The WFE has partnered with the United Nations Sustainable Stock Exchanges (“SSE”) initiative to define ‘How exchanges can embed sustainability within their operations: a blueprint to advance action’.
The WFE launched its five Sustainability Principles in October 2018, and these constitute a formal declaration by the WFE and its membership to take on a leadership role in promoting the sustainable finance agenda. Today’s blueprint addresses WFE Sustainability Principle 5, which encourages exchanges to establish effective internal governance and operational processes and policies to support their sustainability efforts. Whilst the first four Principles are market-facing commitments, the fifth addresses exchanges’ internal aspects only. Indeed, the blueprint is a practical guidance document, aimed at assisting exchanges in translating the WFE’s fifth Sustainability Principle into concrete actions, guiding them towards embedding sustainability into their own exchange operations.
Today’s blueprint highlights four focus areas where exchanges can implement recommended practices and actions to ensure that sustainability becomes integrated across the business. The recommendations and sequencing are not prescriptive and both the WFE and SSE note that each exchange will have its own pace and direction of sustainability integration:
- Integrate sustainability into the exchange’s core strategic planning: The integration of sustainability into an exchange’s strategy and business plan should occur at the outset of the strategy development process, and form part of its vision and mission.
- Reflect sustainability in governance and risk management: An exchange’s senior management and leadership team should show commitment to embedding sustainability,
- Sustainability should also be incorporated within the exchange’s structure and mandate.
- Manage the impacts of exchange operations: Exchanges should be able to leverage existing sustainability management resources to identify and manage the impact of their own operations on the environment and society. The exchange should develop policies, processes and procedures to address these operational priorities, which should be monitored and evaluated to track progress.
- Dedicate resources to manage the exchange’s sustainability work: Either an individual or team should be responsible for overseeing the implementation of an exchange’s sustainability workplan. Fostering a broader sustainability culture, along with awareness programmes, can further steer an exchange towards improved sustainability. Initiatives can include greater communication of sustainability progress; an increased emphasis on recycling and energy efficiency; and opportunities for involvement such as volunteering.
In addition to the four focus areas, the blueprint identifies four fundamental considerations that underpin them: materiality (an essential filter to determine the most important issues); stakeholder engagement (vital to ensure the exchange can respond to, or anticipate, stakeholder concerns); reporting and transparency (many exchanges are already publishing their own sustainability reports); and capacity building (designed to improve both individual- and organisation-level knowledge).
The paper includes illustrative examples from WFE members to demonstrate how some exchanges are already dealing with each focus area or consideration.
The publication of this joint blueprint marks an important milestone in the exchange industry’s leadership of the sustainability agenda in capital markets. The blueprint and a discussion around the paper will feature in the SSE’s 10-Year Anniversary Celebration, which is being held in New York on Thursday 26 September. More than 20 WFE members will be attending the event, which marks the 10-year anniversary since the SSE was initiated in 2009 by the United Nations Secretary General in New York.
Nandini Sukumar, Chief Executive Officer, WFE said: “Less than a year since we launched the WFE’s Sustainability Principles, we are proud to publish today’s blueprint. The paper provides clarity on what it means to be a sustainable exchange, by giving practical actions that exchanges can embed into their own operations as they enable capital markets to move towards a sustainable future. In discussions around sustainability, exchanges are leading by example.”
Last month, the WFE published its white paper on sustainability and commodity derivatives. In 2017, the WFE and UNCTAD published a joint paper on the role of stock exchanges in fostering growth and sustainable development. Environmental, Social & Governance (ESG) is a core strategic mandate and principle of the WFE. The WFE has engaged on the topic of sustainability since the inception of its Sustainability Working Group (SWG) in 2014. Since that time, the group has produced a number of market-leading research reports on the topic of sustainable finance including the annual WFE sustainability survey (for the calendar years 2018, 2017 and 2016); and the WFE’s Environmental, Social & Governance (ESG) Guidance in 2015 and 2018, as well as a responding to number of policy and regulatory consultations on the topic.
James Zhan, Director, Investment and Enterprise Division, UNCTAD and Chair, Governing Board, Sustainable Stock Exchanges UN Partnership Programme, added: ‘’Launching this guidance as a joint document with the exchange industry's leading body, the WFE, is an important indicator of how sustainability is now a central element of mainstream business for the 21st century."
You can read the blueprint in full here.
In addition, the WFE & SSE have formalised their deepening partnership, with the two organisations agreeing to work together on building capacity and technical assistance to stakeholders, and on joint publications and research. Read more about the exchange of letters here.