A core group of five stock exchanges – NASDAQ OMX, BM&FBOVESPA, the Johannesburg Stock Exchange (JSE), the Istanbul Stock Exchange (ISE) and The Egyptian Exchange (EGX) – announced a commitment to promote long-term, sustainable investment in their markets.
These leading exchanges, with over 4,600 listed companies in developed and emerging markets, have voluntarily committed to work with investors, companies and regulators to promote long-term sustainable investment and improved environmental, social and corporate governance disclosure and performance among companies listed on their exchanges.
The endorsements came during the Sustainable Stock Exchanges (SSE) 2012 Global Dialogues, held at the Corporate Sustainability Forum in Rio de Janeiro on the sidelines the United Nations Conference on Sustainable Development (Rio+20) which took place between 20-22 June 2012.
The SSE initiative, co-organized by the Global Compact, UNCTAD, UN-backed Principles for Responsible Investment (PRI) and UNEP Finance Initiative aims at exploring how exchanges can work together with investors, regulators, and companies to enhance corporate transparency, and ultimately performance, on ESG (environmental, social and corporate governance) issues and encourage responsible long-term approaches to investment.
With these new commitments, the SSE initiative is moving into a new phase with a more robust program of activities and support for greater engagement of stock exchanges with companies and investors. As an evidence base for moving forward, a recent report by the SSE, entitled “2012 Sustainable Stock Exchanges: A Report on Progress”, underscores that the majority of exchange entities are interested in promoting greater corporate transparency and responsibility on sustainability issues. The report provides a number of interesting findings, a few of which are detailed here. First, the strong conviction among stock exchanges for corporate responsibility and sustainability is reflected in the advances made by exchanges in including provisions of guidance or encouragement of sustainability disclosure by issuers, the proliferation of sustainability indices and the transition of voluntary disclosure requirements to a more effective “comply or explain” basis in some markets.
Moreover, the report stresses that sustainability presents a business case – but is not a significant revenue driver, yet. The exchanges’ overall increased reliance on trading volumes as a primary source of revenue may appear to work against the aims of long-term investor-led initiatives focused on sustainable capital markets. Yet, stock exchanges contend that the facilitation of high frequency and derivative trading activities is not mutually exclusive to meeting the demands of long-term investors. In fact, according to a survey conducted as a part of the report, 57 percent of respondents agreed that strong sustainability requirements for listed companies made good business sense for the exchange; only 14 percent disagreed. This points to an increased awareness and progression in the views of exchanges on the business case (in 2010, only 37 percent of respondents agreed with this view).
In addition, the report emphasizes that the development of the sustainable capital markets of the future will require a nudge from policymakers given that the factors that need to be integrated are often external to existing market knowledge and experience. Policymakers should support the introduction of guiding principles and a roadmap to enhance ESG disclosure by companies in their markets. They could also formalize mechanisms to hold companies accountable for those disclosures.
“Going forward we would like to publicly recognize those exchanges that are committed to promoting sustainability,” said UNCTAD Secretary-General Supachai Panitchpakdi, who announced the commitment in the presence of senior regulators, investors, and representatives from stock exchanges. “This is the first step of a larger global call to stock exchanges to publicly commit to promoting sustainability” explained Georg Kell, Executive Director of the Global Compact. “We take this opportunity to call on all stock exchanges around the world to join these leading exchanges in making this potentially transformative commitment.”
For more information, please visit: www.SSEinitiative.org or contact info@SSEinitiative.org.