The London Stock Exchange Group (LSE) is to partner with the United Nations Sustainable Stock Exchanges (SSE) Initiative, which aims to promote sustainable business practices among publicly listed companies worldwide.
Nine other stock exchange members are already partners of the initiative, including NYSE Euronext, NASDAQ OMX, the Johannesburg Exchange, Bombay Stock Exchange and BM&FBBovespa (Brazil).
The SSE initiative serves as a platform for dialogue for stock exchanges, working together with investors, regulators and companies to enhance corporate sustainability and encourage responsible long-term approaches to investment.
Its flagship event is the biennial Global Dialogue, which next takes place this October in Geneva.
The initiative is co-organised by the United Nations Conference on Trade and Development (UNCTAD), the United Nations Global Compact (UNGC), the United Nations Environment Programme Finance Initiative (UNEP FI) and the UN-supported Principles for Responsible Investment Initiative (UNPRI).
A stock exchange may become a partner by making a voluntary public commitment to promote improved ESG disclosure and performance among listed companies.
Anthony Miller, economic affairs officer at UNCTAD, said: “The initiative is all about consensus building and developing policy coherence between policymakers themselves.
“It is very important that the LSE has joined, as it’s an iconic international exchange.”
Leon Kamhi, executive director at Hermes Equity Ownership Services, told IPE: “Having a stock exchange commitment to the disclosure of sustainability is a step forward in terms of its influence on the companies that are listed there.
“It is about having a sustainable economy over the long term and being able to pay the pensions of beneficiaries all over the world.”
He added: “At present, there’s a potential cost to energy use in the long term that is not shown in any company’s profit and loss account. But, at some point in the future, regulators might impose a cost, such as a tax.
“So companies should be looking at, for instance, how much carbon they are emitting, and those with a potential risk to the profit and loss should work out a price, which would be disclosed in the financials for potential investors.”
Gabriel Thoumi, CFA and senior sustainability analyst at Calvert Investments, told IPE: “The SSE initiative increases ESG transparency for companies and investors, and therefore improves clarity of the investment proposition on behalf of asset owners who are retail and institutional investors.
“ESG information is financially material because it helps us understand more deeply a company’s governance structure. It also provides companies themselves with opportunities to describe risk, assign a price to it, decrease risk and assign a monetary value to possible ESG opportunities.”
He added: “The LSE is one of the largest stock exchanges in the world, and this partnership demonstrates LSE senior managers’ commitment to sustainability and enacting sustainability as a business principle within the DNA of its daily business operations.”
Thoumi said that, over the past few years, sustainability disclosure had grown from use by a few innovative companies to the norm, with most S&P 500 companies now reporting ESG criteria.