Green Finance
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
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.
SSE Action Plan to Grow Green Finance
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.
Exchanges with ESG bond segments
%
46 of the 120 stock exchanges tracked by the SSE have ESG bond segments.
To find out what stock exchanges are doing to grow green and sustainable finance in their markets, use the SSE’s Stock Exchange Database.
Value Proposition
Green and sustainable finance offers benefits and opportunities for stock exchanges. Green finance products have already been introduced in several markets and have seen tremendous growth, with green bond and green equity indices outperforming their non-green benchmarks. Green finance is nevertheless still in its early stages: as of 2017 green equities were only about 5% of overall listed value and only around 0.2% of total bond issuance worldwide was made up of labelled green bonds. This presents significant growth opportunities for exchanges and other market actors, with potential concomitant revenue growth opportunities, and in some markets this has allowed exchanges to strengthen their competitive position.
The Tools
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.
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:
- SSE G20 Side Event: Launch of Spanish version of SSE Action Plan on Green Finance
- SSE Green Finance Advisory Group Meeting
- SSE Green Finance Dialogue alongside COP23
- SSE COP22 Side Event, Fostering Green Capital Markets
- SSE Executive Dialogue on Green Finance alongside the UNCTAD World Investment Forum
- SSE Leaders Luncheon on Climate alongside COP21
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 grow green finance in their markets through donor-sponsored technical assistance. For more information, please contact the SSE team directly.
Testimonials
“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”