Measuring Sustainability Disclosure on the World’s Stock Exchanges

Author Name: 
Doug Morrow


Stock exchanges can play an important role in promoting corporate sustainability reporting. By incorporating sustainability disclosure requirements into their listing standards, stock exchanges can create a strong incentive for companies to measure and publicly disclose their sustainability performance to the market.

Some stock exchanges have carved out an early leadership position on this front.  Exchanges such as the BM&FBOVESPA (Brazil), the Johannesburg Stock Exchange (South Africa) and the Bombay Stock Exchange (India) have taken concrete steps to encourage sustainability reporting among their listed companies.[1]   Moreover, eight exchanges and counting – all members of the World Federation of Exchanges (WFE)—have joined the Sustainable Stock Exchanges, a United Nations initiative aimed at exploring how stock exchanges can enhance corporate transparency.[2]

While most exchanges have not formally committed to the concept of sustainability reporting, a great many are strategically reviewing whether (and how) sustainability reporting fits with their long term business plan.  Many of these challenges are likely to be discussed at the 53rd General Assembly of the WFE, during a special panel discussion on ‘Sustainability’.[3]

Sustainability disclosure is important.  In addition to providing a more complete picture of a company’s social and environmental impacts, it gives investors an additional source of information that can be mined – and potentially exploited in the context of portfolio management.

Given the growing significance of corporate sustainability reporting and the role that stock exchanges can play in facilitating disclosure, CK Capital elected to build an analytical framework that could be used to benchmark the sustainability disclosure performance of the world’s stock exchanges year over year.  Using this framework, we published the first ever ‘sustainability disclosure ranking’ of the world’s stock exchanges in 2012. 

The second iteration of the ranking, which will be officially launched on October 30th in conjunction with the 53rd General Assembly of the WFE, evaluated 45 stock exchanges across the globe, including large, developed world exchanges such as the New York Stock Exchange, and medium-sized emerging markets exchanges, such as the Bolsa de Santiago in Santiago, Chile.

As in the inaugural 2012 study, all stock exchanges were ranked based on i) how their large listings stacked up in terms of disclosure of the seven “first generation” sustainability indicators; ii) how these disclosure rates were trending over time, and iii) how quickly companies reported sustainability data to the market after their financial year end.  

Since most companies disclose sustainability data between 3 to 12 months after their financial year end, we used 2011 data in this year’s ranking.[4]

In an attempt to understand the drivers of each exchange’s performance in the ranking, an inventory of relevant disclosure policies in each exchange’s home country was also compiled.  A total of 163 disclosure policies were analyzed, 31 of which were implemented by stock exchanges themselves.[5]

Break out discussion: the seven first generation sustainability indicators

As mentioned above, CK Capital’s sustainability disclosure ranking investigates the extent to which the world’s large public companies are disclosing the seven “first generation” sustainability indicators.  These are metrics that are a) broadly relevant for companies across all industries; and b) among the most widely disclosed by the world’s publicly traded companies.  Figure 1 shows the proportion of the world’s ~4,000 ‘large’ companies that disclosed each indicator in 2011, and how each indicator is tethered to financial materiality.[6]


Figure 1: The Seven “First Generation” Sustainability Indicators


First Generation Sustainability Indicator

GRI Indicator

Disclosure Rate, 2011 (↓)

Materiality Driver




Pay equity is an increasingly visible sustainability theme, with tightening rules around workforce and CEO pay disclosure, and greater vigilance of excessive CEO compensation.




The prospect of carbon regulation is leading to a growing monetization of GHG externalities, with the concept of carbon shadow pricing an increasingly utilized accounting tool.


EN3, EN4


Energy use is an important proxy for firm-wide resource use efficiency, and an increasingly important cost centre for companies in many industries.




Water is an increasingly scarce global resource, and a firm’s water use practices can reflect the foresight of its management team.




Waste generated per unit of revenue is an important measure of operational efficiency.

Employee turnover



Low employee turnover is correlated with effective human capital management.

Lost-time injury rate



Workplace health and safety is an increasingly consistent proxy for managerial quality.


Source: CK Capital, the Global Reporting Initiative


Key Findings

The project’s findings are grouped into two categories.  The first set of findings concerns the results of our stock exchange ranking.   The second relates to our review of sustainability disclosure policy mechanisms.  Overall, our analysis reveals a policy archetype that global policymakers – including stock exchanges, government and securities regulators- can follow to maximize the uptake of quantitative sustainability reporting by large listed companies.  


Results – European exchanges dominate, but emerging markets exchanges rapidly closing the ‘disclosure gap’

The BME Spanish exchange, based in Spain, received top billing in this year’s ranking, moving up from 4th position in last year’s assessment.[7]  The top 10 were rounded out by the Helsinki Stock Exchange, the Tokyo Stock Exchange, the Oslo Stock Exchange, the Johannesburg Stock Exchange, the Euronext Paris, the Copenhagen Stock Exchange, the SIX Swiss Exchange, the Athens Stock Exchange  and the Euronext Amsterdam.

It is no surprise to see the strong performance of European stock exchanges. Corporate sustainability reporting has long been encouraged across Europe, with the recent Grenelle II legislation in France the latest in a long line of progressive European disclosure policy.  The European Commission's proposed legislation on non-financial reporting could further enhance the transparency of large European companies on social and environmental matters.[8]

But the real story is the rapid progress of emerging markets-based stock exchanges. While only one emerging markets-based exchange cracked the top 10 in this year’s ranking –the Johannesburg Stock Exchange—we find evidence that a great process of “catch up” is taking place in quantitative sustainability reporting practices across the emerging markets. Our analysis indicates that, as a whole, emerging markets stock exchanges are on track to overtake those based in developed markets by 2015 in terms of the proportion of their large listings that disclose the seven first generation sustainability indicators. 

Sustainability disclosure excellence among emerging markets firms is typified by the Brazilian mining giant Vale SA, India’s Tata Motors and Digi, a Malaysian telecommunications company.  These firms are 3 of only 117 large companies globally –out of a total of 3,972—that currently offer their investors complete ‘first generation’ sustainability reporting. 

Figure 2 segments the 45 exchanges in our study into developed and emerging market categories, and shows the average compound annual growth rate across each group of exchanges for each of the seven first generation indicators on a trailing 5 year (2007-2011) basis.  The data indicate that companies trading in emerging markets –including Brazil, China, Chile, India, Mexico and Singapore—and by extension, their respective stock exchanges, are rapidly closing the sustainability “disclosure gap”.


Figure 2: Compound Annual Growth Rate in First Generation Sustainability Indicator Disclosure, 2007-2011














Source: CK Capital

The relationship between policy and corporate sustainability disclosure – the importance of mandatory, prescriptive and broad policy mechanisms.

Implementing effective sustainability disclosure policies is not an easy task for policymakers.  Sustainability data often falls into a “grey zone” insofar as financial materiality is concerned. This means that many companies can legally circumvent well-intentioned disclosure policies –even, in some cases, mandatory disclosure policies put forward by securities regulators—by invoking the ‘materiality’ principle.[9]

Stock exchanges face an additional burden.  Unlike governments and securities regulators, they increasingly operate as for-profit companies, and are sometimes owned by listed entities.  Many stock exchanges have expressed the legitimate concern that implementing sustainability reporting requirements into their listed standards could discourage future listings.

Perhaps most importantly, a complex, almost overwhelming, set of tools is at the policymaker’s disposal.  Permutations include voluntary, sector-specific disclosure policies, mandatory “all inclusive” policies, the increasingly referenced “comply or explain” model, and policies that use enforcement mechanisms vs. those that do not.   While good work is being done to help policymakers identify best practices,[10] there is a dearth of quantitative evidence to help the global policymakers in this regard.

It is this ‘gap’ that we elected to fill with the policy analysis section of this year’s study.   While based on an admittedly parsimonious framework, our analysis suggests that there are three common characteristics to effective sustainability disclosure policies.  Our analysis suggests that disclosure policies should be mandatory (as opposed to voluntary), prescriptive (as opposed to principles-based) and broad (as opposed to narrow), in terms of the number of sustainability indicators targeted.  We refer to policies that share these three characteristics as ‘super policies’.

Break out discussion: a framework for analyzing sustainability disclosure policies

Figure 3 defines the six characteristics that form CK Capital’s policy analysis tool.

Figure 3: CK Capital’s Policy Analysis Tool





Policy type


Policies that impose a requirement to comply i.e. to disclose the information specified in the policy.


Compliance with the disclosure requirement is optional.

Policy clarity


The policy specifies the categories or specific items to be disclosed.


Policies that only speak of sustainability/CSR reporting as a general requirement.

Policy focus


The policy affects the disclosure of more than 1 first generation sustainability indicator across multiple sectors.


The policy only concerns a single first generation sustainability indicator, or a single industrial sector.


Source: CK Capital


Break out discussion: what does a ‘super policy’ look like?

As mentioned above, super policies in the field of corporate sustainability disclosure are policies that are mandatory in terms of their application, prescriptive in terms of their guidance and broad in terms of their scope.  In Figure 4 we call out several leading examples of super policies around the world.

Figure 4: Examples of Super Policies


Policy name




Affected Stock Exchanges


Grenelle II




Euronext Paris

Grenelle II, which was initiated in 2010 but passed in 2012, makes sustainability reporting for companies with more than 500 employees or more than 100 million Euros in either revenue or assets. For qualifying firms, Grenelle sets disclosure obligations for 42 social and environmental fields. The legislation also requires a third-party to verify the 'extra-financial' information included in the report.  Grenelle II ultimately sets the stage for integrated reporting in France.

Business Responsibility Reports



Securities regulator

Bombay Stock Exchange, National Stock Exchange

Following up on the Indian Government's "National Voluntary Guidelines" published in 2011, the Securities and Exchange Board of India mandated the inclusion of "Business Responsibility Reports" in the Annual Reports of India's 100 largest listed entities based on market capitalisation at both the National Stock Exchange and Bombay Stock Exchange. Business Responsibility Reports include a variety of specific environmental and social indicators, including energy and water use, as well as health & safety data, and metrics around workforce diversity.

Energy Conservation Act




Singapore Exchange

In 2012, Singapore passed the Energy Conservation Act, which requires qualifying companies to report on energy consumption, GHG emissions, energy management strategies and conservation plans.  The Act details a variety of indicators that must be disclosed, thus providing clarity for affected reporting entities.


Figure 5 takes the top 10 exchanges from our stock exchange ranking and breaks them down into two categories: those that are located in countries with at least super policy, and those that are based in countries with no super policies. Nine of the top 10 exchanges are based in countries with at least one super policy in force. [11]

Figure 5: Top 10 Exchanges, by Home Country Policy Environment








Source: CK Capital


Figure 6 performs the same segmentation on the bottom 10 exchanges from our stock exchange ranking.[12] The data show that nine of the 10 bottom performing stock exchanges are based in countries with no super policies. The single exception is the Shenzhen Stock Exchange, which is based in Shenzhen, China. A single ‘super policy’ was found to exist in the Chinese market,[13] although the impact of this policy may be offset by China’s “implementation gap”.[14]

Figure 6: Bottom 10 Exchanges, by Home Country Policy Environment








Source: CK Capital

Taken together, this analysis suggest that sustainability disclsoure excellence is associated with so-called ‘super policies’ – disclsoure policies that are mandatory, prescriptive and broad.  Our data also demonstrate that comparatively poor disclsoure practices are associated with a policy environment characterized by the absence of super policies. 



While more research is needed to fully flesh out the relationship between disclosure policy and disclosure performance, our analysis suggests that mandatory policy instruments that are both prescriptive and broad are most strongly correlated with sustainability disclosure excellence.   Stock exchanges –and indeed policymakers of all description—should consider incorporating these design characteristics into their sustainability disclosure policy program.

The phenomenon of corporate sustainability reporting is here to stay, and demand among institutional investors, asset managers, community groups and other stakeholders for quantitative corporate sustainability data is only going to increase going forward.  Stock exchanges should strategically review how they can best align themselves with this trend.


[1] All three exchanges are members of the World Federation of Exchanges. 

[2] Sustainable Stock Exchanges is an initiative co-convened by the United Nations (UN)-supported Principles for Responsible Investment, the UN Conference on Trade and Development, the UN Environment Programme Finance Initiative, and the UN Global Compact.  It is a peer-to-peer learning platform for exploring how exchanges, in collaboration with investors, regulators, and companies, can enhance corporate transparency – and ultimately performance – on ESG (environmental, social and corporate governance) issues and encourage sustainable investment. For more information, see

[3] As of September 19th, the agenda includes a Sustainability panel from 14:00 to 15:00 on October 30th.  For more information, see

[4] This is to say that 2011 sustainability data is the most recent ‘complete’ sustainability data set For instance, a non-trivial proportion of public companies that report sustainability data have not yet disclosed their data for 2012.

[5] Of the remaining 132 policies, 110 were implemented by Government departments (such as a federal Ministry of the Environment, etc.), 14 by industry associations and 8 by securities regulators (such as the US Securities and Exchange Commission).

[6] Large companies defined as those with a market capitalization in excess of $US 2 B. For the purposes of this project, a total of 3,972 large companies were identified across the global equity market.

[7] The BME Spanish exchanges consist of the Madrid Stock Exchange, the Valencia Stock Exchange, the Bilbao Stock Exchange and the Barcelona Stock Exchange. 

[8] For a review of the proposed legislation and stakeholder consultation, see

[9] According to a recent study, almost 75 percent of U.S. publicly traded companies are ignoring a three-year-old Securities and Exchange Commission requirement that they inform investors of the risks that climate change may pose to their bottom lines.  For more information, see

[11] The exception is the Athens Stock Exchange (Greece).

[12] The bottom 10 exchanges were the NASDAQ, the Indonesia Stock Exchange, the Shenzhen Stock Exchange, the Philippine Stock Exchange, the Bangkok Stock Exchange, the Kuwait Stock Exchange, the Saudi Arabia Stock Exchange, the Lima Stock Exchange, the Qatar Stock Exchange and, in 45th position, the Tel Aviv Stock Exchange.

[13] The policy in question is the set of Social Responsibility Guidelines published by the Shenzhen Stock Exchange in 2006.

About Doug Morrow

Doug Morrow is Managing Director at Corporate Knights Capital. He has seven years of experience in the investment research and consulting industries, with a focus on sustainable investment product development. He helped bring to market the world's first sustainable smart beta equity strategy (2013). He helped develop the world's first carbon tilted corporate bond index (2007) and long/short equity product using corporate sustainability performance data (2006). He has consulted for the International Finance Corporation, the Inter-American Development Bank and The Blackstone Group. He authored the 2006 Global FT500 Carbon Disclosure Project (CDP) Report, as well as the 2012 Sustainable Stock Exchange's Global Benchmarking Study. His work has been cited in the New York Times, Business Week, Environmental Finance and The Globe and Mail. Doug is a member of the United Nation’s International Standards of Accounting and Reporting (ISAR) Group of Experts on Sustainability Reporting and the Association of Chartered Certified Accountants (ACCA) Global Form for Sustainability.