The World Federation of Exchanges and United Nations Sustainable Stock Exchanges Initiative Publish Joint Paper on How Derivatives Exchanges can Promote Sustainable Development

By: The WFE Focus Team Jun 2021

The World Federation of Exchanges and United Nations Sustainable Stock Exchanges Initiative Publish Joint Paper on How Derivatives Exchanges can Promote Sustainable Development 

 The United Nations Sustainable Stock Exchanges (SSE) initiative is today launching new guidance for derivatives exchanges, prepared in collaboration with the World Federation of Exchanges (WFE), the global industry group for exchanges. The joint report provides guidance on ‘How Derivatives Exchanges can Promote Sustainable Development - An Action Menu’.

The document was produced by an international Advisory Group made up of derivatives and stock exchange representatives and experts as well as from experts from the wider ecosystem.

The 71 member-strong Group was chaired by CME Group’s Julie Winkler, Chief Commercial Officer and Owain Johnson, Managing Director and Global Head of Research and Product Development who said: “This report represents the first work by the SSE to extend beyond equity markets and stock exchanges into listed derivative markets, a welcome next step. It reviews the current approaches of derivatives exchanges in sustainability and suggests areas of further work and reflection. Without the risk management products and the forward price discovery that exchanges can bring, a transition to a more sustainable future will be more difficult, costly, and significantly less efficient. CME Group is proud to support this effort and honoured to have served as chair of the derivatives Advisory Group”

“The report is a timely undertaking and a sign of great collaboration within the industry. We are happy to respond to the demand from derivatives exchanges for more guidance on how they can better integrate sustainable development within their operations and are optimistic to see an enthusiastic uptake of the actions proposed.” said James Zhan, Chair of the SSE Governing Board and Director of Investment and Enterprise at UNCTAD.

Nandini Sukumar, Chief Executive Office, WFE said: Derivatives exchanges have long been an important part of the WFE and we are proud to publish today’s report jointly with UN SSE and provide guidance and recommendations to our members on what it means to be a sustainable derivatives exchange. We are looking forward to engaging on this topic further in the future and show that the industry is moving forwards to a sustainable future. 

The project builds on an initial WFE White Paper on the topic and is a response to demand from a number of derivatives exchanges to the SSE to further expand on it.

The resulting report fills a gap in the literature by identifying ways in which derivatives exchanges can play a role in supporting the sustainability transition.

In addition to exploring existing sustainability-related derivatives products and initiatives that exchanges offer, the report also provides an Action Menu that provides practical suggestions on how to make the derivatives ecosystem and derivatives exchanges’ operations more sustainable.

Some of these actions (e.g. product development) may happen in response to market demand and opportunities created by regulatory developments.

Others will depend on an exchange’s assessment of where it is able to have impact, given its operating environment and level of support from participants in its ecosystem.

Ultimately there are opportunities for all exchange operators to ensure their markets continue to respond to the sustainability imperative.

Please click here to read the paper in full


About the SSE

The SSE initiative is a UN Partnership Programme organised by UNCTAD, the UN Global Compact, UNEP FI and the PRI. The SSE’s mission is to provide a global platform for exploring how exchanges, in collaboration with investors, companies (issuers), regulators, policymakers and relevant international organizations, can enhance performance on ESG (environmental, social and corporate governance) issues and encourage sustainable investment, including the financing of the UN Sustainable Development Goals. The SSE seeks to achieve this mission through an integrated programme of conducting evidence-based policy analysis, facilitating a network and forum for multi-stakeholder consensus-building, and providing technical assistance and advisory services.

 About the WFE

Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers. Of its members, 35% are in Asia-Pacific, 45% in EMEA and 20% in the Americas. WFE’s 57 member CCPs collectively ensure that risk takers post over $1 trillion (equivalent) of resources to back their positions, in the form of initial margin and default fund requirements. WFE exchanges are home to over 47,000 listed companies, and the market capitalisation of these entities is over $109 trillion; around $137 trillion in trading annually passes through WFE members (at end 2020). The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets.

Click here to view the WFE’s website, sign up for the industry’s Focus magazine or to visit the WFE on LinkedIn. For Twitter see: @TheWFE