(31 January 2018) The work of the Sustainable Stock Exchanges (SSE) initiative has been endorsed by the European Commission’s High-Level Expert Group on Sustainable Finance (HLEG) in their recently published final report. In particular, the report encourages stock exchanges to provide guidance on ESG reporting to their investors, and references the SSE’s recent report, ‘How Stock Exchanges can Grow Green Finance’ as a valuable action plan for stock exchanges looking to improve their sustainability.
The HLEG was established in December 2016 for the purpose of advising the European Commission on the creation of a strategy to more fully incorporate sustainability within Europe’s financial regulatory apparatus. To this end, the report lays out recommendations to stock exchanges on how best to improve their contribution to sustainable and inclusive growth. The HLEG recommends for stock exchanges to;
- consider streamlining the ESG and sustainability information that listed issuers are required to report
- work together to harmonise information requirements, thus easing the burden of reporting, instead of merely adding to existing disclosure requirements
- establish alternatives to bank finance for small and medium-sized enterprises
The HLEG suggests stock exchanges build on the work of the SSE, recognising the contribution the SSE has already made in facilitating stock exchanges efforts create more sustainable markets.
The HLEG recognises the importance of both green finance products and greening mainstream financial markets for improving the sustainability of the financial system. They highlight the key role that stock exchanges must play in this transition, pointing to the SSE voluntary action plan as a guide for stock exchanges..
The HLEG also welcomes the work that the SSE has done in the area of environmental, social and governance (ESG) disclosure with its model guidance on ESG reporting. Ultimately the HLEG would like to see a consistent global framework of disclosure to minimise the reporting burden for global companies, and further facilitate ESG reporting. In the report they call on IOSCO to play a role here.
In March the European Commission is expected to release its final action plan, building on the recommendations of the HLEG. The report signifies the growing mainstream momentum behind the transition to a sustainable global financial system, and the recognition by the HLEG of the SSE as part of this is welcome and encouraging.
About the Sustainable Stock Exchanges initiative
The SSE is a peer-to-peer learning platform for exploring how exchanges—in collaboration with investors, regulators, and companies—can encourage sustainable investment and enhance corporate transparency, and ultimately performance, on ESG (environmental, social and corporate governance) issues. The SSE is convened by the UN Conference on Trade and Development (UNCTAD), the UN Global Compact, the UN Environment Finance Initiative (UNEP FI), and the Principles for Responsible Investment (PRI). For more information on specific exchanges’ sustainability efforts, how to become a Partner Stock Exchange, and further opportunities to advance the integration of sustainability within capital markets, visit www.sseinitiative.org