GENEVA — To achieve the ambitious Sustainable Development Goals, the United Nations has been widening calls for support from the private sector — and some believe stock markets could play an important role.
Last week, partners of the Sustainable Stock Exchanges initiative met in Geneva, Switzerland, for annual talks. The group aims to promote responsible investment in development by stock exchanges and their listed companies. Launched in 2009, it is coordinated by the U.N. Conference on Trade and Development, together with several other U.N. or related bodies.
U.N. Secretary-General António Guterres launched a new strategy to help finance the 2030 agenda at the U.N. General Assembly, but beyond the strategy, the speakers sharing the podium were a sign that times may be changing.
“Well-functioning stock exchanges enable economic growth and development by facilitating mobilization of financial resources, and by bringing together those who need capital with those who have resources to invest,” said Nandini Sukumar, CEO of the World Federation of Exchanges, during last week’s talks, held as part of the World Investment Forum.
SSE has been growing — only a handful of major stock exchanges remain outside it — but some wonder about the limits of its voluntary approach.
The U.N.’s engagement with the private sector on sustainable development has expanded since the run-up to the Paris Agreement on climate change in December 2015, when 30 new partners joined SSE. The initiative currently counts 78 partner exchanges — including the New York Stock Exchange, the London Stock Exchange, and Nasdaq — who are committed to implementing programs consistent with the SDGs and to encouraging listed companies to realize environmental, social, and governance, or ESG, policies.
The steps that stock exchanges take to achieve this are up to them — they can include offering guidance or creating indices that single out companies with better records. Michael Zimonyi, policy and external affairs manager at the Climate Disclosure Standards Board — a consortium of business and environmental NGOs — said one of the challenges is that large corporations have “rather complex organizational structures.”
“What you end up [with] a lot of times is that some people in the organization push sustainability agendas forward, and other people not part of the conversation push the other way. That is probably the biggest issue we need to address,” he explained.
SSE identifies four SDG targets as most relevant to stock exchanges internally: gender equality (SDG 5); decent work and economic growth (SDG 8); responsible consumption and production (SDG 12); and climate action (SDG 13). Through those actions, it hopes to contribute to other SDGs such as sustainable energy (SDG 7) and sustainable communities (SDG 11).
It also organizes technical assistance for stock exchanges that may not have the capacity to develop or promote ESG policies on their own, including work in Cambodia, Laos, Peru, Nigeria, and Kenya.
Some SSE members say they were motivated to join by their own exposure to climate change. Sunil Benimadhu, chief executive of the Stock Exchange of Mauritius, spoke about his country’s vulnerability to the effects of global warming and what that meant for his commitment to the SSE principles.
“What we are doing is putting our money where our mouth is and trying to bring our small contribution,” he said. The exchange has 168 listed companies, representing a total market capitalization of $12 billion.
While SSE partners join by signing a voluntary commitment, the issue of ESG disclosure, particularly by companies listed on exchanges, has been an issue the initiative hopes to improve on. A number of partners, such as the Johannesburg Stock Exchange and the Singapore Exchange, have imposed mandatory ESG reporting.
Others have offered companies a voluntary approach to reporting, offering guidance to listed businesses and issuing their own sustainability reports.
Lauri Rosendahl, president of Nasdaq Nordic, explained that while the exchange does not require ESG reporting, 85-90 percent of its large companies already do so, although that falls to 12 percent for small- and medium-sized businesses. He said investors needed to put pressure on companies to disclose ESG performance.
Of the world’s major stock exchanges, only a few — including SIX Swiss Exchange and the Toronto Stock Exchange — have remained outside SSE. SIX chairman Urs Rüegsegger told Devex that management shifts may have caused delays in decision-making on SSE partnership. Many of its large companies — such as Nestlé, Credit Suisse, and Novartis — already publish ESG reports, and the exchange issues sustainability indexes.
Still, Zimonyi argued more must be done to get businesses to operate sustainably. “If we look at what science is telling us, not enough progress is taking place,” he said.