Stock exchanges have an important opportunity to prepare their markets for the growing demand for climate-related information in a systematic and globally consistent manner as is being demanded increasingly by investors and the finance sector. In all markets, stock exchanges find particular value in helping their issuers attract capital from international or domestic investors by promoting and enhancing climate-related disclosures.
Stock exchanges can help their markets mitigate the risks associated with climate change, and they are uniquely positioned to advance climate disclosure through market guidance. They can play a special role in supporting consistency and standardisation of information that enables progress in climate reporting. From this perspective, the Amman Stock Exchange (ASE) signed an agreement with the International Finance Corporation (IFC), by which the IFC will provide technical support and training to employees of the exchange and its listed companies. It will seek to enhance their knowledge and awareness with regard to issues and subjects related to disclosure and reporting on actions undertaken by companies to address the challenge of climate change, in addition to supporting the development and launching of climate disclosure guidance that will serve as a manual for implementation by listed companies.
This initiative came in continuation of the approach of the ASE’s efforts to strengthen the competitiveness of the national capital market and its listed companies. The application of the best international standards and practices for various activities in the market, including the standards of disclosure and transparency, has the aim of strengthening the investment climate in the market and enhancing the attractiveness of Jordanian companies for local and foreign investment, and improving their competitiveness.
The ASE was the first exchange in the Middle East to launch such an initiative, which will explain the climate change-related procedures and disclosures required by listed companies.
Mitigating climate-related financial risk is a priority going forward. Launching the region’s first climate guidance reporting initiative will enhance transparency and strengthen companies' climate disclosure practices. It is important as the disclosure of climate risks and opportunities is considered a priority by the investment community and there is urgent demand from investors for better climate data to influence their investment strategies and portfolio allocations. Climate-related disclosures as defined by the TCFD recommendations are financial disclosures that should primarily appear in mainstream financial filings. Climate change is a global challenge that is described by the TCFD as a “non-diversifiable risk,” which affects nearly all sectors and therefore many investors believe it requires special attention. For these reasons, it is recommended that stock exchanges provide their markets with climate-specific guidance for mainstream financial disclosures.
The views, thoughts and opinions contained in this Focus article belong solely to the author and do not necessarily reflect the WFE’s policy position on the issue, or the WFE’s views or opinions.