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Embedding sustainability into stock exchange operations, UN and industry publish joint report

Geneva, Tuesday 24 September 2019 – The United Nations Sustainable Stock Exchanges (SSE) initiative today launches a new guidance for exchanges prepared in collaboration with the the World Federation of Exchanges (WFE), the global industry group for exchanges. The joint report provides guidance on ‘How exchanges can embed sustainability within their operations: a blueprint to advance action’.

The joint report builds on the WFE’s Sustainability Principles, launched in October 2018, which constitute a formal declaration by the WFE and its membership to take on a leadership role in promoting the sustainable finance agenda. The new report focuses specifically on 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. 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.

The blueprint was produced by an international Advisory Group made up of stock exchange representatives and experts. The Advisory Group was chaired by Olga Cantillo, the CEO of the Panama Stock Exchange, who said: “The joint report is a complete guide to putting WFE Sustainability Principle 5 into practice, covering strategic planning, governance, and identifying and managing risk and ESG impact in our operations. It also offers important guidance regarding the resources needed to effectively implement these recommendations. We believe this guide makes a considerable contribution to enabling stock exchanges to effectively implement the actions needed to embed sustainability within their operations.”

“On the occasion of the SSE’s 10 year anniversary, we’re happy to respond to the demand from stock exchanges for more guidance on how they can better integrate sustainable development within their operations,” said James Zhan, Chair of the SSE Governing Board and Director of Investment and Enterprise at UNCTAD. “Launching this guidance as a joint document with the exchange industry’s leading body, the WFE, is also an important indicator of how sustainability is now a central element of mainstream business for the 21st century.”

The blueprint and a discussion around the paper will feature in the SSE’s 10-Year Anniversary Celebration, which is being held at the New York Stock Exchange on Thursday 26 September.

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.”

The blueprint highlights four focus areas where exchanges can implement recommended practices and actions to ensure that sustainability becomes integrated across the business:

Integrate sustainability into the exchange’s core strategic planning:

  1. 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.
  2. 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.
  3. 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.
  4. 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 stock exchanges around the world to demonstrate how some exchanges are already dealing with each focus area or consideration.

Download the report here.