Stock exchanges poised to introduce sustainability reporting standards
The London Stock Exchange (LSE) is among 21 of the world's stock exchanges that look set to introduce sustainability reporting standards before the end of 2016, according to experts.
The United Nations Conference on Trade and Development (UNCTAD), which co-organises the Sustainable Stock Exchange (SSE) initiative, has received confirmation from 21 international stock exchanges that they will introduce new guidelines either this year or within the first quarter of next year.
Seventeen stock exchanges have already recommended their listed companies to report on environmental, social, and governance (ESG) issues. Just two stock exchanges – Norway’s Oslo Børs and Spain’s Bolsas y Mercados Españoles – have implemented the new standards on sustainability reporting so far, but more are expected to introduce new standards before the end of the year after posting draft guidelines on their websites.
“Sustainability reporting has come of age,” UNCTAD director of investment and enterprise James Zhan said.
The SSE scheme encourages companies to act more sustainably. Launched by UN Secretary-General Ban Ki-moon in 2009, the initiative now includes over 60 stock exchanges, representing more than 70% of listed equity markets and some 30,000 companies with a market capitalization of over $55trn.
Zhan said the SSE initiative had helped spread corporate sustainability reporting, by distributing model guidelines for use by the stock exchanges themselves and their listed members.
Anthony Miller, UNCTAD’s SSE initiative coordinator, added: “Market expectations are shifting quickly and we see more and more stock exchanges viewing sustainability reporting as necessary and inevitable. Those expectations create their own momentum.”
The UK’s LSE is one of 23 exchanges that had committed to introduce new standards on sustainability reporting in 2016. The LSE, which has 2,671 listed companies, was recently included in the CDP Carbon Disclosure Leadership Index (CDLI) for the second year running, typifying of a green transformation of the market.
LSE’s latest CSR report highlights a commitment to the long-term sustainability and profitability of the business, which has achieved its overall 2020 target of a 20% reduction in tCO2e/£m revenue, and a 20% reduction in total waste produced against a 2013 baseline. LSE has set environmental targets for the next financial year that include energy, water, waste and travel, including a new paper consumption target, and a plan to set new long-term science-based targets in 2016.
Aviva Investors and Corporate Knights’ annual benchmarking report, which compares the quality of ESG reporting by issuers across 45 different exchanges, shifted LSE from 11th in 2013 to fifth position in 2015, with LSE ranking highest for any of the larger exchanges.
The number of companies reporting their environmental performance is also gradually rising, as investors, campaign groups and consumers continue to pile pressure on firms to accelerate progress towards ambitious climate goals.
The Reporting Matters 2016 report released in October by the World Business Council for Sustainable Development (WBCSD) and consultancy firm Radley Yeldar suggests an overall improvement in the quality of sustainability reporting among big businesses. According to the report, nearly a third of world-leading companies are now implementing the Sustainable Development Goals (SDGs) framework into their sustainability and integrated reports, as the push to mainstream non-financial reporting continues to gain momentum.
Some of the stalwarts of sustainability reporting – such as Virgin Media and Heineken – are beginning to look beyond traditional methods of disclosure to drive stakeholder engagement with their CSR reports. However, the gap between corporations leading the way on sustainable business practices and those that are simply complying with legislation for their CSR programmes is “as large as ever”, according to research into the sustainability reporting performance of the UK’s top 100 listed companies.
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