A new initiative has been launched to lobby for the integrating of environmental and social disclosure requirements into listing rules for companies on US and global stock exchanges. The potential changes could allow investors to better compare the sustainability of companies.
The initiative, which aims to engage with global stock exchanges via the World Federation of Exchanges (WFE), was announced by sustainability advocacy group Ceres in collaboration with fund manager BlackRock and other major institutional investors. Over 100 leading investors from six continents have helped shape the proposal, demonstrating the demand for standardised reporting.
By setting requirements, it is hoped that such a scheme will create an even playing field whilst providing investors with the information they need to make informed decisions.
Gwen Le Bere, vice-president of corporate governance and responsible investment at BlackRock, commented, “Cross boarder collaboration by stock exchange will help shift public companies towards more comparable and meaningful disclosure of environmental, social and governance (ESG) risk factors.
“This will enable investors to more accurately value companies and make better informed investment decisions.”
Taking ESG factors into consideration can give investors additional security in the long-term. Previous research has linked sustainability to investment stability. One study found that firms that invest in corporate social responsibility (CSR) action see less risk in their stock prices, particularly during economic downturns.
“We know from experience that sustainable, long-term growth requires integrating ESG consideration into the investment process”, said Thomas DiNapoli, trustee of the New York Stake Common Retirement Fund.
“A global standard for sustainability would give investors data to assess performance and risk, while allowing exchanges and companies to address specific market regulations and cultures.”
The recommendations made by the group will now be formally submitted to stock exchange members of the WFE, in conjunction with the launch of an exchange comment period that will run for several months.
The role of stock exchanges in sustainable investment has previously been debated, with some saying their role is important and others labelling sustainability efforts as “greenwash”.
Fiona Reynolds, managing director of Principles for Responsible Investment (PRI), said, “Stock exchanges have a key role to play in promoting better ESG disclosure and ultimately performance by listed companies.“