The World Federation of Exchanges (The WFE) has published a revised edition of its Environmental, Social & Governance (ESG) Guidance & Metrics.
Developed by the WFE’s Sustainability Working Group and first published at the end of 2015, the WFE’s ESG Guidance & Metrics are designed to provide a reference point for exchanges looking to introduce, improve or require ESG reporting in their markets. Since its publication, over 35 stock exchanges around the world have issued or committed to issuing ESG reporting guidance for their listed companies.
The revised version seeks to update the 2015 document by:
• Recognising intervening sustainability developments, such as the UN Sustainable Development Goals and the Task Force on Climate Related Financial Disclosures (TCFD) Recommendations;
• Incorporating feedback received from investor groups on the initial WFE Guidance & Metrics document; and
• Adjusting the metrics based on implementation experience in certain markets:
- There are now 30 baseline metrics (33 in 2015) that form the revised guidance, covering indicators across a range of ESG categories, such as: emissions intensity; climate risk mitigation; gender pay ratio; human rights; ethics and anti-corruption; and disclosure practices.
Other notable revisions include:
• Specifying that investors are the target audience for listed company ESG disclosures. Exchanges should therefore focus on ensuring the availability of investor-relevant, decision-useful information.
• Providing greater guidance around ESG report preparation, across four key areas:
- Governance/responsibility and oversight: Reporting issuers could include a board statement outlining how the company determines ESG issues; how they are embedded in the firm’s strategic direction; and how progress is reviewed and measured.
- Clarity of purpose/clear link to business value: Issuers should articulate how the ESG issues they have identified link back to value creation/destruction.
- Materiality: Issuers should provide investors with information about their materiality determination process.
- Quality/frequency of reporting: Issuers should ensure reporting is accurate; aligns to one of the internationally recognised reporting standards; and is timely.
The WFE has published a range of research material in the sustainability space, including: the WFE Annual Sustainability Surveys in 2016, 2017 and 2018; and The Role of Stock Exchanges in Fostering Economic Growth and Sustainable Development with UNCTAD in 2017.