The global industry group for exchanges and CCPs, the World Federation of Exchanges (WFE), has published the results of its sixth annual Sustainability Survey.
The WFE Sustainability Survey gives a comprehensive insight into the nature and extent of member engagement across Environment, Social, and Governance (ESG) issues in both developed and emerging markets. By conducting this survey every year, the WFE is able to keep track of how member engagement evolves in relation to ESG issues.
ESG is a core, strategic principle of the WFE. The 2020 survey has mapped exchange activities against the WFE’s Sustainability Principles for the second time. These principles, which were first published in 2018, state that exchanges can work to educate participants of the exchange ecosystem about the importance of sustainability issues; encourage the availability of investor-relevant, decision-useful ESG information; actively engage stakeholders to advance sustainable-finance agendas; develop products and markets that support the scaling-up of sustainable finance and the reorientation of financial flows; and finally, to establish effective internal governance and operational processes and policies to support sustainability efforts.
Subsequently, the WFE joined forces with the United Nations Sustainable Stock Exchange (SSE) initiative to define and publish “How Exchanges can Embed Sustainability within their Operations: A Blueprint to Advance Action''.
The key highlights of the WFE survey are as follows…
- Exchanges have continued to develop sustainability efforts through strong engagement with the WFE Sustainability Principles. Of the exchanges that responded, 41% ran initatives that correspond to all five Sustainability Principles.
- A number of exchanges were encouraged by new opportunites that opened up as a direct result of their sustainability engagement. This is a positive sign that ESG is becoming an integral part of the strategy and ethos of many exchanges.
- Amost 90% of the respondants received demands from investors for the disclosure of ESG issues; 29% perceived these demands as extensive. The majority of exchanges do not require assurances of ESG disclosure, but the number of exchanges planning to implement this requirement in the future has grown nearly two-fold.
- There is stil no convergance on ESG standards and formats adopted by the exchanges industry. Some WFE members raised the global divergance on ESG standards and practices as a new frontier in the effort for sustainability.
- For the first time, green bonds became the most commonly offered ESG product. The survey also showed minor increases in the availability of all sustainability product offerings, which demonstrates a gradual increase of ESG products across exchanges.
Nandini Sukumar, Chief Executive Officer of the WFE said: “The exchange industry leadership of sustainability continues to evolve. As the world seeks to rebuild a better, more inclusive society amid a global pandemic that has challenged many widely-accepted practices, exchanges are leading by example and are determined to be part of that solution.’’
The survey was conducted in early 2020; responses were based on the 2019 calendar year. All-in-all, 61 exchanges participated in this year’s survey, of which 56 are WFE members. Of those 56 WFE member respondents, six are derivatives-only exchanges.
In line with previous years, the survey questionnaire was revised to better capture the latest exchange-related sustainability developments. Questions about ESG in commodity derivatives were added as the questionnaire sought to reflect the distinctive characteristics of derivatives-only exchanges. In addition, the questions around ESG reporting requirements and standards that are being adopted were revised and expanded, as were questions around sustainability-related, green products. This was done in order to collect more detailed data on product offerings.
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Source: World Federation of Exchanges