CEO Letter - July 2024

Welcome to the July edition of Focus. We lead with Keith Wood and Suraj Pandey, CEO of pTools Software, and Business Development Manager of pTools Software and LEILex, who announce the delivery of its pTools Persistent Sanctions Screening Solution, which provides an automated solution for 'persistent' sanctions screening to help organisations mitigate financial risks and maintain global security.

It was a real pleasure to convene our members and stakeholders at our sustainability event, hosted and chaired by TMX Group last month in Toronto, Canada. The purpose of the event was to help equip our members so that they can better support their issuers in these developing areas. More and more businesses will have to start disclosing this information so we are making sure our members are on the front foot, learning from each other working together to develop best practices.

Over the next few editions of Focus, we look forward to sharing insights from some of the speakers at our event. In this issue, we are delighted to feature our hosts, TMX Group, who will discuss how SMEs are responding to sustainability challenges, and the WWF, which highlights the importance of addressing nature and biodiversity in reporting and transition plans. We hear from Ms. Zvan, a member of the Sustainable Finance Action Council and a member of Canada’s Expert Panel on Sustainable Finance, who writes on how disclosure and taxonomies represent foundational components for sustainable finance. CDP takes us through five key challenges to meeting net-zero commitments and details how stock exchanges can support this, and Manulife Investment Management tells us about how aligning global sustainability standards would be beneficial for investors.

The decision to host a sustainability event after our meeting at COP28 underscores the commitment of the WFE and its members to promoting sustainability. As Boon Chye Loh, SGX Group CEO and WFE Chairman, noted: “The opportunities for exchanges to support the economy and issuers in this journey will cement our roles both nationally and internationally as key players in the ecosystem.”

John McKenzie, CEO of TMX Group, emphasised the critical role of exchanges, stating: “We’ll need significant investment in innovation, transformation and growth, and capital markets are a crucial source of that financing.”

Exchanges are uniquely positioned to support the transition to a sustainable economy by assisting issuers of all sizes and enhancing transparency for investors.

Our event focused on two broad themes: reporting and transition finance. Firstly, in the reporting section, we explored sustainability reporting for SMEs, supply chain reporting and nature reporting. Secondly, under transition finance, we discussed frameworks to support this, including transition planning, third-party assessments and the role of transition taxonomies. New national transition plans are being adopted to address the broader economic shift needed to tackle climate change.

These themes have continued to dominate headlines following our event, particularly with the announcement of strategic relationships between the ISSB and organisations such as the Transition Plan Taskforce, GHG Protocol, CDP, Taskforce on Nature-related Financial Disclosures and the Global Reporting Initiative. This reflects the integration of supply chain and nature reporting into major frameworks used by issuers to provide investors with comparable information. Despite concerns about the reporting burden, especially for SMEs, we anticipate quicker and broader adoption of these new reporting themes due to the growing imperative to integrate sustainability and the progress already made by issuers in understanding the benefits to be gained.

The event also explored progress on transition taxonomies and transition plans, highlighting the crucial role they play in supporting transition finance. We addressed the challenges issuers face in developing credible transition plans and the strategic benefits gained from this process. Additionally, the importance of third-party assessments in enhancing credibility and encouraging uptake among issuers was discussed. It was noted how important it will be to delineate both the issuers’ forward-looking transition plan and its third-party assessment from the traditional assessment made by auditors, where the information is focused on verifiable past-looking financial results. This crucial understanding will nevertheless provide valuable information for investors to consider and assess how well issuers will adapt to the challenges posed by climate change.

We hope you enjoy the rest of this edition of the magazine, featuring additional perspectives from our members and key stakeholders, as well as broader industry themes central to exchanges and CCPs. Alongside our sustainability contributors, this edition features pieces from:

Managing Director, Head of Fixed Income and Financing Solutions, Clearing & Securities Services, Laura Klimpel, who writes on preparing for the implementation of SEC rules around the clearing of certain cash U.S. Treasury security transactions.

Espen Hadmark Hultgreen, Business Analyst at Vermiculus, who tells us about how moving to a modern margining methodology unlocks a broad range of benefits both for CCPs, its members and its clients.

And lastly, Yuji Yamashita, Deputy Commissioner for International Affairs at the Financial Services Agency, Government of Japan, who writes on considerations to strengthen the resilience of CCPs and their financial resources for resolution.