The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, today published the results of its sixth annual Sustainability Survey.
The WFE sustainability survey captures the nature and extent of member engagement with Environment, Social and Governance (ESG) issues in both developed and emerging markets. By carrying out this survey on an annual basis, the WFE and the industry are also able to track the evolution of members’ engagement with ESG issues.
ESG is a core strategic mandate and principle of the WFE, and this year’s survey mapped exchange activities to the WFE’s Sustainability Principles for the second time. These principles, published in October 2018, state that exchanges will work to educate participants in the exchange ecosystem about the importance of sustainability issues; promote the enhanced availability of investor relevant, decision-useful ESG information; actively engage with stakeholders to advance the sustainable finance agenda; provide markets and products that support the scaling-up of sustainable finance and reorientation of financial flows; and establish effective internal governance and operational processes and policies to support their sustainability efforts.
In subsequent work, the WFE partnered with the United Nations Sustainable Stock Exchanges (“SSE”) initiative to define and publish ‘How exchanges can embed sustainability within their operations: a blueprint to advance action’.
Key highlights of the WFE survey include:
· Exchanges continue to develop sustainability efforts through strong engagement with the WFE Sustainability Principles. Among those exchanges that responded, 41% had initiatives that correspond to all five Sustainability Principles.
· A marked number of exchanges were encouraged by the new opportunities arising from their sustainability engagement — a positive sign that ESG is becoming an integral part of exchanges’ strategies and ethos.
· Close to 90% of the responding exchanges perceived investor demand for ESG disclosure, of which 29% believed demand to be extensive. The majority of exchanges do not require assurance on ESG disclosure, but the number of exchanges planning this requirement in the future almost doubled.
· There is still no convergence on ESG standards and formats adopted by the exchanges industry. Indeed, some WFE members raised the global divergence on ESG standards and practices as a new concern in their sustainability efforts.
· Green bonds became the most commonly offered ESG products for the first time. The survey also showed a mild increase in offerings across all sustainability product categories, demonstrating a gradual expansion of ESG products across exchanges.
Nandini Sukumar, Chief Executive Officer, 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 earlier in 2020, with responses referring to the 2019 calendar year. A total of 61 exchanges participated in this year’s survey, of which 56 are WFE members. Of the 56 WFE member respondents, six are derivatives-only exchanges.
As in previous years, the survey questionnaire was revised to better capture the latest exchange-related sustainability developments, adding questions on ESG in commodity derivatives and seeking to reflect the distinctive characteristics of derivatives-only exchanges. In addition, the questions on ESG reporting requirements and standards that are being adopted were revised and expanded as were the questions on sustainability-related green products, in order to collect more detailed data on product offerings.