Stock Exchanges and Shareholder Engagement

A growing number of external forces have put increasing pressure on publicly listed companies to address environmental social and governance (ESG) factors. Among these forces are the growing number of ESG shareholder resolutions, and the steady rise in demand from investors globally for sustainability-related information. Listed companies are responding to this demand on their own accord, or in some cases, in response to shareholder resolutions, as we saw with ExxonMobil last year. However, despite the growing demand for increased ESG disclosure, companies still face the challenge of determining what to report, what is deemed material and how to communicate this based on the market they are listed in and the industry they belong to.

Stock exchanges have long been guiding the companies they list about financial reporting requirements, guidance and training, all of which continue to reflect evolution in the reporting landscape. A stock exchange’s mandate includes ensuring that investors have the information necessary to make informed investment decisions, and investors increasingly want data on environmental and social factors. From corporate disclosure about board diversity to environmental risks such as resource scarcity, stock exchanges are key change agents.

To help stock exchanges guide their markets in responding to this demand, the United Nations Sustainable Stock Exchanges (SSE) Initiative launched in 2015. The UN SSE provides guidance that exchanges can use as a template for sustainability reporting. Alongside the launch of this guidance, the initiative challenges all stock exchanges to provide guidance to their markets and assist companies in responding to ESG information demands. When the SSE launched this campaign, only 14 stock exchanges worldwide provided any guidance on ESG disclosure. Today, 34 stock exchanges provide guidance, and another 12 have committed to do so – now accounting for more than half of the world’s major stock exchanges. The SSE guidance document aims to provide all markets with a common overview of ESG disclosure methods and continues to work with all stock exchanges to ensure all listed companies have the guidance investors want.

Apart from reporting guidance, stock exchanges also work with listed companies to share best practice and facilitate training on a range of sustainability topics. For example, the Egyptian Stock Exchange works with local partners to facilitate board training for female executives and maintains a database of female board-ready executives to support gender diversity on boards. In Luxembourg, the stock exchange has taken an environmental focus and is the leading exchange for listing green bonds, providing guidance on green bond listings, assurance, and working with other exchanges to increase the market appetite (appetite for what?). More examples of best practice on gender equality and green finance can be found in the SSE’s guidance documents on these topics.

Tiffany Grabski

Senior Project Manager, United Nations Sustainable Stock Exchanges Initiative