ESG awareness has been growing in Panama, as it has in many countries, driven by global trends and increasing interest from investors, businesses, and civil society. Companies operating in Panama were starting to recognize the importance of ESG factors in their operations and decision-making processes.
Panama, like many other countries, had not yet developed comprehensive ESG regulations or reporting requirements at the national level as of 2021. However, this could change over time as governments and regulators around the world have been considering ESG reporting frameworks and standards.
Some larger Panamanian companies, particularly those with international exposure, had begun to voluntarily incorporate ESG principles into their business practices and reporting. This includes considerations related to environmental sustainability, social responsibility, and governance best practices.
Panama, being a global financial and trading hub, was influenced by international ESG standards and guidelines. Many Panamanian companies, especially those with international operations, were aligning their ESG efforts with global best practices.
It’s important to note that ESG developments are often dynamic and can change rapidly, influenced by global trends, regulatory changes, and local factors. Therefore, I recommend checking with local authorities, financial institutions, and ESG-focused organizations in Panama for the most current information regarding ESG discussions and regulations in the country.
Up to date, Panama does not have a set of mandatory ESG regulations that apply across the board to all companies. However, specific environmental and social laws exist, but not as ESG regulation.
Panama has historically sought to be aligned with international standards, as well as follow up on them in a very timely manner. In this area, in addition to only knowing first-hand all the advances in ESG, it has sought to put these elements into practice at the corporate level as an initiative of private companies and not by obligation of the standard.
One of the main challenges, both in Panama, is that to develop ESG elements in business operations, there is an associated cost; specifically, an opportunity cost.
Panama is a signatory to the main international instruments on environmental matters that have been adopted through the ratification mechanism, that is, they have been approved in the legislative assembly through a law that is incorporated into the legal system of our country.
Panamanian legislation on the environment is very rich; since before 1972, the year in which the first World Conference on the Environment was held in Stockholm, the Panamanian State began to take legal and administrative measures in matters of ecology and environment. The laws are based on the Magna Carta that is the Political Constitution of Panama; that is why the chapter of the ecological regime has been incorporated and the Constitution or Magna Carta is the supreme norm, written or not, of a sovereign State or organization, established or accepted to govern it.
The Political Constitution of 1972 was approved containing a single article where the interest of the Panamanian State on the ecological problem was reflected.
Since 1983, when the ecological regime was incorporated into the Constitution, the Panamanian State has created important laws and taken relevant actions in the field of ecology and the environment, including the Forestry Law, the Law on Reforestation Incentives, the Wildlife Law, the Environmental Education Law, the Decree Law that develops the Forestry Law, the General Law 41 of Environment, the Law 44 that establishes the Special Administrative Regime for the management, protection and conservation of the hydrographic basins.
The social pillar in Panama is mainly regulated through labor laws covering working conditions, workplace safety, and workers’ rights. These laws are applicable to all companies to pursue protection of the human capital.
Product liability is covered by consumer protection laws that impose certain obligations on companies in terms of product quality and safety.
Regarding shareholder opposition and corporate governance, in Panama is contemplated under the Law 32 of 1927 on Public Limited Companies in Panama (SA), this law defines shareholder responsibilities and rights but does not specifically address ESG or sustainability issues in this context.
Other opportunities and social aspects such as inclusion and diversity are beginning to gain attention, but still lack a specific regulatory framework. Some companies are taking the initiative to address these issues voluntarily.
Although Panama covers through specific laws the aspects of social pillar, these are mostly specific and are not oriented to a comprehensive ESG approach.
The corporate governance framework in Panama is structured mainly by the Law 32 February 26 of 1927, Code of Commerce and Law 5 of February 2007, which regulates aspects such as the incorporation and operation of companies, the structure of the board of directors and all the requirements of the appropriate conduction of the corporation.
Also, by means of Law 124 of January 7, 2020, the Superintendence of Non-Financial Subjects is created, as an autonomous body of the State, which will have as its general objective the exclusive competence to regulate and supervise, in administrative channels, the non-financial obliged subjects in accordance with the provisions of Law 23 of 2015 on the prevention of Money Laundering, terrorist financing and financing the proliferation of weapons of mass destruction.
For our country, it is imperative to comply with all the regulations regarding the correct conduction of the companies, KYC, AML.
Alida Benedetti, partner
CENTRAL LAW in Panama
abenedetti@central-law.com
