Stock Exchanges Lead On Sustainability Issues

Tuesday, 26 November 2013
By Susan Drury

Stock exchanges in countries around the world, including emerging markets, are noticeably at the forefront in the development of sustainable initiatives, according to a new report. "Sustainability Initiatives: Insights from Stock Exchanges into Motivations and Challenges", from ESG research group EIRIS, looks at the implementation of such initiatives by stock exchanges and provides key recommendations for future effective sustainability initiatives.

The key motivations for stock exchanges in developing sustainability initiatives include:

  • Improving the ESG performance for companies listed on their exchanges.
  • Encouraging and assisting investors to engage with companies on sustainability issues.
  • Identifying their place in the market as being committed to sustainability.
  • Drawing on the latest research to support the link between long-term financial performance and ESG issues.

Stock exchanges shared valuable insights for peer benefit, including:

  • Advice on the benefits of acquiring senior management buy-in.
  • Visible improvements in company performance.
  • Opportunities developing from research demonstrating the links between good ESG performance and long-term financial performance.

EIRIS, which works with a number of stock exchanges around the world, gave a number of key recommendations:

  • Engaging with investors and companies concerning the long-term benefits of facilitating improved company performance on ESG issues, both for the benefit of investors and companies and society in general.
  • Engaging with investors, particularly mainstream investors, to identify those sustainability-focused products and services that exchanges can offer which would offer maximum investor value.
  • Exploring ways of working together to overcome the challenges facing stock exchanges.
  • Working with national regulators to develop ESG-related listing rules and encouraging companies to provide audited ESG data.
  • Drawing on the latest research to support the link between long-term financial performance and ESG issues.

“Through their key position in the financial ecosystem stock exchanges can provide powerful encouragement to sustainability, and the benefits from their sustainability initiatives will be for companies, investors and society as a whole,” commented Stephen Hine, Head of Responsible Investment Development at EIRIS.

Research found that there was a strong correlation between those markets with stock exchanges that have pioneered sustainability indices and strong corporate ESG issues. An analysis of the performance of the biggest 300 emerging companies against EIRIS’ Global Sustainability Ratings product found “a markedly strong performance from both South African and Brazilian companies (both of which have stock exchanges with sustainability indices) and weaker ESG performance from companies in China and Russia”.

For more information, visit the EIRIS website.
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