Participation by the biggest stock exchange will likely push global exchanges closer to adopting stricter listing requirements in the future
NYSE Euronext became the eighth major stock exchange to join the United Nations’ Sustainable Stock Exchanges Initiative (SSEI) on July 24. The initiative aims to find ways for exchanges to collaborate with investors, regulators, and companies to improve corporate transparency, and ultimately performance, on environmental, social and corporate governance issues and promote responsible long-term approaches to investment.
Other exchanges that are part of the SSE initiative are NASDAQ OMX, BSE, BM&FBOVESPA, the Johannesburg Stock Exchange, the Egyptian Exchange and MCX Stock Exchange.
The SSEI is co-organized by the United Nations Global Compact Office, the United Nations Conference on Trade and Development, the United Nations-supported Principles for Responsible Investment and the United Nations Environment Programme Finance Initiative.
NYSE Euronext marked joining the initiative by hosting an event at its New York headquarters attended by leaders of NYSE-listed companies, sustainability professionals, representatives of not-for-profit organizations and leaders from the UN, including Secretary-General Ban Ki-moon. Discussion centred on best practices to encourage sustainability within the capital markets.
Mike Wallace, director of the Global Reporting Initiative’s Focal Point USA, sees this as another significant step toward a meeting to be held in October for all members of the World Federation of Exchanges where listing guidelines related to sustainability will be discussed. ‘I don’t think we’ll see listing requirements at that time,’ he says, ‘but we will see a more formal position from the World Federation of Exchanges about the roles and responsibilities of stock exchanges relating to listed companies.’
What makes the initiative a great idea, he adds, is its effort to get all stock exchanges to do the same thing, thereby setting the bar higher for reporting by public companies and minimizing the risk that companies might choose to delist and search for another exchange with more relaxed requirements.
As with various other initiatives from the UN Principles for Responsible Investment (PRI) to the Ceres-led Investor Network on Climate Risk (INCR), ‘a lot of companies that sign on take years to think about it before they put their name on it,’ says Wallace. ‘The same thing applies to the UN Sustainable Stock Exchanges Initiative,’ which emerged from the Rio Plus 20 event held in 2012 to mark the 20-year anniversary of the UN’s first climate change conference.
‘Organizations go through their own evolution in how they apply sustainability to their own situation,’ says Wallace. ‘You see some companies strap on sustainability in ways that’s more sales oriented like selling green products, while other organizations do it very quietly and thoughtfully and want to understand their own history first.’
Two years ago, NASDAQ launched its own sustainability index built around GRI-reported data, while at the same time NYSE Euronext was compiling its first sustainability report and creating the role of head of corporate responsibility within the company.
Other stock exchanges are establishing their own precedents by urging listed companies to report using GRI or to explain why sustainability performance is not material. Brazil’s BM&fBOVESPA is seeking GRI reporting from companies and publishing a list of them and their disclosures on its website, as well as offering GRI training to companies that are interested. Meanwhile, the Singapore Stock Exchange has not only recommended GRI reporting but suggested companies get their reports verified by a third party.
NYSE Euronext describes itself as the only global exchange operator to have achieved carbon-neutral status for three consecutive years. That presumably includes the fact that its major facilities in New York, Chicago, Brussels and London purport to run on renewable wind energy or other kinds of clean-powered electricity. NYSE Euronext has also been selected for prominent sustainability indices such as CDP's S&P 500 Disclosure Leadership Index, the Dow Jones Sustainability Index and FTSE4Good.
Wallace says he’s not aware of pushback by any companies against the possibility of stricter listing requirements. The biggest companies listing on NASDAQ, NYSE and BOVESPA are already voluntarily disclosing sustainability information.
‘They’re big in market cap, they’re big in physical presence…and they already get these issues,’ he says. ‘It will be the smaller guys that protest [tougher listing criteria]. But they’re in the supply chains of all the bigger guys and they’re getting these questions already.’
They can either choose to respond in ad hoc fashion to sustainability questions or they can put together a systematic annual report on all these factors, he says. ‘It’s not going to stop.’