Securities Regulation

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 10.5: Improve the regulation and monitoring of global financial markets and institutions and strengthen the implementation of such regulations

The Goal

Many securities regulators around the world have demonstrated increasing interest in the relationship between sustainability issues and their core mandates. While their specific roles, responsibilities and authorities differ from jurisdiction to jurisdiction, securities regulators are recognised by IOSCO to generally have three overarching and interrelated objectives:

  • To protect investors;
  • To ensure that markets are fair, efficient and transparent; and
  • To reduce systemic risk.

The SDGs are an articulation of the world’s most pressing sustainability issues, the scope of which includes ESG issues plus economic development. The SDGs can therefore be seen as an “ESG+” policy framework that provides some guidance as to the potential direction of travel for public policy and markets in these areas.

While most securities regulators do not have explicit organisational mandates to promote sustainable development, sustainability issues in and of themselves, as well as policy responses to these issues, are of direct relevance to their existing mandates. This is because sustainability issues can create financially material risks and opportunities for investors and may affect the resilience of the financial system as a whole.

Action Plan

The SSE worked with a working group of 70 capital market stakeholders, chaired by the Financial Regulatory Authority of Egypt, to develop a report on securities regulation sharing experiences and outlining an action plan for regulators wishing to support the Sustainable Development Goals. The report identifies five action areas where securities regulators can contribute to a more stable and resilient financial system that better supports the SDGs. These are:

  1. Facilitate investment to support the delivery of the SDGs: Aid investment flows to towards achieving the SDGs via financial products.
  2. Strengthen corporate sustainability-related disclosures: Improve the quality and quantity of disclosure on environmental and social data.
  3. Clarify investor duties on sustainability: Guide investors on the integration of sustainability into their decisions.
  4. Strengthen corporate governance to support sustainability: Introduce board responsibilities related to environmental and social factors.
  5. Build market capacity and expertise on sustainability: Facilitate the training of market participants on sustainability topics.

These five areas provide the overarching structure for this report. For each, the SSE’s most recent report defines the issue, identifies the role that securities regulators might play and presents examples drawn from current practices of securities regulators around the world.

The Tools

SSE guidance on securities regulation

Developed by a working group of nearly 70 capital market stakeholders, chaired by the Financial Regulatory Authority of Egypt, this report on securities regulation shares experiences and outlines an action plan for regulators wishing to support the Sustainable Development Goals.

The SSE guidance document on Securities Regulation and other publications by the SSE can be found here.

 

SSE Securities Regulation Database

The SSE’s Securities Regulators Database provides examples of how securities regulators are already contributing the the achievement of the Sustainable Development Goals. These examples correspond with the SSE’s Action Plan for securities regulators and can be filtered by the ten action areas this action plan presents.

To contribute new examples to this database, please contact the SSE. This database and the SSE’s other databases can be found under the Data tab of the SSE’s website. 

 

Technical Assistance: The SSE works with stock exchanges and securities regulators to support the SDGs in their markets through donor-sponsored technical assistance. For more information, please contact the SSE team directly

Testimonials

“I applaud the SSE and its Advisory Group for making a valuable contribution to the ongoing discussion among securities market regulators, exchanges, investors and issuers to promote sustainable finance. This new SSE research provides a constructive framework and practical set of illustrative examples to help securities regulators further explore how they can encourage investment in sustainable development.”

Financial Regulatory Authority (Egypt)

“Through the Sustainable Stock Exchanges (SSE) initiative, the world’s exchanges have taken a bold but pragmatic lead in working toward this future. In this guidance, the SSE outlines key considerations for securities regulators and identifies areas in which they can most usefully focus their efforts to uphold their responsibilities as regulators while helping to align capital markets with the needs of the future via the SDGs. In doing so, it also recognises that regulators have unique jurisdictional mandates within which they must operate, varying capacities to affect change, and different starting points from which to build.”

Mary L. Schapiro

29th Chair of the U.S. Securities and Exchange Commission

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