Role of stock exchanges in sustainable investment up for debate

A new report has outlined the increasingly important role stock exchanges play in corporate sustainability reporting. In contrast, environmental groups have described Johannesburg Stock Exchange’s (JSE) efforts as “nothing more than greenwash”.

The JSE recently raised its requirements for its socially responsible investment (SRI) index, resulting in four companies being dropped. The index aims to help investors identify companies with long-term focuses.

However, Bobby Peek, director of environmental group GroundWork, told Business Report that it was difficult to understand how some businesses, such as Sasol, Amsa and BHP Billiton, could be included in the SRI index.

The UN-supported Principles for Responsible Investment (PRI), which brings together institutional investors with trillions of pounds of assets, argued that stock exchanges are playing an increasingly prominent role in enhancing corporate sustainability. A recent study by research firm CK Capital analysed global sustainability disclosure trends and provided guidance on how stock exchanges can encourage sustainability reporting.

The report ranks the world’s stock exchanges based on the extent their large listed companies are disclosing the seven “first generation” sustainability indicators: employee turnover, energy, greenhouse gases, lost-time injury rate, payroll, waste, and water.

European stock exchanges were ranked favourably, with eight of the top 10 coming from the continent, although stock exchanges in emerging markets are expected to catch up in the next two years.

Doug Marrow, lead author of the report, said, “Emerging markets stock exchanges are on track to surpass their developed-world counterparts in quantitative sustainability reporting by 2016.

“This ‘catch-up’ process is being driven by many factors including policy leadership from stock exchanges themselves.”

Despite progress, the report found that only 3% of the world’s large companies and 0.04% of the world’s small companies currently offer their stakeholder complete “first generation sustainability reporting”.

The 45 stock exchanges analysed were responsible for 31 disclosure policies. All of these policies were implemented after 2000 demonstrating how the market is evolving and adapting to SRI.

Further reading:

Stock exchanges at forefront of developing sustainability initiatives

Mandatory corporate responsibility reporting favoured in poll

UBS on SRI, charity, philanthropy and giving: the debate

Ethical, responsible, sustainable: what should we call enlightened investment?

The Guide to Sustainable Investment 2013