Financial Markets and Allocation of Capital Will Be an Integral Part in Enabling Decarbonisation

Stock exchanges have a unique role in the financial system in the intersection between corporations and investors. We at Nasdaq aim to facilitate and support our clients' success across the global economy as they navigate the evolving climate and environmental landscape.

We believe environment and climate is an opportunity not only to take responsibility for a better world but also to develop the business itself; sustainable businesses will have better access to long-term capital and talent. As an exchange our role is to provide transparency and integrity, create transparent markets to allocate capital in the most efficient way possible, and support corporates in their effort to decarbonize through different tools and services.

One of the most important aspects in driving the green transition is the re-allocation of capital into more sustainable projects and businesses. In this, we need to support both already green companies and companies with a transformation journey ahead. We believe that the best way forward to support this is transparency. Nasdaq Stockholm launched Nasdaq Sustainable Bond Market as the first stock exchange in the world in 2015, but we started to list sustainable bonds even earlier. This year we celebrated the 10^th anniversary of the world’s first green bond which was issued by the Swedish real-estate company Vasakronan.

Inspired by the growth of sustainable bonds, we launched the voluntary Nasdaq Green Designations for equity issuers to support companies on our Nordic markets on their transition path. Just recently, the Nasdaq Green Designation offering was also expanded to cover private companies.

When the World Federation of Exchanges (WFE) launched its WFE Green Equity Principles, a global framework for classifying shares as green, Nasdaq collaborated closely and contributed to the development with experience from Nasdaq’s own Green Designations. Nasdaq welcomes WFE’s initiative to support exchanges in helping listed companies to transform. The broader the application by exchanges around the globe, the more effective the concept will be.

Nasdaq Green Designations

Nasdaq Green Designations include two Designations: Nasdaq Green Equity Designation and Nasdaq Green Equity Transition Designation. The former is attainable for companies that have more than 50 percent of both its turnover and investments deriving from activities considered green, whereas the Transition designation is for companies that are not yet in majority green in terms of revenue, but have more than 50 percent of its investments allocated to green activities. Both designations have limits defining how much turnover may derive from fossil fuel activities. Over time the concept and criteria may develop to remain relevant as economies and companies progress on the path to net zero. Our aim is not to introduce new standards or metrics; instead Nasdaq Green Designations is aligned as much as possible with existing standards including the EU taxonomy.

The main aims with Nasdaq Green Designations is to provide green and transition companies with increased visibility and transparency towards investors and other stakeholders In the application process, a qualitative assessment of the company’s alignment with the Nasdaq Green Designation Principles is done by an approved external reviewer. The external review of their business model serves not only as a tool to get a status check on the company’s current sustainability position but also as support in defining or tuning their long-term sustainability strategy. The Nasdaq Green Designations is re-assigned on an annual basis.

With Nasdaq Green Designations, we also wanted to enable transparency for companies in the early phases of their important decarbonization journey. Only highlighting companies that have come far on their transformation journey is not enough. It is key to include companies transitioning, to give them the tools for increased transparency which in turn can attract capital to accelerate the transformation of their business models. Reaching the end goal of net zero requires a long-term commitment.

The sustainable transformation is complex and we support our clients to effectively navigate the ESG ecosystem through our marketplace and technology solutions, reporting tools and data analytics capabilities. We offer ESG advisory services and workflow tools for ESG data and reporting. We also have derivatives products such as ESG versions of the flagship indexes Nasdaq-100 and OMXS30. With our recent launch of Custom Baskets Forwards more clients are given access to tailor portfolio exposure in efficient derivative instruments, for example, ESG & climate investments, thematic investing, ETF replications, tailor-made indexes, and equity financing.

Carbon Dioxide Removals

In the transformation journey it will come to a point where a company can not eliminate all their emissions. This is when Carbon Dioxide Removals (CDRs) is a necessary complementary tool. The permanent carbon removals must not be seen as a license to operate ‘business-as-usual’ for fossil-based industries but is solely a complementary tool for countries and corporates to neutralize the last residual emissions and thereby reach net zero. Puro.earth – the world’s first carbon crediting platform for engineered carbon removals – is one of the newest additions to Nasdaq’s ESG solutions. Nasdaq acquired a majority stake in Puro.earth in 2021 to develop credible and transparent carbon market. Carbon removal is an instrument which will allow net negative emissions (such as DACCS, BECCS, Enhanced Rock Weathering, Biochar) to be packaged in a certificate and be used by corporates as a tool to reach net zero.

Puro.earth brings suppliers of Carbon removal technologies together with companies with residual emissions via an extensive range of distribution partners. Puro.earth’s high integrity carbon removals, the CO2 Removal Certificate (CORC), are in line with the guidance of Oxford Principles for net zero, providing companies with a much-needed tool in their efforts to reach their net zero targets. Puro.earth is the first crediting program with a focus on durable carbon removal with a minimum of 100-year storage time to obtain endorsement by the International Carbon Reduction and Offset Alliance (ICROA).

Permanent carbon removals need scale-up and to be expanded to the companies that need to address emissions now and in the future. We cannot wait, as infrastructure and production need to be scaled-up now to ensure that the necessary capacity will be available to support companies' net-zero emissions goals. Capital markets will play an important role in accelerating the deployment of carbon removal technologies across the globe to ensure we have sufficient capacity by 2050.