek, provided there is mutual agreement between employers and employees.

Despite these advancements, the anticipated human rights due diligence bill – which would impose obligations on companies to identify, prevent and address human rights risks in their supply chains – has not progressed as quickly as expected. This delay leaves a regulatory gap in the protection of human rights, particularly in high-risk industries.

Overall, Chile’s social landscape in 2024 reflects a strong focus on labour rights and workplace safety, with ongoing efforts to address human rights issues in corporate practices.

In 2024, governance trends in Chile have centred on enhancing corporate accountability and transparency through new regulations. The Economic Crimes Law (Law No 21,595) has greatly expanded corporate liability for ESG offences, with companies now being required to integrate ESG risks into their compliance models, with stricter penalties for misrepresentation or non-compliance. The broad range of offences and the severity of penalties have led to a cultural shift within companies, with management and boards prioritising non-financial risks and ESG-related responsibilities as core duties.

In addition, General Standard No 508 (NCG 508), issued by the CMF in May 2024, outlines corporate governance and comprehensive risk management instructions for stock exchanges and product exchanges. This regulation emphasises the role of boards of such entities in overseeing risk management frameworks, ensuring adequate organisational structures and establishing internal control mechanisms. NCG 508 also sets standards for policies, procedures and controls, requiring entities to align with international best practices while regularly updating their governance and risk management protocols.

Furthermore, the proposed “More Women on Boards” bill seeks to increase female participation on the boards of publicly traded and special corporations, gradually implementing a maximum quota of 60% for the gender, with greater representation. This initiative aligns with Chile’s broader efforts to promote gender diversity and strengthen corporate governance practices.

Chile’s regulatory and supervisory authorities play a crucial role in the ESG transition by ensuring the effective implementation and enforcement of sustainability regulations. The CMF, the SEA and the Superintendence of the Environment (SMA) are known for their rigorous oversight, requiring companies to fully comply with governance and environmental standards.

Similarly, the Labour Directorate (DT) and the Superintendence of Social Security (SUSESO) oversee compliance with social regulations, ensuring that labour laws like Ley Karin and the 40-Hour Workweek Law are strictly enforced. Their role in safeguarding employee rights and workplace conditions is central to upholding Chile’s social standards, making these authorities essential to the country’s broader ESG strategy.

Each of these bodies is characterised by its rigorous oversight and is staffed by highly specialised professionals, making them difficult to bypass and ensuring that compliance is enforced with integrity and gravity. Companies must approach these regulators with due diligence, as their strong reputation for upholding legal and ethical standards means that attempts to circumvent regulations are unlikely to succeed. Their role is pivotal in driving Chile’s ESG agenda forward, promoting transparency, protecting labour rights and ensuring environmental sustainability. As such, these entities are critical to the effective functioning and credibility of Chile’s ESG regulatory framework.

In Chile, the sectors most impacted by ESG regulations in the coming years will be mining, particularly lithium extraction, and the expanding green hydrogen industry, due to their environmental footprint and strategic role in the economy. These industries face increased scrutiny on issues such as water usage, emissions and community impacts, especially under the Climate Change Framework Law. In addition, these industries operate in global markets and are increasingly pressured by stakeholders to adhere to international ESG standards and assessments, such as the Global Reporting Initiative (GRI), International Financial Reporting Standards (IFRS), the Initiative for Responsible Mining Assurance (IRMA), the Dow Jones Sustainability Index (DJSI) and the International Council on Mining and Metals (ICMM), to maintain market access and obtain financing.

Given their significant contributions to Chile’s GDP, mining and energy companies must meet the stricter ESG criteria enforced by international financiers, who require compliance with green finance standards. This creates a performative effect, where the need to meet these standards materially influences how these industries operate. At the same time, financial institutions in Chile will also be subject to growing ESG obligations as the government tightens regulations to combat greenwashing and establish more robust sustainability criteria, ensuring transparency and accountability in investments.

Chile's deep integration into the global economy makes it particularly vulnerable to geopolitical shifts and international policy changes, which is impacting the implementation of ESG regulations. While Chile's government actively supports ESG standards, progress has been slow, likely due to global economic challenges. Despite the slow legislative progress, ESG considerations are well integrated into key sectors, particularly mining and energy, which must adopt the international standards imposed by clients and global banks.

However, as ESG practices become more embedded, the increasing complexity in obtaining the necessary permits has been a growing concern, particularly among foreign investors. Chile was once seen as having a comparative advantage due to its efficient regulatory processes, but is now facing criticism for the bureaucratic hurdles that are slowing down project approvals. This raises concerns that the added requirements might lead to a more burdensome regulatory framework, potentially creating an adverse reaction from investors and threatening the viability of future projects, thus impacting the country’s economic competitiveness.

In 2024, corporate governance practices in Chile have evolved through key regulatory changes that emphasise transparency, diversity and digital governance. A significant development is the Economic Crimes Law (Law No 21,595), which expands corporate liability for ESG offences, requiring companies to integrate ESG risks into their Crime Prevention Models. This law is among the most stringent globally, covering a broad array of crimes and imposing severe penalties. It has led to a cultural shift, with boards and senior management now required to fully incorporate non-financial risks – such as environmental and social issues – into their fiduciary duties. This law took effect in September 2024 and its impact is expected to grow, with the first prosecutions for inadequate due diligence in preventing economic crimes expected in 2025.

NCG 508 establishes governance and risk management guidelines for stock exchanges, focusing on oversight, internal controls and alignment with international best practices. The “More Women on Boards” bill further advances gender equality by requiring 20% female representation on boards within six years, promoting greater diversity in corporate leadership.

Chile is also making strides in digital governance with the introduction of a new AI bill, which creates a risk-based framework to ensure ethical use of AI. This effort, along with updates to the National AI Policy, reinforces Chile’s position as a leader in responsible AI regulation in Latin America.

The proposed Human Rights Due Diligence bill will further extend corporate responsibility, making human rights risks a core part of governance requirements. These reforms reflect Chile's commitment to modernising corporate governance through ESG integration, enhanced diversity and addressing the growing importance of digital governance.

In Chile, listed companies are currently the primary entities required to report on ESG matters, reflecting the government's strategy to implement sustainability disclosures gradually. At present, the obligation to report ESG data is focused on very large companies regulated by the CMF under NCG 461 and NCG 508. These regulations require detailed disclosures on ESG practices, including board composition, risk management and anti-corruption measures. As mentioned in 1.1 General ESG Trends, there have been discussions to delay implementation by one year for special entities and relatively smaller listed joint stock companies.

Unlisted entities, particularly small and medium-sized enterprises (SMEs), are not yet subject to these reporting requirements, but ESG reporting obligations are expected to be extended to a broader range of companies over time. Regulators are mindful of the high costs and technical barriers that mandatory ESG reporting could impose on smaller businesses. To address these concerns, the CMF has proposed simplified reporting requirements and extended deadlines to ease the compliance burden on SMEs. However, with the introduction of the Economic Crimes Law, companies with annual revenue exceeding USD1 million are now required to implement prevention and due diligence mechanisms covering a range of risks, including environmental, labour, social security and corporate governance risks, regardless of whether or not they are publicly listed.

While listed companies are held to strict ESG reporting standards, unlisted entities currently enjoy more flexibility. However, market pressure and regulatory expectations are likely to push unlisted companies toward adopting ESG practices, either voluntarily through best practices or through eventual regulatory mandates tailored to their size and capacities.

The roles and responsibilities of directors and officers in Chile have significantly evolved with the implementation of the Economic Crimes Law (Law No 21,595), which now holds them criminally liable for failing to establish effective Crime Prevention Models. For the first time, directors and senior management are legally required to actively consider non-financial risks, such as environmental, labour, social security and corporate governance risks, as part of their fiduciary duties. This has led to a shift from focusing solely on financial oversight to engaging in the development and integration of ESG strategies.

Directors and senior management must implement strong internal controls, ensuring that ESG matters – such as environmental impact, social concerns and governance – are incorporated into the company’s decision-making processes. Failure to do so can result in severe legal liabilities. In addition, regulations issued by the CMF, such as NCG 461 and NCG 508, further mandate that boards oversee the transparency and accuracy of ESG disclosures. Given the interaction between the ESG reporting obligations and the Economic Crimes Law, there is also the potential for criminal liability if false or misleading ESG information is approved or reported by directors.

This growing responsibility emphasises the need for directors to be well-versed in sustainability issues and to ensure that ESG risks are integrated into the company's reporting and governance practices.

Chile does not have a specific legal framework designed exclusively for social enterprises, but businesses can incorporate social objectives within traditional structures like Sociedades Anónimas (SA) and Sociedades de Responsabilidad Limitada (SRL). Co-operatives are also an interesting option, as they prioritise social welfare and equitable participation over profit maximisation. Co-operatives are structured to ensure that members have a say in decision-making and benefit directly from the organisation’s activities, making them ideal for businesses focused on shared value and community impact.

Many socially oriented businesses in Chile opt for B-Corp (Empresas B) certification, which formally recognises companies that meet high social and environmental standards. This certification provides a way for companies to distinguish themselves as socially responsible enterprises and align with global best practices in sustainability.

Moreover, a growing trend among high net worth companies is the creation of foundations aimed at benefiting local stakeholders, particularly communities where the company or its projects operate. These foundations focus on improving local livelihoods, enhancing social development and fostering positive relationships between companies and the communities impacted by their operations.

In Chile, current ESG obligations are not yet strong enough to drastically influence shareholder behaviour or decision-making. However, the implementation of NCG 461 has started improving transparency by requiring publicly listed companies to disclose their ESG practices. While these disclosures are still evolving, they offer shareholders more insight into a company’s sustainability and risk management efforts.

Under the Economic Crimes Law, the fiduciary duties of directors and managers have been elevated, placing greater pressure on companies to comply with ESG standards to avoid risks that may threaten long-term business sustainability. Shareholders are becoming more informed through increased access to ESG data and are showing a growing interest in encouraging better practices within the companies in which they invest. Therefore, shareholder expectations and pressure are increasingly shaping corporate governance for the adoption of ESG strategies. This positions shareholders as key influencers, pushing companies to voluntarily adopt higher standards, aligning with global trends and safeguarding business sustainability.

In Chile and Latin America, the past year has seen increased momentum in green financing initiatives. Chile issued its first Sovereign Green Bond Framework in 2019 and has continued to build on this with social and sustainability bonds, making it a regional leader. Although recent regulatory developments have only indirectly supported the growth of sustainable finance, updates to environmental regulations under the SEIA, along with the establishment of stricter environmental standards, have created a more predictable framework for sustainable projects. The Chilean Sustainable Finance Taxonomy, currently under development, will guide companies on eligible activities for green financing. However, a comprehensive regulatory framework for sustainable finance is still needed across the region, particularly to establish clear guidelines for greenwashing prevention and reporting.

In Chile, the General Banking Law does not yet explicitly codify ESG requirements, but financial institutions are increasingly incorporating ESG principles into their operations. Commercial banks are demanding non-financial disclosures from companies and promoting investments aligned with sustainable governance standards, guided by frameworks such as the IFC Performance Standards and the Equator Principles.

The CMF and the Central Bank of Chile are actively promoting ESG integration through complementary guidelines. In 2021, the CMF introduced a circular recommending the adoption of the Task Force on Climate-related Financial Disclosures (TCFD) framework, urging banks to disclose climate-related financial risks and integrate environmental and social factors into their risk management processes. This aligns Chile with international standards for ESG reporting and transparency.

The Central Bank of Chile has incorporated climate-related risks into its financial stability assessments under the Agenda de Finanzas Verdes initiative. This encourages the banking sector to consider environmental risks when evaluating long-term investments and asset portfolios. While not formal amendments to the General Banking Law, these developments mark a broader shift toward embedding ESG criteria in Chile’s financial system.

In addition, Chile is introducing a Sustainable Finance Taxonomy, a standardised classification for sustainable activities, which will further support the integration of green financing principles into the financial sector. This taxonomy will offer clearer definitions for sustainable investments and help align financial products with ESG goals, enhancing transparency and accountability across industries.

Access to green financing in Chile has expanded significantly through various mechanisms introduced by the government and financial institutions. The Chilean government has actively promoted green bonds, issuing approximately USD7.7 billion in green bonds since 2019. These bonds make up a substantial portion of Chile’s total sovereign debt, and have primarily been allocated to climate change mitigation, sustainable water use and biodiversity protection.

The Corporación de Fomento de la Producción (CORFO) has developed a refinancing programme aimed at supporting projects that focus on renewable energy, energy efficiency and circular economy initiatives. Through financial intermediaries, CORFO offers loans of up to 15 years and finances up to 70% of the total investment, with a cap of USD20 million per project.

Local banks have joined these efforts by promoting green and sustainable loans for projects that prioritise environmental benefits. The Ministry of Energy has also launched a centralised website that consolidates information on public funding sources, making it easier for companies to explore financing options.

While these initiatives have increased accessibility, smaller companies and projects still face challenges in meeting stringent eligibility criteria and understanding ESG frameworks. The upcoming Sustainable Finance Taxonomy aims to standardise the criteria for green projects, making green finance more accessible and transparent.

In Chile, the mining sector is the primary industry facing potential risks of becoming a stranded asset. However, unlike other traditional industries, the mining sector has been proactive in integrating ESG practices to align with global sustainability trends. Key mining companies are investing in renewable energy, water efficiency and community engagement initiatives, demonstrating a strong commitment to adapting to evolving ESG requirements, under the commitment to comply with Chile's goal of achieving carbon neutrality by 2050 and shifting its energy matrix towards renewable sources.

Chile’s 2030 National Decarbonisation Plan has already led to the closure of several coal-fired power plants, but these closures have been managed through transition plans that aim to minimise economic and social impacts. A major consumer of energy, the mining industry is actively transitioning to renewable energy sources, thereby reducing its carbon footprint and aligning with national decarbonisation goals.

Rather than excluding traditional borrowers, financial institutions are increasingly supporting mining companies that adopt sustainable practices. This shift is reflected in the availability of green loans and sustainability-linked bonds tailored specifically for mining operations that meet environmental and social standards.

While the risk of stranded assets remains, particularly for non-compliant operations, the extractive resources and non-renewable energy industries are not being left behind. Instead, the focus is on transforming traditional sectors to meet ESG criteria and maintain their competitiveness in a low-carbon economy. This approach ensures that traditional industries can adapt to new requirements without losing access to critical financing.

Chile’s sustainable finance landscape faces several challenges as it adapts to growing ESG expectations. A primary concern is greenwashing, where companies exaggerate their environmental credentials to attract investment. To address this, a proposed bill against greenwashing aims to regulate sustainability claims, penalise misleading statements and establish clear guidelines for companies to follow. Once approved, this bill will help to ensure transparency and credibility in ESG claims, thereby building trust in sustainable finance.

Conversely, greenbleaching has not been observed in Chile and has not been raised as an issue, as many ESG regulations remain voluntary and primarily follow a best practices approach. This situation has allowed companies to be more flexible in their reporting without fearing liability.

An emerging concern is the rise of “anti-ESG” sentiment from sectors that view stricter regulations as barriers to competitiveness. This is particularly relevant for resource-intensive industries like mining, which may resist compliance if they see these standards as harming profitability. This is particularly true with respect to neighbouring countries with less rigorous ESG standards.

In addition, financial institutions are experiencing higher compliance burdens as ESG standards become more complex, requiring enhanced monitoring and reporting systems. This can strain smaller institutions with limited resources. An unresolved issue is the lack of a clear taxonomy to classify green projects – a challenge Chile may not be able to fully resolve independently and that requires a degree of international consensus.

Finally, effective regulatory enforcement is essential to ensure compliance. Without strong oversight, the impact of new regulations may be limited, reducing Chile’s ability to attract sustainable investment and meet its climate goals. Addressing these challenges will require co-ordinated efforts between regulators, financial institutions and the private sector.

In Chile, ESG-related soft law is increasingly being integrated into binding regulations, reflecting a shift towards stricter compliance. A key development is the proposed Human Rights Due Diligence Law, which aims to enforce corporate responsibility regarding human rights and environmental protection. The initiative is aligned with international standards, such as the European Union's Corporate Sustainability Due Diligence Directive, and would require companies to identify, prevent and mitigate any negative impacts across their value chains. If passed, this law would mark a significant transition from voluntary ESG guidelines to mandatory due diligence obligations.

Moreover, the CMF's NCG 461 introduced mandatory ESG disclosures for publicly listed companies. The regulation requires these companies to include information on their ESG policies in their annual reports, establishing a clear reporting standard. While NCG 461 does not yet impose penalties for non-compliance, it has laid the groundwork for more robust reporting obligations.

The Economic Crimes Law (Law No 21,595), enacted in 2023, expanded corporate liability to include offences related to environmental damage and governance misconduct. This law increases accountability for companies, making it part of a broader regulatory framework that supports ESG enforcement.

Overall, while many ESG regulations in Chile are still based on best practices, the country is moving towards hard law frameworks that aim to provide clearer guidelines and stricter compliance measures for companies.

In Chile, there is an increasing focus on human rights due diligence in corporate supply chains, driven by the global trend of strengthening corporate responsibility. While there is no comprehensive due diligence law covering all ESG areas, the Chilean government is considering a regulation focused specifically on human rights due diligence. This would require companies to assess, prevent and mitigate human rights risks throughout their supply chains, aligning with international standards like the United Nations Guiding Principles on Business and Human Rights.

The proposed regulation would place responsibilities on companies to actively identify potential human rights violations within their operations and business relationships, setting a precedent for broader vertical responsibilities. Although it has not yet been formally introduced as a bill, discussions around this regulation have raised awareness among companies regarding the need to implement robust risk management systems that extend to third-party contractors and suppliers. This growing attention on supply chain due diligence is also closely tied to international commercial pressure, especially concerning Chilean exports.

The Economic Crimes Law (Law No 21,595) has expanded corporate liability in areas like governance and environmental offences, and has made companies responsible for the commission of economic crimes in those areas even if committed by commercial partners such as suppliers and service providers. Thus, the implementation of the company's Crime Prevention Model requires the extension of the law's application to reach supply chains.

The implementation of the Economic Crimes Law (Law No 21,595) has significantly impacted how companies in Chile manage their supplier relationships and contract partners. The law expanded the scope of criminal liability for companies, and requires businesses to integrate a comprehensive risk management approach that includes third-party suppliers in their compliance structures. This has forced companies to be more diligent when selecting partners and to incorporate them into their Crime Prevention Model as relevant stakeholders.

Under Law No 21,595, companies must consider suppliers and contractors in their risk matrix and include them in due diligence processes to identify any potential risks related to, for example, environmental, governance or corruption offences. This approach aims to ensure that companies are not only compliant with internal policies but are also protected from being held liable for illegal activities carried out by their business partners.

As a result, companies are now more cautious when contracting suppliers, often requiring them to meet specific compliance standards and sign agreements that align with the company’s crime prevention policies. This includes implementing enhanced Know Your Supplier (KYS) procedures, ongoing monitoring and, in some cases, terminating relationships if a supplier fails to meet the required standards.

This regulatory shift is not only improving compliance among primary companies but is also enhancing practices down the supply chain. Smaller suppliers are being pushed to elevate their standards, adopt formal risk management procedures and invest in training programmes to understand and meet these new requirements. By doing so, suppliers strengthen their own compliance frameworks, making them more attractive business partners and minimising the risk of being excluded from supply chains.

Ultimately, this approach is fostering a more responsible and transparent business environment throughout Chile’s supply chains, ensuring that suppliers play a proactive role in mitigating legal and reputational risks. Increasingly, the reputational risk of incorporating suppliers with a negative ESG track record has led large companies to adopt stricter selection criteria when choosing their business partners, encouraging better practices and alignment with sustainability goals.

In Chile, the integration of non-financial risks such as ESG factors has become a critical component in M&A due diligence processes. Traditionally, due diligence focused primarily on financial, operational and legal risks, but recent trends show a growing emphasis on assessing a target company’s ESG performance to identify potential risks and liabilities that could impact the long-term value of an acquisition.

This shift is driven by several factors, including regulatory developments, investor expectations and the increased importance of sustainability in business strategies. For example, assessing a target company’s environmental impact, labour practices, human rights policies and governance structures is now standard practice. Failing to address these non-financial risks can lead to significant reputational damage, restricted access to project financing or even legal liabilities post-acquisition.

As a result, M&A transactions now often include specific ESG due diligence modules alongside traditional parameters. This involves evaluating the target’s adherence to ESG standards, identifying areas of non-compliance and estimating potential future costs for aligning the company with best practices. Incorporating ESG matters into due diligence not only helps buyers understand the full scope of risks but also ensures that the acquisition is aligned with sustainability goals.

This comprehensive approach strengthens decision-making, reduces the risk of inheriting hidden liabilities and supports sustainable growth strategies, making ESG an indispensable element in M&A due diligence processes.

In Chile, ESG disclosure requirements for publicly listed joint stock companies are governed by NCG 461, issued by the CMF, which requires listed companies to report on ESG practices in their Annual Reports, including climate-related risks, human rights and governance structures. The goal is to increase transparency and ensure that non-financial risks are integrated into overall corporate strategies.

To support broader compliance, the CMF has been considering a one-year extension for the implementation of NCG 461 and introducing simplified reporting requirements for special and relatively smaller listed joint stock companies. This would allow them to submit an abridged version of the Annual Report, focusing on essential ESG information without the extensive disclosures required from larger entities.

This phased approach aims to reduce the compliance burden on smaller companies while promoting the adoption of ESG principles across the market. As a result, large companies must still provide comprehensive ESG data, while SMEs can gradually build up their reporting capacity, ensuring an inclusive transition towards more robust sustainability practices in Chile’s corporate sector.

In Chile, there are currently no mandatory requirements for companies to publish specific transition plans or commit to ESG targets, except for those set by NCG 461, which applies to large publicly listed companies and requires them to disclose their ESG policies, strategies and risk management in their Annual Reports. However, it does not mandate formal transition plans or binding ESG targets. Moreover, there is no specific legal standard or law addressing greenwashing, which leaves a regulatory gap concerning the accuracy and verification of companies' sustainability claims.

Nonetheless, companies are increasingly expected to adopt voluntary commitments in line with international standards, such as the TCFD and Sustainability Accounting Standards Board (SASB) frameworks. Many firms – especially those in sectors with high environmental impact like mining and energy – are implementing emission reduction goals, climate risk assessments and sustainability targets to align with global best practices.

With Chile’s recent approval of the Climate Change Framework Law, large emitters will soon be required to develop Climate Change Adaptation and Mitigation Plans, which will set specific emission reduction goals and outline pathways to meet national decarbonisation targets. While the detailed regulatory guidelines are still being developed, these requirements will become a crucial element of corporate ESG strategies in the coming years. Currently, companies that publicly adopt ESG targets are mainly accountable to their clients and investors.

Overall, while transition plans and binding ESG targets are not yet universal, Chile is advancing towards a more structured framework. The absence of clear greenwashing regulations is a notable gap, but future regulations are expected to close this and strengthen accountability.

In Chile, there are currently no specific regulations governing the use of ESG labels or sustainability claims. However, companies must comply with the general Consumer Protection Law (Law No 19,496) and Advertising Standards to avoid making false or misleading statements about the sustainability of their products or services. This implies that any sustainability-related claims must be accurate, verifiable and not misleading, ensuring that consumers are not deceived by vague or exaggerated ESG statements.

Chile is working on a proposed bill against greenwashing, which aims to regulate and standardise how companies and financial institutions present their environmental and social credentials. Once enacted, this legislation will establish clear criteria for making sustainability claims and introduce penalties for companies that engage in greenwashing. The bill seeks to ensure that companies back up their claims with reliable data and certifications, ultimately enhancing the credibility of ESG labels and fostering transparency in the market.

In the absence of specific ESG label regulations, many Chilean companies voluntarily adopt international standards and certifications, such as the Global Reporting Initiative (GRI), B Corporation Certification and ISO 14001 for environmental management. These standards serve as benchmarks for validating sustainability claims and ensuring consistency in reporting.

In Chile, environmental compliance is overseen by the SMA, which ensures that companies adhere to environmental regulations. The SMA monitors compliance with environmental standards and has the authority to enforce penalties for non-compliance.

ESG disclosures and sustainability marketing claims are primarily monitored by the CMF, which oversees compliance for large publicly listed companies. NCG 461 mandates that listed entities include ESG information in their annual reports, such as environmental policies, human rights practices and corporate governance structures.

For sustainability claims made to consumers, the National Consumer Service (SERNAC) is the primary regulatory body. SERNAC enforces the Consumer Protection Law (Law No 19,496), which prohibits misleading or deceptive advertising. Companies making false or exaggerated ESG claims can face fines and reputational damage if their marketing practices are found to mislead consumers.

It is also worth noting that Chile is drafting a greenwashing bill, and that new supervisory responsibilities may be established to oversee the use of ESG labels and claims more rigorously. This would likely involve a combination of the CMF and SERNAC, ensuring that both corporate ESG disclosures and consumer-facing sustainability claims are properly regulated and aligned with best practices.

In Chile, the enforcement of ESG-related non-compliance has been strengthened with the recent enactment of the Economic Crimes Law (Law No 21,595), which came into effect in 2023. This law significantly expands corporate liability by including offences related to environmental crimes and misleading disclosures in corporate reports. Under the law, companies and their executives can be held criminally responsible for providing false or incomplete ESG information that is legally mandated (for example, NCG 461), potentially facing severe penalties, including fines and imprisonment for those involved.

However, because this law is very new, there is still uncertainty about how it will be enforced by prosecutors, and the scope of its application and the criteria that will be used to assess violations are not yet fully defined. This ambiguity poses a challenge for companies, as the lack of clear enforcement guidelines means that compliance practices must be particularly cautious to avoid unintended breaches.

For consumer-facing claims, SERNAC enforces the Consumer Protection Law (Law No 19,496), which penalises misleading advertising. The anticipated greenwashing bill is expected to further strengthen penalties, providing a clearer framework to address ESG-related mis-statements and ensuring greater accountability in the Chilean market.

In Chile, ESG reporting is expected to advance significantly in quality and scope as regulatory pressures and market expectations grow. The Empresas Sumando Valor 2023 report, produced by Acción Empresas, CPC, Global Compact and SOFOFA, shows an increase in ESG reporting but highlights gaps in areas like climate goals and biodiversity. The adoption of NCG 461 by the CMF has laid the groundwork for mandatory disclosures among listed companies, but its effectiveness remains limited in driving substantial improvements in reporting quality.

New regulations, such as the Economic Crimes Law (Law No 21,595), are expected to further compel companies to enhance transparency and accuracy in their ESG disclosures. This law introduces criminal liability for providing false or misleading information, creating higher stakes for compliance.

The CMF is also considering measures to support special and relatively smaller listed joint stock companies by introducing simplified reporting requirements and extended deadlines to ease compliance, promoting broader adoption of ESG practices.

Moving forward, Chilean companies will need to adopt international frameworks like the TCFD, the GRI, the SASB and the EU's Corporate Sustainability Reporting Directive (CSRD), to align with global best practices. This evolution will require improved data management and internal controls, ensuring that ESG reporting is not only comprehensive but also reliable and meaningful to investors and stakeholders. These efforts will shape a more transparent and robust ESG landscape in Chile.

Chile does not have a specialised court dedicated exclusively to addressing ESG matters. Instead, disputes are generally heard by different forums, depending on the nature of the issue and the sector involved. Environmental matters, for instance, are addressed by the Environmental Courts (Tribunales Ambientales), which have exclusive jurisdiction over conflicts related to environmental regulations, damage assessments and remediation actions. These courts provide a specialised mechanism for environmental litigation, offering technical expertise in addressing complex environmental issues.

For social matters such as labour rights or community-related grievances, parties can resort to the Recurso de Protección (Emergency Injunction Action) before the local Court of Appeals. This legal instrument is designed to protect constitutional rights when there is an imminent threat to fundamental freedoms. It is widely used in Chile to seek quick judicial intervention in response to urgent social issues, such as labour rights violations or infringements of the rights of Indigenous communities.

In contrast, disputes involving corporate governance, such as breaches of fiduciary duties, shareholder conflicts or mismanagement of corporate assets, are typically handled by civil courts. These cases are usually framed as claims for damages or compensation, and require evidence of financial harm or misconduct by corporate officers. Because there is no specialised tribunal for governance issues, these matters follow standard civil procedures, which can lead to longer resolution times.

An additional forum for hearing ESG-related cases is the criminal courts, particularly in relation to the commission of economic or environmental crimes. Under the Economic Crimes Law (Law No 21,595), entities can face criminal liability for failing to prevent crimes within their companies, including those related to governance and environmental violations, and natural persons may also be held criminally accountable. This law has expanded the scope for prosecuting offences that fall within the ESG framework, making criminal courts a novel venue for addressing serious violations related to ESG compliance.

Therefore, the legal landscape for ESG litigation in Chile is fragmented and sector-specific, with no single, specialised forum to address all ESG-related issues. Companies and stakeholders must carefully identify the appropriate legal mechanism based on the nature of the conflict, whether it is environmental, social or governance-related.

Non-governmental organisations (NGOs) and activists in Chile are becoming increasingly sophisticated and play a crucial role in advancing ESG-related issues. Their knowledge of the legal framework has empowered them to strategically leverage existing regulations to influence corporate and governmental decisions, particularly regarding environmental and social matters.

In recent years, Chile has witnessed a surge in climate activism, with activists actively engaging in legal processes to challenge environmentally harmful projects and promote stricter compliance with environmental laws. They frequently bring lawsuits before the Environmental Courts, challenging permits and environmental impact assessments, and demanding greater protection for ecosystems and local communities. This legal expertise allows them to effectively participate in complex cases, utilising scientific data and robust legal arguments to strengthen their positions.

In addition, activists are adept at using legal instruments like the Recurso de Protección (Emergency Injunction Action) to protect social and community rights when they believe constitutional guarantees are at risk. This legal sophistication has made them formidable stakeholders in large-scale projects, especially those impacting Indigenous communities and vulnerable populations.

Their strategies are not limited to litigation. Activists and NGOs also use public campaigns, media and international platforms to raise awareness, influence public opinion and pressure companies and the government to adopt higher ESG standards. As a result, they have become key drivers of more responsible business practices in Chile, compelling companies to address environmental and social issues more proactively.

The growing influence of these well-informed and organised activists is reshaping the ESG landscape in Chile, making it essential for companies to consider their perspectives when developing projects and compliance strategies.

In Chile, there have been no significant claims or legal actions brought by investors or regulatory authorities related specifically to greenwashing. This is partly because many ESG regulations are still voluntary and focus on best practices rather than strict compliance. While the CMF has implemented NCG 461 to improve transparency in ESG reporting for listed companies, the regulation does not include direct penalties for exaggerated or misleading ESG statements.

That said, concerns about greenwashing are increasing, especially as the Chilean government is currently working on a proposed bill to regulate greenwashing. This bill aims to set clear criteria for sustainability claims and introduce penalties for companies that provide false or misleading information about their environmental credentials. The legislation would apply to both financial and non-financial sectors, ensuring that companies back up their sustainability claims with verifiable data.

On the other hand, greenbleaching (where companies avoid making any ESG claims to reduce liability) has not been observed in Chile. Many companies continue to voluntarily disclose their sustainability efforts, particularly due to market expectations and investor interest in ESG practices. However, as new regulations develop, the balance between avoiding greenwashing and encouraging meaningful ESG commitments will be a critical issue for both regulators and companies moving forward.

In Chile, ESG-related litigation is expected to become increasingly frequent over the coming years, as is expected to occur internationally as well. This trend will likely be driven by the strengthening of local regulations, greater stakeholder awareness and the increasing influence of sophisticated NGOs and activists. As companies are held to higher standards of environmental and social responsibility, disputes related to non-compliance, inadequate ESG disclosures and social impacts on local communities are likely to increase.

The enactment of laws such as the Economic Crimes Law (Law No 21,595), which expands corporate liability for environmental and governance offences, combined with the potential introduction of a greenwashing bill, will provide more legal tools for plaintiffs to pursue ESG-related claims. These regulations will create clearer grounds for litigation, especially for misrepresentations in corporate sustainability reporting or breaches of new human rights due diligence obligations.

In addition, as Chile advances in its implementation of the Climate Change Framework Law and progresses with its 2030 Decarbonisation Plan, companies will face greater scrutiny over their environmental impacts and compliance with new climate regulations. This will likely lead to an increase in disputes, particularly in sectors with high environmental footprints, such as mining and energy.

Overall, as Chile’s ESG landscape matures and regulatory enforcement strengthens, the number of ESG-related cases is expected to rise gradually. Companies will need to proactively manage these risks by improving their ESG strategies, enhancing transparency and adopting more robust compliance frameworks to avoid potential litigation in the near future.