Responsible Investor

Exchanges Push the Sustainability Agenda

The world’s stock exchanges are working toward more sustainable business models according to a report to be published by the World Federation of Exchanges (WFE), a trade association with 51 member exchanges globally.

The report, which was produced by sustainable investment consultancy Delsus Limited, found exchanges were increasingly active in three main areas promoting sustainability: provision of information tools for sustainable investors such as indices; fostering specialised listing and trading platforms for sustainable investment niches and in less advanced markets, increasing awareness of environmental, social and governance (ESG) issues among listed companies.

Dan Siddy, founder and director of Delsus and author of the report, said: “Over the last five years or so, social and environmental risks and opportunities have emerged to become commonplace long-term investment themes in the world’s capital markets.

“Alongside the growing political and economic challenge of climate change and the transition to a lower-carbon future, labour standards, human rights, product safety, human capital and poverty reduction are also major issues.”

Information tools facilitating sustainable investment

In the more advanced markets of the US and Europe, indices tracking the performance of sustainable stocks have typically answered investor demand through

licensing to tracker funds or customisation to client requirements, according to the report. However in emerging markets such as Brazil and South Africa they have been used from the outset as a tool central to addressing ESG awareness, increasing investor confidence and influencing corporate behaviour.

Over the past ten years the number of sustainability indices offered directly by WFE members has grown from just one in 1999 to 48 to date, with a significant number based in emerging markets.

Following the pioneering launch of the NYSE Arca Cleantech Index by the New York Stock Exchange in 1999, indices have sprung up in the emerging markets of Brazil, Egypt, India, Indonesia, Israel, Korea and South Africa.

Johannesburg’s SRI Index, launched in 2004 and Brazil’s BM&FBOVESPA (which links the Brazilian Mercantile & Futures Exchange with the São Paulo Stock Exchange) Corporate Sustainability Index, launched in 2005, were the earliest such indices. In both cases evaluation of listed businesses against sustainability criteria has served as a starting point to make ESG considerations mainstream for businesses and investors. Companies

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