Investors and stock exchanges discuss ESG listings ‘comply or explain’ at UN headquarters

UN Secretary General Ban-ki Moon, this week kicked off a high-level meeting at the UN headquarters in New York between major institutional investors including the Norwegian Global Pension Fund and France’s national pensions reserve fund (FRR) and global stock exchange executives in New York to look at ways of tightening up environmental, social and governance criteria for company listings. Among discussion topics at the UNPRI-organised event, was the introduction of a ‘comply or explain’ requirement for companies to put an annual sustainability report to a shareholder vote at their annual general meetings. Some countries already oblige companies to include a description of their corporate responsibility activities and practices in their Annual Reports or, if there are none, a make statement to this effect. Speakers at the UN event included Serge Harry, executive vice president and deputy head of strategy at NYSE Euronext, Paul Abberley, chief executive at Aviva Investors and Peter Clifford of the World Federation of Stock Exchanges. Abberley said he hoped the event would be “catalytic” in promoting more sustainable business behaviour. Aviva called last year for a debate on how listing authorities could promote corporate transparency. Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade and Development (UNCTAD), who was at the conference, said investor calls for greater ESG disclosure in stock marketlistings were backed by many of the regulators, standard setters and accountants participating in its Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR). Panitchpakdi said: “We welcome the work already done by many exchanges on this issue and this collaborative dialogue sends an important signal to listing authorities around the world that they play an important role in promoting the ESG agenda. UNCTAD research shows clearly that disclosure requirements can have a significant impact on the transparency and long-term sustainability of companies around the world”. The PRI said the aim of the conference was to explore how the world’s exchanges can work together with investors, regulators, and companies to enhance corporate transparency, and performance on ESG issues and encourage responsible long-term approaches to investment. Exchanges are waking up to ESG issues with new listing rules and disclosure requirements, ESG indices and new exchanges for ESG-related asset classes such as carbon. But the only stock exchange signatories to the UN PRI so far are Ecuador and the Johannesburg SE, which joined this week.
UNPRI executive director James Gifford, said: “Any moves to improve corporate disclosure on ESG issues are likely to benefit exchanges through enhancing both the reputation of markets and the investability of the companies traded on them.”