London- Worldwide, less than 1/3 of stock exchanges provide written guidance to their listed companies on environmental, social and governance (ESG) disclosure. In response to this, the United Nations Sustainable Stock Exchanges (SSE) initiative, along with a diverse advisory group chaired by London Stock Exchange Group, created a new resource for exchanges. Today, representatives of the SSE initiative, along with nearly 100 investors, gathered at the London Stock Exchange for this morning’s market open to officially launch the SSE’s new resource for exchanges: the Model Guidance on Reporting ESG Information to Investors: A Voluntary Tool For Stock Exchanges to Guide Issuers. The ceremony also marks the start of a global campaign to have all exchanges provide their issuers written guidance on reporting ESG information by the end of 2016.

The campaign is off to a successful start with the Bucharest Stock Exchange, Egyptian Exchange, HoChiMinh Stock Exchange, Hanoi Stock Exchange, London Stock Exchange Group, Nigerian Stock Exchange and Santiago Stock Exchange all making early public commitments.

“EGX guidance for reporting on ESG will provide the Egyptian Capital Market with an integrated reporting model, helping listed companies to disclose efficiently ESG practices and ensuring that the market efficiently meets the new ESG-related information needs of investors.” –Egyptian Exchange

“Having voluntarily joined the SSE initiative, Hanoi Stock Exchange deeply acknowledges the importance of issuers’ transparent ESG reporting. With reference to the SSE’s Model Reporting Guidance, we intend to introduce a roadmap for application of our own customized market guidance on ESG reporting for listed companies within 2016. We look forward to the good impact of the guidance on enhancing the quality of listed companies, making our domestic securities market more sustainable and attractive to global investors.” –Hanoi Stock Exchange

“We intend to use the SSE Model Guidance as a basis for discussions with both investors and issuers in order to determine our own guidance, which we expect to produce by the end of next year.” – Mark Makepeace, Group Director of Information Services, London Stock Exchange Group and Chief Executive of FTSE Russell 

“The Nigerian Stock Exchange (NSE) is using its unique platform to advocate for the adoption of global corporate governance standards and sustainable business practices. We are committed to developing principle-based sustainability reporting guidelines and a roadmap that will inspire sustainability imperatives in the Nigerian capital market. In October 2015, we will hold a Sustainability Conference, an inaugural stakeholder engagement session to discuss business opportunities and risks arising from ESG issues and reporting”– Oscar N. Onyema, CEO, The Nigerian Stock Exchange

Contributing to this momentum building around ESG reporting, the WFE Sustainability Working group (SWG) plans to release a complementary document later this year that will highlight areas of ESG practice and disclosure that are of utmost relevance to individual exchanges and the industry in general.  The SSE voluntary Model Guidance is a key document for this SWG work. “The guidance in [the SSE Model Guidance], which SWG leadership and members helped to create, provides a useful and necessary starting point for exchanges in engaging their issuers on ESG,” say the Chair of the SWG, Evan Harvey (Nasdaq) and Vice-Chair Corli le Roux (Johannesburg Stock Exchange) in the Forward to the SSE publication. Evan Harvey, goes on to say that “The [SSE] Model Guidance is an essential first step in creating industry-wide change on sustainability reporting practices and performance, and the basis for the work of the WFE sustainability working group going forward.”

The purpose of the Model Guidance is to help exchanges address the current information gap by providing a model, or template, that exchanges can use to develop their own, custom guidance. “Bursa Malaysia welcomes the SSE Model Guidance on Reporting ESG Information to Investors. Greater clarity and a defined baseline for companies to incorporate or work towards is needed as there are several reporting standards available,” said Dato’ Tajuddin Atan, Chief Executive Officer of Bursa Malaysia Berhad. “I believe the market is ready and as it stands, Malaysia today has 25 ESG companies and a total of 14 of our public listed companies have already adopted the Global Reporting Initiative reporting guidelines.”

The guide was developed thanks to the leadership of exchanges from around the world, and support from a multi-stakeholder advisory group composed of investors, companies and industry experts. Chairing the advisory group, David Harris of London Stock Exchange Group worked with the more than 50 advisory group members over six months to ensure the document was relevant, useful and most importantly, effective.

“Being core players of the financial industry, exchanges increasingly recognize their role in forming the rules and best practices in order to promote application of ESG practices by their stakeholders and society as a whole. ‘The Model Guidance on Reporting ESG Information to Investors’ prepared by the Sustainable Stock Exchanges (SSE) Initiative will serve undoubtedly as an important step in creating a more effective and high quality ESG reporting to investors, which in turn will contribute to the creation of well-functioning markets.” affirmed Dr. Mustafa K. Yılmaz, Borsa İstanbul Executive VP.

According to Sonia Favaretto, Press and Sustainability Officer at BM&FBOVESPA (now B3), “BM&FBOVESPA launched the guide ‘New Value – Sustainability in Companies, How to Start, Who to Involve and What to Prioritize’ in 2011, as we understand it to be a tool that will guide and stimulate listed companies to report their ESG issues. It has been an important instrument for increasing transparency in the Brazilian capital market as regards this matter. Therefore, we strongly encourage other stock exchanges to publish their sustainability guides by the end of 2016. The voluntary Model Guidance that is being released by SSE is a good example of how to orientate companies in a didactical and clear way. We congratulate SSE for this initiative. It is an honor to be part of it.”

Hauke Stars, member of Deutsche Börse Executive Board shared, “Deutsche Börse Group strives to promote transparency and standardisation within the capital markets – also regarding sustainability. Therefore, we are committed to increasing the availability of the respective information to investors and analysts. Transparency is the key to informed investment decisions and thus an indispensable basis for safe and regulated markets – nationally and internationally. That’s why we published our own ESG Best Practice Guide in 2013 and are pleased to share our expertise within the SSE initiative.”

From the perspective of Singapore Exchange, “while financial reporting by listed companies is firmly established, sustainability reporting is relatively young.  Financial reporting focuses on what results have been achieved and sustainability reporting seeks to address increasing investor interest in a fuller explanation of how businesses achieve their financial results as well as what risks and opportunities are within sight.  The additional transparency and spotlight on governance from sustainability reporting will increase confidence and trust in capital markets.  I hope that having the Model Reporting Guidance will encourage more participation from exchanges and markets around the world.”

The release of the SSE voluntary Model Guidance and its call for exchanges to provide ESG guidance by 2016 will be supported by a written campaign led by Allianz Global Investors. The campaign, backed by the Principles for Responsible Investment and United Nations Global Compact, will write to all World Federation of Exchanges (WFE) members and SSE Partner Exchanges, commending those exchanges that already issue ESG reporting guidance and encouraging those exchanges that do not to create their own by the end of 2016. Companies, asset owners and managers are invited to sign the campaign’s letter (deadline 5 October 2015) to show they support exchanges globally taking concrete steps to create more transparent and long-term markets. For more details or to join the campaign please email [email protected].  To view the progress of the SSE campaign, please visit the SSE website.

Commenting on the written campaign, Marissa Blankenship, Senior ESG Analyst at Allianz Global Investors, said: “Stock exchanges have a leading role to play in promoting sound financial reporting and corporate governance standards. As a conduit between issuers and investors, they are uniquely placed to help shape sustainable capital markets. This campaign is a call to action, asking every exchange to have created voluntary ESG reporting guidance for companies by the end of 2016”.

For more information about the SSE Model Guidance, please contact the SSE Secretariat at [email protected].