The WFE convenes ESG leaders of exchange industry at TMX Group

 

CONFERENCE RECAP

The WFE convenes ESG leaders of exchange industry at TMX Group

London, 14 June 2024 – The World Federation of Exchanges (The WFE), the global industry association for exchanges and clearing houses, convened key stakeholders across the finance industry - from our exchange members to issuers and investors - at TMX Group in Toronto last week to discuss the key ESG issues within the exchange and market infrastructure space.

With our dedicated Sustainability Working Group, which gathers Chief Sustainability Officers and ESG experts from across the 250 market infrastructures that sit within our membership, The WFE has led our industry’s efforts on these matters for over a decade and continues to be the forum where industry consensus on all regulatory and public policy is shaped.

The conference focused on the following two themes:

1. Reporting - exploring aspects such as sustainability reporting for SMEs, supply chain reporting and nature reporting;

2. Transition finance and frameworks to support this - notably transition planning and third-party assessment of such plans and the role of transition taxonomies.

Nandini Sukumar, CEO of the World Federation of Exchanges said, “Exchanges sit at the core of the financial market, playing a vital role in creating the vehicles for capital to be deployed into sustainable development. Exchanges are about collaboration and teamwork, and this conference further builds on our momentum in this area. We will continue to drive progress and demonstrate the collective commitment of exchanges in supporting the capital requirements needed for the green transition.”

Key highlights:

John McKenzie, The WFE Working Committee Chair and CEO of TMX Group, focused his opening remarks on the role exchanges play to support all market participants as they evolve their sustainability goals and practices, including “advocating for climate and sustainability-related disclosures that provide the investment community with consistent, robust and above all else, useful information for investment decision-making.” He also highlighted that capital markets have a critical role to play in financing a more sustainable future: “We’ll need significant investment – in innovation, transformation and growth – and capital markets are a crucial source of that financing.”

Boon Chye Loh, Chair of the WFE and CEO of SGX Group, in his opening remarks highlighted the increasing efforts by governments to mandate disclosures, such as in Singapore. He said that these changes hold the promise of enhancing the ability of investors to make comparable and informed decisions around investments and enable them to channel investment where it is needed most. For issuers it provides an opportunity to prepare for the risks involved for themselves and their supply chain, and to add credibility to their transition plans, helping them to adapt in a timely manner and to seize a comparative advantage by doing so. He stressed that exchanges can play an important role in helping provide know-how, advice and share solutions that others are adopting globally, as well as helping issuers anticipate the changes that will come to their shores, as a result of regulatory changes abroad; or in supporting the dialogue issuers will have with their stakeholders. The Chair concluded that “the opportunities for exchanges to support the economy and support issuers in this journey will cement our roles both nationally and internationally as key players in the ecosystem”.

Kevan Cowan, Chair of the Board of Directors of the Ontario Securities Commission, delivered a keynote address in which he stated that two thirds of Canadian listings are considered SMEs. Praising the WFE 10^th Annual Sustainability Survey, Cowan noted that the results showed a clear demand for sustainability-focused information which is in line with what he is seeing in the Canadian market. Cowan noted that, for SMEs, the focus is on providing decision-useful information for investors. He also flagged the Canadian Sustainability Standards Board’s recently launched consultation on sustainability reporting for Canadian companies.

One panel looked at reporting regimes for SMEs in which Sarah Keyes, CEO of ESG Global Advisors, warned of putting a high regulatory burden on SMEs, as they are key in Canada’s economy. She noted that ESG reporting is a performance issue, not just a regulatory issue, and that the cost of inaction needs to be balanced with burden of reporting. Chris Birkett, Vice President and Head of TSX Listings at TMX Group, added that the role of exchanges is not only to facilitate access to capital, but also to provide education for issuers and ensure they have a voice. Jeff Killeen, Director of Policy and Programs at PDAC, spoke about how SMEs or companies in the Canadian Mineral Sector, for example, may not meet the thresholds for required reporting. Or they may not fit into the more standardised global reporting frameworks due to the scale of operation or because the activities they take on don’t produce the relevant data. In these scenarios he maintained that, though it might not be a requirement, it is best practice for explorers to be transparent with stakeholders, which is why PDAC produces guidelines and tools to help its members’ disclosures.

Following panels looked at supply chain decarbonization. Dr. Güzhan Gülay, Executive Vice President of Borsa Istanbul, explained how an exchange can add value to a responsible supply chain, outlining in particular the role that the exchange has played in gold markets in Istanbul. He implored non-EU regulation to harmonise with EU regulations and regulations like responsible supply chains for minerals and regulations for carbon emissions. He also added that Exchanges should be more involved in supply chain practices like carbon markets. Rosalind Share, AVP of Sustainability Research and Insights at Mackenzie Investments, said that the WFE’s conference is an “opportunity to truly partner in building a just, more prosperous world”. She also commented that, “we as investors hope to spur action, we’re starting by asking for sustainability-related disclosures that we need to serve our investors better”, and that “regulators and exchanges play a huge role in helping to protect not just the institutional investor, but the customers whose capital we are stewarding”.

 

Elizabeth Aceituno, Finance Private Sector Lead at the WWF, delivered a presentation on the importance of including nature in all financial decision making leveraging on studies that show how our economy relies on nature and biodiversity. She outlined the encouraging progress made to develop an internationally accepted nature related disclosures framework with the work done by the Taskforce of Nature-related Financial Disclosures (TNFD). This provides a valuable reporting framework on nature and biodiversity that is, most importantly, compatible with other reporting standards in identifying nature related risks and opportunities. 

 

Aceituno also outlined how taxonomies that include nature are critical and stated that a good taxonomy should have: 

•    Clear environmental objectives including nature (not simply climate mitigation)

•    A well-defined scope of economic activities for which environmental criteria have been developed. 

•    Robust environmental performance criteria (metrics and thresholds essential to evaluate the impact)

•    They should be dynamic and forward looking, based on best available science and technology neutral. 

 

Interoperable taxonomies would really be key and common standards and meeting the above principles would support this. Aceituno also urged exchanges to think about how to encourage nature reporting amongst issuers. She also outlined the importance of considering nature and biodiversity in companies’ transition plans as being critical. Nathan Maycher, Director of Climate, Disclosure & Integration at Suncor, proposed that we should expect nature to have a big part in future discussions.

Panellists shared insights and tips for integrating new best practices into their reporting. Gabriela Figueiredo Dias, IESBA Chair and Co-CEO of IFEA, explained why complying with strong ethics and independence standards, such as those contained in the IESBA Code, can serve as a robust and consistent global baseline for all sustainability and financial reporting. She stressed that an ethical framework is crucial to the preparation of high-quality information to enable investor protection by helping to avoid situations like legal battles, reputational risks, or financial erosion. She also stated that all preparers of sustainability information, whether they be accountants or not, should comply with the fundamental ethical principles of the IESBA code when conducting their work. Alex Matturri, CBOE Board Member, commented that an organisation needs to have the right talent internally to capture information. He said it is important to consider ways to collect data for reporting as well as the various stakeholders with interest in your reporting e.g. shareholders or customers. Temi Popoola, Group MD and CEO of the Nigerian Exchange Group, cautioned that exchanges, by necessity, walk a tightrope: on the one hand raising the standard of disclosures amongst issuers and ensuring they are comprehensive, whilst on the other, needing to recognise that if disclosures are too burdensome, it may cause delistings; however he urged issuers to see exchanges as a stakeholder or a partner to collaborate with issuers in this area.

The afternoon was partially devoted to transition finance. Pratima Divgi, Head of Capital Markets for CDP North America, set the scene with a keynote speech which focused on the need for transition plans; the challenges issuers often face in developing credible climate transition plans, and the integral role of stock exchanges in driving transparency and efficiency in transition finance.

Our CEO, Nandini Sukumar, moderated the final panel which looked at the challenges in transition planning for issuers and the benefits gained from the process, as well as the role of third-party assessment in adding credibility and encouraging uptake amongst issuers in developing transition plans. Alyson Slater, Managing Director, Head of Sustainable Investment, Public Markets at Manulife Investment Management, held that “a transition plan is not a separate thing from business plan”, and stated that, as an asset manager, clients are often asking for low carbon products or Paris-aligned funds, but they cannot provide that without underlying information from issuers. 

You can see the full programme of the event here and the playback of the meeting is available now in the WFE member portal. Many speakers have authored articles for the next edition of The WFE’s Focus Magazine.

The views of the panellists expressed are those of the speakers and do not necessarily reflect the views or positions of any entities they represent.

- ENDS - 

Media:

Cally Billimore

Manager, Communications

Email: [email protected]

Phone: +44 7391 204 007

Twitter: @TheWFE

Edelman Smithfield (PR)

Email: [email protected]

Phone: +44 7813 407 665

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, 37% are in Asia-Pacific, 43% in EMEA and 20% in the Americas. WFE’s 57 member CCPs collectively ensure that risk takers post some $1 trillion (equivalent) of resources to back their positions, in the form of initial margin and default fund requirements. WFE exchanges are home to 59,400 listed companies, and the market capitalization of these entities is over $122.94 trillion; around $162.04 trillion (EOB) in trading annually passes through WFE members (at end 2021).

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.

Click here to view the WFE’s website, sign up for the industry’s Focus magazine or to visit the WFE on LinkedIn. For Twitter see: @TheWFE

---