UN member States agreed on 17 Sustainable Development Goals (SDGs) to be accomplished by 2030. The following target is directly addressed by this topic.
Target 13.3: Improve education, awareness raising and human and institutional capacity on climate change mitigation, adaptation, impact reduction and early warning
The Goal
Climate change poses both risks and opportunities to financial markets as a whole, and stock exchanges have the opportunity to prepare for these changes by creating more resiliency in their markets. The financial impacts related to climate have led investors, policymakers and financial service providers to request additional data from issuers in order to effectively assess risks and to price them in the market.
Green finance products have already been introduced in several markets and have seen tremendous growth, with green bond and green equity indices outperforming their nongreen benchmarks.
Stock exchanges are uniquely positioned to advance climate resiliency in their markets through a series of tools, rooted in their important roles as educator and information gateway for the market. To support them, we’re providing guidance, capacity building and consensus building on multiple topics that contribute to a greener capital market system.
Net Zero Exchange Group
The following stock exchanges are members of the Net Zero Exchange Group, which is officially recognized by Race to Zero. The Net Zero Exchange Group is also part of the Net Zero Financial Service Providers Alliance within the Glasgow Financial Alliance for Net Zero (GFANZ). The Exchange Group’s Net Zero Target-Setting Guidance framework was officially approved in June 2023 by the UN Climate Change High-level Champions overseeing the Race to Zero campaign. This endorsement marked a milestone in the Group’s commitment to combating climate change and contributing to the global transition to a sustainable, net-zero economy.
The UN SSE provides secretariat services to the NZFSPA – Exchange Group and will continue to work with the group to assist and guide them in the implementation phase. You can find out more here or by reaching out directly to the UN SSE team if you wish to join this group.
Carbon Markets
Carbon markets have gained significant attention in recent years as one of the fastest growing market mechanisms to mobilize resources supporting the transition to a net zero emissions economy. As marketplaces or facilities where emission allowances, carbon credits and derived financial instruments are bought and sold, carbon markets can incentivize emissions reduction, and channel investment capital towards climate mitigation efforts.
In 2023, the UN SSE published its guidance "How exchanges can maximize the opportunities of carbon markets", the product of a year-long process by 88 experts from 58 organizations across 39 countries, making up the informal SSE Carbon Markets Advisory Group. The publication offers a practical action framework to guide exchanges that are looking to optimize the opportunities of involvement in carbon markets. The action framework has two main objectives, each with three action areas that contain a range of suggested actions that exchanges can consider for application as appropriate.
Climate disclosure
The growing demand for decision-useful, climate-related financial information in annual reports and financial filings has led to an increased need for issuers to update their knowledge on climate-related risks and reporting frameworks. Climate disclosure is a prerequisite to enable finance-industry commitments such as the Glasgow Financial Alliance for Net Zero (GFANZ) where asset owners, banks, asset managers and the insurance sector have commited to align with a trajectory of emissions reduction to net zero by 2050.
Stock exchanges have an important opportunity to prepare their markets for the growing demand for climate-related information in a systematic and globally consistent manner as is being demanded increasingly by investors and the finance sector. In all markets, stock exchanges find particular value in helping their issuers’ attract capital from international or domestic investors by promoting and enhancing climate-related disclosures. As investors and providers of finance increase integration and consideration for climate risks, and many commit to align their portfolios with net-zero emissions, it’s essential that companies seeking their capital through markets are clear in providing the climate-related information needed. Stock exchanges can meet investor demands by promoting consistent and comparable reporting practices. In this manner stock exchanges also help ensure climate resiliency of their capital market system to ensure stability, transparency and long-term growth.
The Tools
Net Zero: Target Setting Guidance for Exchanges
To make provision for the diversity of exchanges, their individual circumstances and growth in target setting against the backdrop of a rapidly advancing environment of climate action, flexibility is being retained as necessary in the approach to the targets and guidance contained in this document. As a result, the targets in this document capture a wide range of elements that align with the NZFSPA commitment. Guidance is provided on what the target entails, the timing of implementation and relevant disclosure aspects. From this guidance, individual exchanges should be able to generate individual targets while taking into account their particular circumstances. Although exchanges are expected to pursue all applicable targets in due course, implementation can take place in a progressive manner, on a proportionate basis and through phased implementation.
The Net Zero Target Setting Guidance for Exchanges and other publications by the SSE can be found here.
Action Plan to Make Markets Climate Resilient
To help exchanges lead a transition to more climate-resilient markets using the various tools available to them, this document provides a voluntary practical Action Plan and bespoke guidance on creating climate-resilient markets. Stock exchanges can help their market to mitigate risks associated with climate change, access growing opportunities and help align climate-related disclosures to global standards and best practices to ensure their markets are both efficient and resilient.
The SSE Action Plan to Make Markets Climate Resilient and other publications by the SSE can be found here.
SSE Model Guidance on Climate Disclosure
The SSE published a tool for exchanges titled “Model Guidance on Climate Disclosure: A template for stock exchanges to guide issuers on TCFD implementation” to assist exchanges in guiding their market on how to disclose climate-related financial information. The template is oriented around the Financial Stability Board’s (FSB) Task Force for Climate-Related Disclosures (TCFD) recommendations, the current best practice for climate-related disclosure. Within this guidance the template is written in the voice of an exchange, providing text they may use when they guide their issuers, as well as ideas for strengthening their guidance by adapting it to their market’s circumstances.
For an editable version of the SSE Model Guidance on Climate Disclosure please contact the SSE team at [email protected].
SSE Guidance Document – How Stock Exchanges can Grow Green Finance
The SSE’s guidance document on Green Finance was developed with the inputs of over 70 experts from around the world and includes practical examples from more than a dozen stock exchanges including Brazil’s B3 exchange, Deutsche Boerse, Intercontinental Exchange (parent to New York Stock Exchange), Johannesburg Stock Exchange, Luxembourg Stock Exchange, London Stock Exchange, Nasdaq and Shanghai Stock Exchange, among others. The report found that the growth of green finance depends on both promoting green finance products as well as greening mainstream financial markets. Real world examples are provided for each action item to assist with implementation.
The SSE guidance document on Green Finance and other publications by the SSE can be found here.
SSE Academy Training on climate and sustainability disclosures
In order to provide markets with high-quality training on climate disclosure the SSE Academy and its partners launched training in 2021 on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. the UN SSE, IFC and CDSB recorded a multifaceted course for exchanges to distribute to their markets and staff, free of charge. As TCFD has now been integrated into the IFRS Sustainability Disclosure Standards, the SSE Academy together with the IFRS Foundation and IFC have now launched a new training on the IFRS standards S1 and S2.
- Training on IFRS sustainability standards: For more information on the SSE Academy training on the IFRS S1 and S2 standards, visit the Academy page here.
- TCFD 101 and 102 videos: The TCFD continues to be a useful resource as companies get started on their climate-related disclosures. Although our TCFD training program has now transitioned to training on the IFRS Sustainability Disclosure Standards, you can watch the videos of the TCFD training here.
Consensus Building and Collaboration
The SSE has gathered key market players on a number of occaisions to build consensus and initiate collaboration on green finance worldwide. These events include:
- COP28: Climate and sustianable finance in the new era: a primer for the adoption of the ISSB Standards; Exchanges and climate innovation: Climate Disclosure, Carbon markets and Net Zero Transition; Exchanges and climate action: financing the net zero transition
- COP27: CEO Roundtable: The role of exchanges in creating a net zero world; The role of stock exchanges in promoting innovative climate solutions
- COP 26: CEO Roundtable: Race to Zero – How stock exchanges can tackle the climate crisis; Role of exchanges in promoting innovative climate solutions: financing, standards, and education
- SSE Webinar on Net-Zero
- SSE G20 Side Event: Launch of Spanish version of SSE Action Plan on Green Finance
- SSE Green Finance Advisory Group Meeting
- UN COP23 alongside SSE Green Finance Dialogue: How stock exchanges can grow green finance
- UN COP22 Side Event and SSE: Fostering Green Capital Markets
- SSE Executive Dialogue on Green Finance alongside the UNCTAD World Investment Forum
- UN COP21 alongside SSE Leaders Luncheon on Climate
To ensure your participation in future SSE events, sign up to the SSE’s mailing list here.
SSE Diagnostic Checklist
In order to assist stock exchanges in self-assessing their current state of play on green finance, and to help develop their own roadmap, a diagnostic checklist has been developed The SSE Green Finance Diagnostic Checklist allows an exchange to benchmark their current support for green capital markets, and helps an exchange better visualise what action areas present further opportunities.
The diagnostic checklist can be found within the SSE’s Guidance Document, How Stock Exchanges can Grow Green Finance.
Technical Assistance
The SSE works with stock exchanges to advance climate action in their markets through donor-sponsored technical assistance. For more information, please contact the SSE team directly.
Testimonials
“Stock exchanges can play a leading and transformative role in helping corporate issuers to make the transition to a sustainable economy. When launching the COP26 private finance agenda, I stressed that comprehensive disclosure of climate financial risk is foundational to finance driving a successful transition to net zero. The work of stock exchanges in supporting the widespread adoption of TCFD reporting is critical in this regard. I therefore commend the work that the Sustainable Stock Exchange (SSE) initiative, and its over 100 Partner Exchanges, have done over the past decade, putting in place a framework to help mainstream sustainable finance. I welcome this model guidance, updated to incorporate the latest approach on climate-related disclosure from the Taskforce on Climate-related Financial Disclosure (TCFD), as a key example of the role that exchanges can play in driving this change, and encourage exchanges worldwide to take it up.”
Mark Carney
Special Envoy on Climate Action and Finance, United Nations
“Securing our future is a collective responsibility and requires all actors across regions, industries, regulators and the financial sector to do our bit. The model guidance that we have published today is perhaps the first hill – I have no doubt, we will have many more hills to climb as we embed transparent climate reporting in our markets. I sincerely thank the UN SSE, the London Stock Exchange and Mark Carney for helping exchanges play their part and I genuinely hope that exchanges will find value in these reports.”
Dr. Leila Fourie
CEO, Johannesburg Stock Exchange
“This new Green Action Plan will guide the efforts of Stock Exchanges all over the world to go green. The fact that Luxembourg’s Stock Exchange has taken the lead in this initiative shows once again that Luxembourg’s financial center is at the forefront of sustainable finance“
H.E. Pierre Gramegna
Minister of Finance, Luxembourg
“Stock exchanges can play a decisive role in triggering the trillions needed to ward off a global tragedy. Therefore, I very much welcome today’s release of this important publication by the UN Sustainable Stock Exchange. I hope that actions will soon follow words and that this plan, which highlights two crucial aspects: promoting green products, and greening financial markets, will stimulate supply and the demand for green finance.”
Werner Hoyer
President, European Investment Bank
“This guidance document provides stock exchanges in any market with a solid platform to ensure the development of green finance initiatives in their market and to support their Nation’s achievement of their Paris Agreement commitments. We applaud the SSE and its Advisory Group on Green Finance for this exceptional work in ensuring all stock exchanges have the tools to succeed in transitioning to green markets.”
Patricia Espinosa
Executive Secretary, United Nations Framework Convention on Climate Change
“It has been an honour for the Luxembourg Stock Exchange to chair this distinguished Advisory Group and contribute, together with other experts, to the elaboration of the action plan. This SSE guidance offers action points and guidance for stock exchanges and constitutes a roadmap towards our ambitious goal of simultaneously stimulating demand and supply for green investing.”
Luxembourg Stock Exchange
“We are proud to be a founding members of the SSE, and the work being done is more relevant now than it ever has been. The JSE fully supports the recommendations of the report and is pleased to announce that their own Green Segment was launched in October with green bonds being the first product. The JSE is committed not only to supporting green finance, but to promoting ESG as an investment consideration more broadly.”
Johannesburg Stock Exchange
“Fully aware of the growing importance of stock exchanges’ role and contribution to the global climate related challenges, EGX remains committed to raise the awareness on the importance of green finance in securing a better tomorrow for future generations. We commend the SSE initiative as a learning platform that helps exchanges supporting the transition of green finance and taking a leading role in creating more sustainable and inclusive economies”
The Egyptian Exchange
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