With the growing popularity of ESG investing that emphasize the Environmental, Social and Governance aspects of companies, record demand for sustainable funds has been observed in 2021. However, the question remains: are stock exchanges around the world doing enough to promote ESG investment?
Intercontinental Exchange, the owner of the world’s largest stock exchange (NYSE), has actively advanced ESG investment. Notable initiatives include: the publication of ESG Reference Data, assessing climate risk exposure with ICE Climate Risk and the launch of sustainability indexes for fixed income. Nasdaq Inc., the operator of the popular Nasdaq stock exchange, made significant progress in diversity by introducing the Board Diversity Transparency rule in 2021. It also acquired majority ownership in Puro. Earth, a provider of carbon removal solutions. Further, through the Nasdaq Global Sustainable Bond Network, companies can disclose their sustainable bond data.
In Europe, Deutsche Borse acquired a majority stake in Institutional Shareholder Services (ISS), which provides ESG data and research. The ESG rating and analysis provided by ISS can promote ESG investment by strengthening the role of sustainability criteria in making investment decisions. The London Stock Exchange Group has also issued a detailed guide with recommendations for global ESG reporting.
In Asia, the Hong Kong Stock Exchange established the ESG Academy to guide the investor community on the evolving ESG requirement. Further, it has recently published the Guidance on Climate Disclosures to facilitate ESG disclosure. In Singapore, the Singapore Stock Exchange (SGX) has launched the SGX Sustainability Indices to facilitate ESG investing. Through its subsidiary Scientific Beta, it also provides ESG research and analysis to financial market practitioners.
In sum, stock exchanges around the globe have evidently made active contributions to promoting ESG investing. However, going forward, it remains to be seen whether these financial institutions will continue being a driving force behind ESG investing.
Kam Ho Man Coleman
References
Intercontinental exchange, ESG data, https://www.theice.com/data-services/esg-data
Nasdaq Inc., Environmental, Social and Governance, https://www.nasdaq.com/esg
Deutsche Boerse, ESG Product Hub, https://www.deutsche-boerse.com/dbg-en/products-services/esg-product-hub
London Stock Exchange Group, Your Guide to ESG Reporting, https://www.lseg.com/esg
Hong Kong Stock Exchange, Exchange Publishes Corporate Governance and ESG (Climate Disclosures) Guidance, https://www.hkex.com.hk/News/Regulatory-Announcements/2021/211105news?sc_lang=en