The Athens Stock Exchange ESG reporting guide

Published by: Socrates Lazaridis, Chief Executive Officer, Athens Stock Exchange Dec 2019

The Athens Stock Exchange (ATHEX) published its first Environmental, Social & Governance (ESG) Reporting Guide in November 2019, marking an important milestone on ESG and sustainable development in the Greek capital market. Resilient and well-functioning markets are underpinned by transparency and strong corporate governance, and, in view of the challenges companies and societies now face, they must also include robust practices on environmental and social issues.

As was demonstrated during the WFE General Assembly & Annual Meeting in Singapore in October 2019, where ESG was one of the main points of discussion, there is a growing understanding of the importance of sustainability within the finance industry and a pressing need to prioritise the creation of long-term value over short-term gain. Investors have played a key role in driving this shift through the progressive incorporation of ESG criteria into their investment strategies and analyses. There is now an extensive body of research that establishes the link between ESG performance and financial performance, demonstrating that ESG issues are material for both companies and investors. The presence of accurate and comparable ESG information can provide a holistic view of a company, helping investors price risks and opportunities accurately. There is, therefore, a need for clear information, and companies need to be able to address ESG requirements effectively. Regulation has also been moving in the direction of increased transparency, with different mandatory disclosure requirements, like the European Union’s Non-Financial Reporting Directive being put in place. Considering the priorities set by the European Commission’s Technical Expert Group on Sustainable Finance, these requirements are expected to be expanded in the future.

Exchanges have an important role to play when it comes to enhancing ESG disclosure and contributing to the creation of more sustainable capital markets, as demonstrated through international mobilisations like the Sustainable Stock Exchanges (SSE) initiative. The Athens Stock Exchange joined the SSE initiative in 2018, making a commitment to promote ESG disclosure and performance within its market. Following this commitment, the ATHEX ESG Reporting Guide was developed with the aim of helping issuers increase their transparency, improve their ESG performance, and communicate with investors effectively. It was designed in cooperation with George Serafeim, Professor at Harvard Business School, with technical input from KKS Advisors. The guide is meant to function as a practical tool that levels the playing field and empowers companies to improve their ESG performance. Taking into consideration that a key problem we face is the lack of comparability and standardisation of ESG data, the ATHEX ESG Guide proposes practical guidelines and metrics companies should use to disclose this information, and to enable relevant stakeholders and investors to incorporate it into their decision-making.

A central element of the guide is the concept of materiality because the ESG issues that companies should prioritise differ between sectors. The metrics proposed in the ATHEX ESG Guide follow a two-tiered structure: economy-wide metrics, applicable to all sectors of the economy and divided into core and advanced metrics; and sector-specific metrics, to ensure that companies can determine the material ESG issues that may affect their ability to generate value in the long-term. The reporting guidelines are based on best-practices outlined in international sustainability guidelines and reporting frameworks like GRI, SASB’s industry-specific standards, CDP, the Greek Sustainability Code as well as a review of existing reporting practices in the Greek market. The proposed guidelines and metrics are also fully aligned with the EU Non-Financial Reporting Directive, and can, therefore, be used by companies for whom these disclosures are mandatory and by those who wish to disclose ESG data on a voluntary basis.

Transparency through high-quality disclosure of comparable data forms the foundation of our ESG strategy. The ESG Reporting Guide can help establish a framework through which companies can disclose material ESG information that can be used to formulate strategies and improve performance. Similarly, this information can be useful to investors and asset managers in gaining a view of ESG practices in Greece. Based on ESG data, different sustainability products that encourage and reward high-performers, like indices and ETFs, can be developed in the future to encourage sustainable investment in the Greek capital market. Through capacity building, our goal in the long-term is to instill sustainability and transparency as key pillars of the Greek market, helping reduce information asymmetries, attract investors, and improve access to capital which will yield significant benefits for the Greek economy as a whole.

You can find the full ESG Reporting Guide on the ATHEX website.