World Federation of Exchanges’ Ninth Sustainability Survey Reveals Industry Reached ESG Milestone
Every exchange participated in at least one ESG initiative and WFE Sustainability Principle
London, June 12, 2023 – The ninth Annual Sustainability Survey published by the World Federation of Exchanges (WFE), the global industry group for exchanges and central clearing counterparties, has revealed that the industry has reached a milestone in collective efforts to achieve sustainability.
The new data indicates that this year – for the first time since the surveys began – every exchange that responded participated in at least one ESG initiative and engaged in at least one WFE Sustainability Principle.
The report also shows that the number of exchanges reporting engagements in at least a dozen of the listed ESG initiatives rose from eight last year to 16 this year, and two exchanges engaged in all 14 initiatives. A further 12 exchanges also reported having put in place net-zero targets.
There was also an annual increase in the average number of initiatives implemented per exchange from 8.4 to 9.2.
Exchanges have continued to adopt the WFE’s Sustainability Principles – with 70% of survey respondents implementing initiatives that corresponded to all five principles.
Nandini Sukumar, Chief Executive Officer of the WFE, said: “This is a real milestone, as our survey reveals widespread adoption among exchanges of both the WFE Sustainability Principles and ESG initiatives. The industry has also come together to create the Green Equity Principles, the first exchange-wide agreement on what is green. We will continue as an industry to champion ESG in financial markets as we make the crucial move towards a sustainable and inclusive global economy.”
The survey found that, of the 58% of exchanges reporting their own carbon emissions, 68% cover Scopes 1, 2 and 3, which reflects a comprehensive approach to measuring and managing their carbon footprint, considering both direct and indirect emissions throughout their value chain.
The main challenges reported by exchanges were external factors such as limited resources for implementation, unreliable ESG data, and a lack of standardised reporting frameworks for promoting sustainability. The most frequently reported motivation for ESG engagement was sustainability concerns and opportunities for business expansion.
The report reveals that green bonds persist as the most popular ESG product. Three exchanges have also introduced green equity, relying on either their own standards or those established by national regulators.
Member highlights from the report include:
Borsa İstanbul (BIST), which has a history of creating sustainability-themed indices, introduced the Sustainability 25 Index last year, comprising companies with exceptional sustainability performance, market capitalisation, and liquidity.
Hong Kong Exchanges and Clearing Limited (HKEX)'s Sustainable and Green Exchange (STAGE) welcomed more sustainable and green finance products this year and now features data and information on 100+ green, social and sustainability (GSS) bonds, as well as ESG ratings for more than 720 companies. The platform remains a central hub for data and information on sustainable and green finance products in Asia.
Several South African financial institutions have listed green, social, and sustainability-focused bonds and ETFs on the Johannesburg Stock Exchange (JSE). FirstRand Bank and Nedbank are funding green and eco-friendly projects, while Standard Bank aims to finance affordable housing for female borrowers.
With the growing investor interest in ESG, the Korea Exchange (KRX) is increasing its range of ESG products. It has introduced a sustainability-linked bonds segment to overcome the limitations of existing Socially Responsible Investment (SRI) bonds and to back companies' sustainability initiatives.
By the end of 2022, the China Securities Index, a Shanghai Stock Exchange (SSE) subsidiary, had released 122 ESG-related indices. There were 77 products tracking these indices with assets under management (AUM) over RMB 100 billion (USD 14.4 billion). The SSE has also supported low-carbon industries through equity financing, with eight new energy, energy-saving, and environmental protection sector companies listed on the SSE STAR Market in 2022.
Singapore Exchange (SGX) launched the Sustainable Fixed Income Initiative (SFI Initiative) in November 2022. SFI Initiative is designed to help investors identify green, social and sustainable fixed-income securities that meet recognised standards.
A total of 54 exchanges participated in this year’s survey, including five derivatives-only exchanges. You can download a copy of the report here.
About the World Federation of Exchanges (WFE)
Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 34% are in Asia-Pacific, 45% in EMEA and 21% in the Americas. WFE’s 91 member CCPs collectively ensure that risk takers post some $1.3 trillion (equivalent) of resources to back their positions, in the form of initial margin and default fund requirements. WFE exchanges are home to 57,656 listed companies, and the market capitalization of these entities is over $101.17 trillion; around $146.29 trillion (EOB) in trading annually passes through WFE members (at end 2022).
The WFE is the definitive source for exchange-traded statistics and publishes over 350 market data indicators. Its free statistics database stretches back more than 40 years and provides information and insight into developments on global exchanges. The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities’ goals of ensuring the safety and soundness of the global financial system.
With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policy makers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system.