Since 2009 the Sustainable Stock Exchanges (SSE) initiative has been working in partnership with stock exchanges to develop more sustainable capital markets. To create these markets, sustainable development must be integrated into the mainstream economy. With the historic adoption of the UN 2030 Agenda and 17 Sustainable Development Goals (SDGs), markets have an internationally agreed upon framework for contributing to the creation of sustainable markets and society.
To promote further action, this report is organized into two segments. The first is a progress report on stock exchanges’ work in promoting sustainable capital markets. The second explores five targets under the SDGs that stock exchanges are well positioned to support. Combined, these two segments demonstrate what is possible when stock exchanges around the world take steps to integrate sustainable development into capital markets.
In examining the ESG practices of 82 stock exchanges, the SSE found exchanges were increasingly taking actions that contribute to creating more sustainable capital markets.
One development was the sheer number of exchanges now partnering with the SSE initiative. 58 stock exchanges, representing over 70% of listed equity markets, have made a public commitment to advancing sustainability in their market and are now official SSE Partner Exchanges.
In regards to market transparency, 12 exchanges currently incorporate reporting on environmental, social, and governance (ESG) information into their listing rules and 15 provide formal guidance to issuers. The progress of SSE’s campaign to encourage exchanges to issue guidance signals that the industry is ready to take the lead when presented with practical opportunities to develop more sustainable markets.
To transition to a sustainable financial system, market incentives must be aligned with long-term values and ESG considerations need to be integrated into standard practice. The SDGs outline many of these ESG factors and provide a framework to address them.
Stock exchanges around the world are already making changes to address the SDGs. Examples of this include:
- The Luxembourg Stock Exchange now lists 110 green bonds and represents half of all listed green bonds globally.
- The Johannesburg Stock Exchange is creating a culture of reporting ESG information in South Africa.
- Oslo Børs became the first stock exchange to offer a separate list for green bonds.
- Stock Exchange of Mauritius and IIX Asia Exchange are creating an opportunity to invest with impact.
- The Amman Stock Exchange conducted research to examine the impact of gender diversity on the performance of companies in Jordan.
- The Nairobi Securities Exchange has introduced diversity training to promote gender equality
Achieving the SDGs requires significant financing, estimated at US$5-7 trillion per year. While public funding and development assistance remains important, the scale of the investment challenge requires new flows of private capital. The SDGs provide a global growth strategy for the next decade. As the intersection between companies and investors, stock exchanges are well positioned to contribute to the SDGs.
The report concludes with recommendations for exchanges based on the existing good practices of their peers. The recommendations range from introducing ESG reporting guidance to promoting gender-diverse boards to listing green bonds. There is an urgency for greater action if these global goals are to be achieved in the next 15 years. By putting the recommendations into action, exchanges can take leadership in creating more stable capital markets and a sustainable society.