4 Dec 2023, Dubai, UAE
On Finance Day at the 28th annual United Nations climate change conference (COP28) in Dubai, the SSE convened capital market stakeholders to discuss the operational-level next steps required to advance on climate disclosures and net zero targets. The panel discussion, moderated by SSE Academy Head Ms. Tiffany Grabski, discussed the role of capital market infrastructure and the institutions behind it for enhancing the private sector’s contribution to key objectives being negotiated at COP.
“Capital market infrastructure is essential to financing climate solutions, providing opportunities for new processes and practices that integrate climate-related risks and opportunities into businesses and financial institutions. Stock exchanges and regulatory authorities have an important role in shaping the way financial systems support a transition to a net-zero emissions world,” said Ms. Grabski.
The panel discussed concrete activities needed to support this transition, which were summarized through three areas of action –regulation, standardisation and education.
Regulation
Speaking about the UK’s Financial Conduct Authority’s work in this area, Alicia Kedzierski, ESG Department Head (FCA) said: “One of the big priorities for us in the coming year in particular is embedding or operationalising what is already out there. We are getting so much within the regulatory space [...], we have 40 live pieces of work happening within our department. But, it’s not about just putting out rules [but these rules] have to be actually lead to change. [...] We are looking at firms taking this from this being just compliance […] to truly making it part of how they run and how they operate.”
When asked about their work to support a common language on sustainable finance, Tajinder Singh, Deputy Secretary General of IOSCO said: “What we are really doing [as regulators] is we are ensuring that there is trust in the system, and that’s what allows things to go forward. With the ISSB’s Standards that were finally issued this year, we moved quite quickly, but rigorously, to endorse them. And that already is a big signal to regulators in terms of how they adopt them, apply them, or otherwise make use of them. This is something we are very proud of.” Mr. Singh also noted that IOSCO is focusing on building trust also throughout voluntary carbon markets, noting the importance of environmental and financial integrity.
When asked about the role of Financial Market Infrastructures like Euroclear in scaling the sustainable finance marketplace, Francesco Vanni d’Archirafi, Group Chairman of Euroclear said: "As a major international finance market infrastructure, sustainable economic growth is at the core of Euroclear’s Purpose. We can help scale the development of sustainable finance markets by delivering safety, increasing efficiency, and reducing infrastructure, regulatory and informational barriers to issuance."
Through regulation and listing requirements, stock exchanges and capital market regulatory authorities can raise the bar on requirements ensuring that companies are providing investors with the information they need to price climate-related risks and opportunities. Regulatory authorities in 14 countries have integrated the FSB’s Task Force on Climate-Related Financial Disclosures (TCFD) recommendations into disclosure requirements and the trend has continued with the IFRS Sustainability Disclosure Standard S2. However, panellists noted that advancing regulation also requires globally-accepted standards together with extensive capacity and skills building throughout the capital market ecosystem.
Standardization
Herry Cho, Head, Sustainability and Sustainable Finance at SGX Group said their exchange finds it important to support the work of the ISSB. “We were also the first market to have done public consultation on the finalised ISSB standards for mandatory adoption, and that’s for Singapore companies overall […]. There will be specific consultation specifically on what is needed from listed companies in due course as well.” SGX has also worked with the SSE to host the first trial session of a new training programme with the SSE on ISSB reporting.
In response to a question on what gives him hope for markets contributing to the ongoing climate challenge, Mr Singh said: “Remember, two years ago we didn’t even have an ISSB and now we are talking about those standards and we have endorsed them. And I didn’t hear the term “alphabet soup” come up once in today’s conversation!” Mr. Singh commended the work of the IFRS Foundation to consolidate and align the work of SASB, CDSB, Integrated Reporting, TCFD, CDP and GRI – which were previously seen as an ‘alphabet soup’ of disclosure frameworks.
Panellists identified the important role that capital market infrastructure can play in enabling the standardization of practices, such as through the adoption of the IFRS Sustainability Disclosure Standards for sustainability- and climate-related disclosures. Participants discussed the important need for a global understanding of key concepts with a globally accepted language for communicating in corporate reports on climate-related risks and opportunities, paired with local adaptation.
To support the adoption of the IFRS Sustainability Disclosure Standards, the SSE launched at COP28 a toolkit on sustainability-related financial disclosures. The toolkit includes a Model Guidance that provides stock exchanges with a standardised global template for guidance to ensure stock exchange’s guidelines align with the IFRS Standards. Additionally, the toolkit includes a gap analysis checklist and primers on transition plans and climate metrics to help stock exchanges as they guide their markets on these new standards and concepts.
“The next phase for us is for the Board to look at the 400 submissions they received on what they will be focusing on next, covering integrated reporting, biodiversity and ecosystem services, as well as human rights and human capital. We are also working with regulatory authorities around the world to secure mandatory adoption of the standards,” Mardi McBrien, Chief of Strategic Affairs & Capacity Building at the IFRS Foundation.
Education
The success of the standards – and their integration into regulation – was seen as depending on a global need for upskilling and capacity building for all capital market participants. From the regulators and stock exchanges shaping the capital market infrastructure and listing rules, to the companies raising capital or those investing, all capital market participants will need to expand their knowledge to efficiently and effectively integrate climate-related risks and opportunities into markets.
Speaking about their work on advancing ESG matters, Bandar Al Blehed, Head of Client Relations Development at the Saudi Exchange said: “One of the major challenges that we have seen is the lack of knowledge, the lack of awareness.... So we decided to do a lot of training, we already did training with the SSE and we are going to do one with them again next week on the ISSB. It was so exciting last time that the Q&A session lasted for over an hour. That just tells you the level of engagement we are having with our issuers.” The Saudi Exchange will be holding its ISSB training on 12 December.
Brian Matt, Head of ESG Advisory at the New York Stock Exchange (NYSE) also discussed the importance of sustainability officers being responsible for educating the rest of their businesses: “I do have a lot of sustainability officers telling me that they are educating the legal teams, the HR teams, the rest of the business to really embed sustainability into what they’re doing from an operational perspective.”
Speaking about the need to support markets in adopting the standards, Mardi McBrien noted: “I am also really glad that we have the SSE as a partner in our capacity building programme. The SSE has launched a training programme with us to support the bottom-up adoption of the standards. I encourage every exchange to get in touch with the SSE to sign up and get your markets ready.”
To support markets in its education journey, the SSE Academy launched a capacity building program in collaboration with the World Bank’s IFC and the IFRS Foundation providing cost-free training for capital market participants. Built off the SSE’s award-winning capacity building program for the adoption of TCFD, the interactive training offers participants direct access to top experts as they enhance their skills and knowledge on applying the IFRS Standards for sustainability-related financial disclosures.
To find out more about the SSE Academy’s many programs supporting capital market education, visit https://sseinitaitve.org/academy
Watch the recording here:
