Stock Exchanges and Sustainability
Stock exchanges play a unique role in shaping more sustainable capital markets. Stock exchanges are critical levers for improving the depth, consistency and comparability of corporate disclosure on sustainability performance, including climate change risks. Leading exchanges around the world have implemented robust corporate education programs, sustainability-themed indexes and set minimal standards for sustainability disclosure as a prerequisite for companies to list on those exchanges.
The list of governments and stock exchanges around the world requiring or encouraging corporate sustainability disclosure continues to grow—a recent study shows that there are currently 180 laws and regulatory standards in 45 countries calling for corporate sustainability reporting. Additionally, institutional investors have increased their focus on the critical role of stock exchanges in creating sustainable capital markets, including supporting mandatory requirements for stock exchanges to promote sustainability disclosure that is consistent and comparable across markets.
To bring attention to these issues, the United Nations created the Sustainable Stock Exchanges Initiative (SSE Initiative). The SSE Initiative brings together stock exchanges, regulators, investors and other key stakeholders to promote improved disclosure on environmental, social and governance (ESG) issues, and is co-organized by the Principles for Responsible Investment (PRI), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Environment Programme Finance Initiative (UNEP-FI) and the United Nations Global Compact (UNGC).
Aviva Investors and the PRI encouraged investor engagement with exchanges to advance the goals of the SSE Initiative. As part of this effort, INCR committed to engaging with five stock exchanges regarding corporate sustainability reporting and listing standards.
Investor Initiative for Sustainable Exchanges
Following the creation of the United Nations-led SSE Initiative, INCR formed the Investor Initiative for Sustainable Exchanges Working Group to support the SSE Initiative and convene a group of INCR members to coordinate engagement with stock exchanges and mobilize exchanges around the world to adopt a sustainability listing requirement.
Ceres and INCR, with input from global investors, developed the Investor Listing Standards Proposal: Recommendations for Stock Exchange Requirements on Corporate Sustainability Reporting. The Listing Standard Proposal has been submitted to World Federation of Exchanges (WFE) members for comment. The comment period, lasting several months, is facilitated through partnership with the World Federation of Exchanges and its recently formed Sustainability Working Group. For more information, please click here.
After engagement with INCR members, NASDAQ OMX joined the SSE Initiative as a “Partner Exchange” and made a formal commitment to promote sustainable investment and improved ESG disclosure and performance among its listed companies. The New York Stock Exchange quickly followed suit.
For more background on how investors are increasingly collaborating on stock exchange engagement, please see here.
“Exchanges play a vital role in the move towards more sustainable capital markets as they have the opportunity to influence and monitor companies seeking to access equity markets.”
Paul Abberley, Chief Executive, Aviva Investors London