On 2 November 2009 more than 100 top executives from around the world met at UN Headquarters in New York to explore how the world’s exchanges can work together with investors, regulators, and companies to enhance corporate transparency, and ultimately performance, on ESG (environmental, social and corporate governance) issues and encourage responsible long-term approaches to investment.
This unique event, co-hosted by the UN-backed Principles for Responsible Investment Initiative (PRI), UN Global Compact and the United Nations Conference on Trade and Development (UNCTAD), examined the various ways in which stock exchanges promote sustainable business practices. Examples included existing best practices such as enhanced sustainability reporting requirements for listed companies and the establishment of ESG indices.
A number of stock exchanges are becoming increasingly active in raising awareness of ESG issues and standards among listed companies, driven by calls from institutional investors through initiatives like the UNEP Finance Initiative and the PRI.
In a video message to open the meeting, UN Secretary-General Ban Ki-moon said that environmental, social and governance issues were critical in creating a world economy that was more stable, inclusive and sustainable. Mr. Ban told participants, “Stock exchanges and other financial bodies and institutions have a key role to play. Many of you have taken important steps to advance this agenda. I welcome your efforts to incorporate ESG considerations into new stock indexes, listing rules and regulatory frameworks. I hope today’s discussions will inspire you to go further still.”
PRI signatories such as Aviva Investors, Fonds de réserve pour les retraites (FRR), and PREVI spoke openly about the ways in which investors and exchanges could work together to address this agenda. One of the six Principles of the PRI calls for signatories to “seek appropriate disclosure on ESG issues by the entities in which they invest”.
A number of exchanges showcased how they already implement ESG strategies by enhancing listing rules and disclosure requirements, setting up ESG indices and launching new exchanges for ESG-related asset classes such as carbon.
Supachai Panitchpakdi, Secretary-General of UNCTAD said: “We welcome the work already done by many exchanges on this issue and this collaborative dialogue sends an important signal to listing authorities around the world that they play an important role in promoting the ESG agenda. UNCTAD research shows clearly that disclosure requirements can have a significant impact on the transparency and long-term sustainability of companies around the world”.
James Gifford, Executive Director of PRI, explained, “The global financial crisis convinced many investors and policymakers of the urgent need to promote better risk management, good governance and enhanced transparency to protect long-term returns. Any moves to improve corporate disclosure on ESG issues are likely to benefit exchanges through enhancing both the reputation of markets and the investability of the companies traded on them”.
One of the many high-profile investors speaking at the conference was Paul Abberley, Chief Executive of Aviva Investors in London. In November 2008, Aviva Investors called for a debate on how stock market listing authorities could help promote increased corporate transparency. Mr. Abberley said, “We are extremely pleased with our collaboration with the United Nations and have high hopes that today’s conference will play a catalytic role in promoting more sustainable business behaviour. Our main focus is on promoting a global listing environment that requires companies to consider how responsible and sustainable their business model is, and also encourages them to put a forward-looking sustainability strategy to the vote at their AGM”.
A copy of Paul Abberley’s speech is available here.