Sustainable Stock Exchanges: Urgent Need for Simple Metrics

The 4^th biennial Global Dialogue on the Sustainable Stock Exchanges (SSE) Initiative, concluded yesterday (10/14) at the United Nations Geneva headquarters, unveiled the urgent need for all stakeholders – stock exchanges, regulators, investors, and businesses – to adopt simple, yet effective and standardised, ways of measuring and reporting non-financial corporate performance.

“Right now investors are largely flying blind and mostly clueless when it comes to determining the level of a given company’s adherence to sustainability parameters,” said Mark Wilson, CEO of Aviva Group which manages about £250bn through its Investors Global Services arm. “Most information available pertains to short-term corporate objectives only. The situation is actually getting worse and, as a result, the sustainability agenda is not getting any closer to becoming reality,” he added.

Mr Wilson said consistent reporting rules on sustainability are needed: “While the Amsterdam, Helsinki, and Johannesburg exchanges have made great progress in providing clear data, and now lead the way, there are simply too many initiatives that try to stick different metrics on sustainability data, creating confusion amongst investors in the process.”

“While the little sustainability data available to investors lacks uniformity, most exchanges are paying more than just lip service to ESG and are actively looking for ways to encourage the reporting of non-financials by listed companies.”

The Global SSE Dialogue took place at the fourth World Investment Forum organised by the United Nations Conference on Trade and Development (UNCTAD). The event brings together investors, government officials, development professionals, and other stakeholders from around the world. The forum aims to be a global meeting place for the exchange of ideas and experiences on development and poverty-reduction policies and initiatives.

The Sustainable Stock Exchanges Initiative seeks to underline the importance of environmental, social, and governance (ESG) issues for business and development. The Global Dialogue, a roundtable gathering of high-level officials, showcases the many sustainability-related opportunities and challenges facing capital markets.

While the little sustainability data available to investors lacks uniformity, most exchanges are paying more than just lip service to ESG and are actively looking for ways to encourage the reporting of non-financials by listed companies.

Chairman Upendra Sinha of the Securities and Exchange Board of India also made an appeal for the global standardisation of sustainability reporting requirements. “This idea now needs to be taken to the next level, and that means finding and adopting a sustainability baseline.” Mr Sinha called on market regulators to exert pressure on large institutional investors to modify their parameters to include sustainability data: “As substantial shareholders, these large investors can better defend against corporate pushback.”

From Peru came a slightly different sound. Lilian del Carmen Rocca, superintendent of the securities market, said that it would prove hard to push investors one way or the other: “However, clear rules can help them make up their mind. Though Peru still lacks sustainability reporting requirements, we are developing a number of initiatives aimed at improving corporate governance by defining a set of metrics that facilitate reporting.”

Mrs Chitra Ramkrishna, CEO of the National Stock Exchange of India, noted that attitudes have already changed considerably: “For companies, the implementation of corporate governance frameworks used to be merely something good to have. Now it is being considered an essential element for any company that wishes to access public money through a stock exchange. The same could happen to sustainability frameworks. But, we do need a set of metrics for that.”