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
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.
Action Plan to Make Markets Climate Resilient
What is the TCFD?
The Financial Stability Board (FSB) established the Task Force for Climate-Related Financial Disclosures (TCFD) to develop recommendations for more effective climate-related disclosures. The TCFD recommendations explicitly state that material climate risk should be disclosed in financial filings and doing so is essential if climate change is to be truly integrated into business strategy. Since the launch of these milestone recommendations, together with a number of other key initiatives aimed at clarifying the information required to achieve climate-resilient markets, investors, issuers and financial services are now evaluating how best to adjust practices domestically, regionally and globally. Stock exchanges, as the linchpin of capital markets, have a key role to play in this global movement.
SSE tracks reporting instruments mentioned in stock exchange guidance documents, including TCFD.
SSE Action Plan to Grow Green Finance
In 2015, world leaders met in Paris and agreed on ambitious goals to avoid the worst effects of climate change. The same year, countries worldwide agreed on the United Nations Sustainable Development Goals (SDGs) which include a clear call to action on climate change. Meeting these global goals will require a transition to green and sustainable financial markets. In order to create the new forms of green and blended finance as set out in the Paris Agreement and the SDGs, there is a need for both the promotion of green products specifically, as well as the greening of mainstream financial markets more broadly. This guidance seeks to help stock exchanges start or further enhance their work on green finance by providing them with an action plan.
In alignment with the SSE’s Voluntary Action Plan, the SSE tracks a number of sustainability activities that can help stock exchanges to grow green finance in their market. This includes the presence of products such as sustainability bond segments or ESG indices and mainstreaming green through inclusion of ESG requirements into listing requirements.
To find out what stock exchanges are doing to grow green and sustainable finance in their markets, use the SSE’s Stock Exchange Database.
Exchanges with ESG bond segments
45 of the 120 stock exchanges tracked by the SSE have ESG bond segments.
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 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 firstname.lastname@example.org
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.
Climate disclosure training
In order to provide markets with high-quality training on climate disclosure and provide an overview of 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. Watch the videos here. The SSE is an officially CPD provider, more information available here.
‣TCFD 101 provides an overview of what climate-related reporting is and why it is important. It will also provide participants with the global and regional context and focus on the initial steps on how to address the TCFD recommendations.
‣TCFD 102 provides an in-depth program during which participants will peer-review each others’ TCFD reports and wider good practice. For markets with no or very little reporting on TCFD, the course will focus on setting up internal processes for reporting and potential first areas to get started on.
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:
- COP26: CEO Roundtable: Race to Zero – How stock exchanges can tackle the climate crisis and COP26: 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.
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.
“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.”
“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.”
“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“
“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.”
“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.”
“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.”
“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.”
“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”