Stock exchanges have bolstered their sustainability engagement with Deutsche Börse,
Johannesburg Stock Exchange, London Stock Exchange Group. Luxembourg Stock Exchange, and Singapore Exchange leading the way, according to the World Federation of Exchanges 2021 sustainability survey.
The report, which canvassed 62 exchanges, found that these five exchanges reported engagement in all the 12 listed initiatives that have been launched.
These range from having a formal commitment and dedicated team to sustainability to offering environment, social and governance (ESG) education to issuers and investors as well as including a special segment for green bonds and sustainability related products.
In general, the average number of initiatives implemented per exchange increased from 6.7 to 7.7 mirroring the growing importance of ESG as an integral part of exchanges strategies and ethos.
In addition, the report showed that last year slightly over half or 50.8% of exchanges were in line with all five WFE Sustainability Principles – a 10 percentage point hike from 2019.
Published in October 2018, these Principles recommend exchanges educate participants about sustainability issues; promote the enhanced availability of ESG information and engage stakeholders to advance the sustainable finance agenda.
Exchanges are also expected to provide markets and products that support the development of sustainable finance; and embed sustainability into the exchange’s governance, strategy, and organisational structures.
This year’s survey also added, questions to gauge the adoption of different standards used to define sustainability, to understand the balance between ESG efforts and to highlight gender balance at the board level.
Although governance was a key area of focus in 2020 for exchanges, there was increased attention on social factors for example, facilitating the issuance of bonds aimed to support sectors affected by the pandemic.
The report noted that investor demand for ESG products continues to drive innovation. While green bonds are the most popular ESG products, offerings across all sustainability product categories have now increased, including Sustainability Linked Bonds (SLBs), which nine exchanges are now offering
In terms of challenges, business and economic concerns are cited as the main obstacles to implementing ESG initiatives, a reflection of the uncertainty caused by the pandemic.
Exchanges also voiced their ongoing concerns over the lack of convergence in ESG standards and disclosure formats.
“Our survey results highlight the exchange industry’s continued leadership in sustainability matters,” said Nandini Sukumar, Chief Executive Officer, the WFE.
She added, “As we continue to emerge and learn lessons from the pandemic, exchanges will play a vital role in the shift towards an inclusive and sustainable global economy. As an industry that has championed ESG in financial markets for over a decade, we are pleased to see engagement and interest in these issues from a wider group of stakeholders.”
©Markets Media Europe 2021
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