Posts

Stock Exchanges Adopt Sustainability Reporting

newyorkstockexchange

Trading floor at the New York Stock Exchange, May 15, 2014 (Photo by Scott Beale / Laughing Squid ) Creative Commons license via Flickr

By Sunny Lewis

GENEVA, Switzerland, December 13, 2016 (Maximpact.com News) – As many as 21 more of the world’s stock exchanges could introduce sustainability reporting standards before the end of the year, bringing the total number to 38, says an official with the United Nations Conference on Trade and Development .

Seventeen stock exchanges already recommend that their listed companies report on environmental, social, and governance, known as ESG, issues.

zahnjames

James Zhan, director of investment and enterprise, UNCTAD (Photo courtesy UNCTAD) Posted for media use.

And James Zhan, director of the Division on Investment and Enterprise at UNCTAD, which co-organizes the UN’s Sustainable Stock Exchanges (SSE) initiative, said that 23 stock exchanges have committed to introduce new standards on sustainability reporting in 2016.

Just two have implemented so far, but more are expected to introduce new standards before the end of the year or early in 2017, he said.

The upsurge in sustainability reporting standards follows the launch of the SSE Model Guidance on Reporting ESG Information to Investors.

Twenty-one stock exchanges have confirmed to us they will introduce new guidelines either this year or within the first quarter of next year, and we know that many of them are close because they have posted draft guidelines on their websites for comment and discussion,” Zhan said.

Sustainability reporting has come of age,” he said, adding that the UN and nongovernmental organizations are no longer the only ones to advocate sustainability reporting and that “the markets themselves are demanding it.

In a newly published biennial report “2016 Report on Progress” on the progress made by Sustainable Stock Exchanges, SSE, the authors examined the environmental, social, and governance practices of 82 stock exchanges and found that exchanges are increasingly taking actions that contribute to the creation of more sustainable capital markets.

The report was prepared for the fifth SSE Global Dialogue held in September in Singapore. Representatives from 16 countries, including stock exchange chief executives, institutional investors and companies, senior government policymakers and United Nations representatives gathered to discuss the theme, “A New Global Agenda.

One development in the new agenda is the number of exchanges now partnering with the SSE initiative. Fifty-eight stock exchanges, representing over 70 percent of listed equity markets, have made public commitments to advancing sustainability in their markets and are now official SSE Partner Exchanges.

Market transparency is gaining in acceptability too. Twelve exchanges currently incorporate ESG reporting into their listing rules and 15 provide formal guidance to stock issuers.

The progress of SSE’s campaign to encourage exchanges to issue guidance signals that the industry is ready to take the lead when presented with practical opportunities to develop more sustainable markets.

Another significant development is the growth of green finance. Green bond listings grew considerably and there is increasing interest among equity investors in issues like stranded assets and carbon risk.

The Luxembourg Stock Exchange now lists 110 green bonds and represents half of all listed green bonds globally.

Today 11 stock exchanges offer green bond listings, demonstrating that exchanges are already supporting the transition to a green economy and there is room for further growth.

ESG indices remain the most popular sustainability instrument among exchanges, with 38 of 82 exchanges providing them.

Upon joining the ESG guidance campaign in September 2015, Oscar Onyema, CEO of the Nigerian Stock Exchange, said, “The Nigerian Stock Exchange is using its unique platform to advocate for the adoption of global corporate governance standards and sustainable business practices. We are committed to developing principle-based sustainability reporting guidelines and a roadmap that will inspire sustainability imperatives in the Nigerian capital market.

Looking at the policy landscape, many governments, too, are encouraging corporate disclosure of ESG factors, with 30 of the largest 50 country economies having at least one regulation on disclosure of ESG factors in place.

Government involvement on the investment side is less developed, with eight of the 50 countries implementing an investor stewardship code that addresses ESG factors.

Despite many reasons to be optimistic, the SSE’s data show that more action is needed if stock exchanges are going to play an important role in promoting the reorientation of financial markets to support the Sustainable Development Goals.

By reporting on sustainability issues, companies tend to act more sustainably too, Zhan said. They may have an incentive to do so, since analysts increasingly see a positive correlation between sustainable performance and strong financial performance too.

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.

The SSE initiative works to “advance sustainability” in the markets. It is organized by UNCTAD, the United Nations Global Compact, the United Nations Environment Programme Finance Initiative (UNEP-FI) and the Principles for Responsible Investment.

The private sector is seen as critical to achievement of the UN’s Sustainable Development Goals , and the SSE initiative is viewed as an important channel to get the private sector more involved in accomplishing these goals.

Launched by UN Secretary-General Ban Ki-moon in 2009, the SSE initiative now includes 58 stock exchanges, representing more than 70 percent of listed equity markets, and some 30,000 companies with a market capitalization of over US$55 trillion.

The SSE initiative was built on the demand from exchanges for a place to come together with investors, companies and policymakers to share good practices and challenges in a multi-stakeholder environment.

Since 2012 when the first five stock exchanges – BM&FBOVESPA in São Paulo, Brazil; Borsa Istanbul; Egyptian Exchange (EGX); Johannesburg Stock Exchange (JSE); and Nasdaq – made a public commitment to advancing sustainability in their market, the initiative has grown into a global partnership platform including most of the world’s exchanges.

Through the SSE, exchanges have access to consensus and capacity building activities, guidance, research and other support to assist in their efforts to contribute to sustainable development.

Market expectations are shifting quickly and we see more and more stock exchanges viewing sustainability reporting as necessary and inevitable,” said Anthony Miller, UNCTAD’s SSE initiative coordinator. “Those expectations create their own momentum.”

The report concludes with recommendations for exchanges that range from introducing ESG reporting guidance to promoting gender-diverse boards to listing green bonds.

By putting the recommendations into action, exchanges can take leadership roles in creating more stable capital markets and a sustainable society.


Featured image: Nasdaq displays the SSE logo in Times Square, New York City, March 2016 (Photo courtesy UNCTAD) Posted for media use

Billboard- 970x250-min-min

Become part of Maximpact’s consulting network join consultants from all around the world covering over 20 sectors of focus within sustainability and impact.

 

Green Grow the Climate Awareness Bonds

By Sunny Lewis

LUXEMBOURG, October 29, 2015 (Maximpact News) – The European Investment Bank is the first issuer to link its individual green bonds to the projects they finance for the sake of transparency and accountability ahead of the Paris climate talks.

As the planet warms, growing cities and developing countries need airports, roads, buildings, water systems and energy generation that can withstand rising temperatures and extreme weather.

Green bonds, called Climate Awareness Bonds or CABs, are a new and increasingly popular source of climate-friendly funding for these expensive projects.

Green bonds were created to increase funding by accessing the $80 trillion bond market and expanding the investor base for sustainable projects. They are dedicated exclusively to climate mitigation and adaption projects, and other environmentally beneficial activities.

The EU’s nonprofit long-term lending institution, the European Investment Bank (EIB), the world’s largest issuer of green bonds, has just announced that it is enhancing the transparency of its reporting on Green Bonds by showing bondholders precisely what their money does.

The bank is going this direction to be in step with the Paris Climate Summit set for November 30 through December 11. There, world leaders will sign a legally-binding universal agreement to limit global warming to 2 degrees Celsius above pre-industrial levels.

Bertrand de Mazières, director general of finance, European Investment Bank, said, “Ahead of the Paris climate conference, COP 21, EIB is supporting EU’s leadership in climate policy through innovation in the green bond market.”

DeMazieres_Bertrand

“Green bond issuance has grown substantially, and has the potential to contribute significantly to addressing the 2 degree Celsius target,” said de Mazières.

Transparency and accountability are key themes of the European Union’s position for the Paris climate conference, as adopted by the EU Council on September 18.

“The Paris Agreement must provide for a robust common rules-based regime, including transparency and accountability rules applicable to all Parties…” the EU Council declared.

In harmony with this declaration, earlier this month the EIB extended its transparency effort by reporting on the allocations of proceeds from individual CABs to individual projects, beginning with allocations made in the first half of 2015.

De Mazières explained why, saying, “Granular transparency on the allocation of the CAB-proceeds helps this process by bringing investors more precise insights and promoting best practice.”

The disclosure of the allocation of individual CAB-proceeds to individual projects establishes a direct link between the two.

EIB can deliver this level of information due to an upgrade of its internal procedures and IT-infrastructure following extensive due diligence in 2014 and 2015.

Today, the bank records CAB-eligible disbursements and allocates CAB-proceeds to them on a daily, first-in first-out basis.

This enables detailed monitoring and reporting of allocations, and helps to complete the set of information available to investors.

Eila Kreivi, EIB’s director and head of Capital Markets, said, “Investors are increasingly eager to receive clear information on the use of proceeds and the impact of eligible projects. EIB’s launch of detailed reporting in these areas this year has established an important reference.”

“Transparent management and reporting are essential to further grow the green bond market,” she said. “At the same time, one must be careful not to overload issuers with administrative hurdles. Striking the right balance will be a key challenge for the market.”

EIB’s first Climate Awareness Bond pioneered the green bond segment in 2007 and the EIB is the largest issuer of Green Bonds to date.

In September 2014, together with other multi-lateral development banks, the EIB committed to maintaining a developmental role to spur further sustainable growth of the green bond market.

In response to a recommendation in the Green Bond Principles “to help establish a model for impact reporting that others can adopt and/or adapt to their needs,” the African Development Bank, International Bank for Reconstruction and Development and the International Finance Corporation (IBRD) have joined EIB in a first harmonization proposal for bonds that fund renewable energy and energy efficiency projects. It is now being circulated for discussion.

Meanwhile, the EIB is popularizing its CABs across the world, entering the Canadian market for the first-time this week.

The Climate Change Support Team, working for United Nations Secretary General Ban Ki-moon has described green bonds as very attractive to institutional investors, with demand for green bonds much larger than the supply.

EIB’s issuance of €2.7 billion equivalent in Green Bonds this year to date has brought total CAB issuance to over €10 billion and confirms EIB’s position as the world’s largest issuer of Green Bonds.


Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Featured image: shutterstock – royalty-free stock images
Slide Show images: a) Gemasolar, a 15 MW solar power tower that uses molten salt for receiving and storing energy, is located in the city of Fuentes de Andalucia, Seville, Spain. (Photo by Markel Redondo/Greenpeace under creative commons license via Flickr). b) Wind turbines generate electricity at Europoort, an area of the Port of Rotterdam and the adjoining industrial area in The Netherlands.  (Photo by Frans de Wit under creative commons license via Flickr)
Image 01: Bertrand de Mazières, director general of finance, European Investment Bank (Photo by Crédit Agricole, sometimes called the Green Bank, a French network of cooperative and mutual banks)

Financing Sustainable Development: a ‘Quiet Revolution’ Underway

KimJimLimaPointing

By Sunny Lewis

LIMA, Peru, October 13, 2015 (ENS) – The world’s leading development banks Friday pledged to boost climate finance by committing $100 billion a year by 2020 to help developing countries mitigate and adapt to a warming planet.

At the International Monetary Fund-World Bank Annual meetings held in Lima October 9-11, bankers explored exactly what financial support is required to keep the planet from tipping into climate catastrophe.

In Lima, they were offered the results of a two-year-long inquiry conducted by the UN Environment Programme summarized in a new report, “The Financial System We Need.”

The UNEP Inquiry  found that “a quiet revolution” is happening right now.

World Bank Vice President and Special Climate Envoy Rachel Kyte called the changes “a new generation of policy innovations that aim to ensure the financial system serves the needs of inclusive, environmentally-sustainable, economic development.”

Financial policymakers and regulators are now integrating sustainable development into financial systems to make them respond to a 21st century facing rising temperatures and a burgeoning population in need of clean energy and clean water.

UNEP Executive Director Achim Steiner said, “UNEP’s Inquiry has for the first time compiled and analyzed inspiring initiatives from across the world that seek to better align the financial system with sustainable development, showing that there is much to be learnt from the developing world.”

SteinerAchim
Image: UNEP Executive Director Achim Steiner (Photo courtesy UN Environment Programme)

The inquiry documented an upwelling of sustainable development momentum driven by developing and emerging nations including Bangladesh, Brazil, China, Kenya, and Peru, championed by France and the United Kingdom.

The UNEP Inquiry reports that, “Amplifying these experiences through national and international action could channel private capital to finance the transition to an inclusive, green economy and support the realization of the Sustainable Development Goals.”

These 17 goals , adopted by the UN General Assembly in September, range from ending poverty and hunger, ensuring clean water and sanitation for all, urgent action to control climate change, and responsible use of forests and oceans, to making cities safe and resilient, and ensuring gender quality and justice across the world.

The UNEP Inquiry into the Design of a Sustainable Financial System was established in January 2014 with a mandate to advance policy options linking the financial system with sustainable development.

Backed by a high-level Advisory Council of financial leaders, the Inquiry has looked in-depth at practice in more than 15 countries related to banking, bond and equity markets, institutional investment, insurance and monetary policy.

To reach its findings, the Inquiry worked with central banks, environment ministries and international financial institutions as well as major banks, stock exchanges, pension funds and insurance companies.

The Inquiry’s report presents a Framework for Action with a toolbox of 40 different measures, a set of five policy packages for banking, bond and equity markets, institutional investors and insurance, and a set of 10 next steps to promote international financial cooperation.

IMFLagardeChristine

Murilo Portugal, the president of Brazil’s banking association, FEBRABAN, and a member of the Inquiry’s Advisory Council, said Friday, “The Inquiry has catalyzed awareness of the need to align financial markets to sustainable development, and highlighted practical pathways to improving such an alignment.”

FEBRABAN offers three key insights based on the UNEP report:

  • Financing for sustainable development can be delivered through measures focused on the financial system, as well as the real economy.
  • A growing number of policy innovations have been introduced by both developing and developed countries, demonstrating how the financial system can be better aligned with sustainable development.
  • Systematic national action can now be taken to shape a sustainable financial system, informed by current trends and complemented by international cooperation.

Bankers and financiers in many countries are already moving towards sustainable development. The UNEP Inquiry found over 100 measures that are already in place, including:

  • In Peru, new due diligence requirements have been introduced for banks to help reduce social and environmental externalities.
  • In China, a portfolio of 14 distinct recommendations advances China’s green financial system, covering information, legal, institutional and fiscal measures.
  • Kenya has advanced financial inclusion through scaling of mobile-based payment services and is now also supporting green financing.
  • In France, new disclosure requirements on climate change have been introduced for institutional investors as part of the country’s energy transition legislation.
  • The United States is emphasizing fiscal measures to accelerate green finance and has made advances in disclosure and investor action.

Naina Kidwai, chairman of India’s branch of British banking and financial services company HSBC and director, HSBC Asia Pacific, is a member of the Inquiry’s Advisory Council.

Kidwai found the UNEP report useful, saying, “Too often the financial system and sustainable development have been tackled in separate silos. The Inquiry has shown for the first time how to systematically connect the dots, demonstrating practical ways in which we can mobilize the scale of capital needed in emerging markets, particularly for clean energy and clean water.”

Speaking in Lima, Yi Gang, deputy governor of the People’s Bank of China, said the UNEP Inquiry report “delivers a vision of embedding sustainable development into the core of financial and capital markets.”

“It should be a very useful guide and reference for many governments, financial institutions and international organizations in thinking about how to advance green finance,” said Yi.

The core definition of sustainable development is, “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

It was first defined in the 1987 publication “Our Common Future,” by the UN World Commission on Environment and Development, also known as the Brundtland Report after former Norwegian Prime Minister Gro Harlem Brundtland, who chaired the commission.

Brundtland saw that the many crises facing the planet are interlocking elements of a single crisis of the whole and saw the need for the active participation of all sectors of society in sustainable development consultations and decisions.

These elements stand forth again nearly 30 years later in the UNEP Inquiry report presented to the World Bank and IMF fall meeting in Lima.

Dr. Atiur Rahman, governor of the Bangladesh Bank, and a member of the UNEP Inquiry’s Advisory Council, said in Lima, “For the first time, the Inquiry has mapped the many innovations around the world seeking to ensure that the financial system serves its purpose of financing inclusive, green development.”


Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Featured image: Bank governors and finance ministers pose for a photograph at the IMFC meeting October 9, 2015 during the 2015 IMF/World Bank Annual Meetings in Lima, Peru. (Photo by Stephen Jaffe courtesy IMF)
Header Image: World Bank Group President Jim Yong Kim briefs the media at the IMF-World Bank Group Fall meeting in Lima, Peru, October 8, 2015 (Photo courtesy World Bank Group)
Image 03: International Monetary Fund Managing Director Christine Lagarde briefs the press at the 2015 IMF/World Bank Annual Meetings in Lima, Peru, Oct. 8, 2015. (Photo by Stephen Jaffe courtesy IMF)

Better Names for Impact Investing (and other insights from Hazel Henderson)

by Marta Maretich

Hazel Henderson has never really liked the term “impact investing”.

“All investments have impacts,” she told us. “I pointed this out to the authors of the original paper published by the Rockefeller Foundation. Some of these impacts include blowing the tops off mountains and spilling oil in the Gulf of Mexico!”

Not mincing words is one of the characteristics that has made Henderson a thought leader in the ethical investing movement. Futurist, evolutionary economist, worldwide syndicated columnist, consultant on sustainable development and author of many books, articles and blogs, Henderson has turned her personal vision of a new kind of capitalism into a remarkable career spanning four decades.

Her CV is beyond distinguished, including 22 years of service on the Advisory Council of the Calvert Social Investment Fund and membership in the Social Investment Forum and the Social Venture Network. She founded Ethical Markets Media and won a slew of international honors for her work. She is the creator of the Green Transition Scoreboard, a tool that tracks the private financial system for all green sectors worldwide since 2007 (current total is $5.2 trillion) and measures progress “as defined by the triple bottom line of planet, people and profits”. Follow #greenscore on Twitter.

Taking a measured view of impact

This stellar track record speaks of Henderson’s lifelong commitment to positive change in the area of beneficial finance and socially responsible investing. It also makes her a hard person to impress. While the world gets more excited about the potential of impact investing to solve its many problems, her support for the practice is tempered with realism.

“While I applaud the approach and achievements so far of this kind of investing,” she says, “I don’t see it as a new “asset class” since it must operate within all the old and still failing models of mainstream investing. And, as I have discussed with many of impact investing’s best practitioners in our TV series Transforming Finance the term “impact investing” simply adds to the confusion! Why not call it “positive impact investing” and thus make its good intentions clear?”

She’s right of course

Henderson makes several important points here; ones borne out by the latest research into impact investing.

One is that impact investing is not a distinct new field of investing, or “asset class”, but an investment approach that spans asset classes. For Henderson, who has been at the forefront of the worldwide movement to diversify the financial methods that can be used to achieve social and environmental benefit, it’s only one tool in the larger toolbox that now (thanks to her and social benefit investment pioneers like her) includes a full spectrum of approaches: microfinance, social entrepreneurship, social impact bonds, venture philanthropy, catalytic capital, responsible investing, patient capital and so on.

Another of Henderson’s points is that not all impact is good impact: “blowing the tops off mountains,” as she puts it, definitely comes into the bad impact category.

The principle here is that intentionality matters when it comes to impact investing. Obviously, the idea is to avoid bad impacts; that goes without saying. But it’s not enough for good impacts to happen by accident, either, or as mere byproducts of doing business. To be authentic impact businesses, enterprises have to be built around the positive impacts they exist to create (along with profits).

And it’s not enough to cross our fingers and hope for positive impact without bothering to find out whether it’s really happening. Positive impact goals; and the metric processes that measure them; need to form part of the business plan of impact businesses. Otherwise, there’s nothing to distinguish them from ordinary businesses and no reason for impact investors (who currently complain of a shortage of good opportunities) to commit their capital.

Keeping sight of a higher purpose

Finally; and perhaps most importantly; Henderson’s comment reflects her belief that we need to do more than just tinker with the way world finance works.

Impact investing may be a good thing, but its dependence on the “old and still failing models of mainstream investing” mean that the approach is, after all, nothing so revolutionary as is sometimes claimed. More precisely, it’s an adaptation of what we’ve had in the past, using familiar techniques and market models, though in new contexts. As such, it doesn’t go far enough to satisfy Henderson, whose organization’s mission is: “to foster the evolution of capitalism beyond current models based on materialism, maximizing self-interest and profit, competition and fear of scarcity”. Henderson proposes to achieve this by reforming markets and metrics while growing the green economy worldwide.

Henderson’s vision for the future of finance is more radical than that of the elite group that gave impact investing its name. Where they hoped to harness the power of capital for good, Henderson wants to alter the very nature of capitalism, transforming it into something that better serves the needs of humanity and the planet. This higher purpose makes it unlikely that she will champion any single approach to changing the way we invest. In one example of her far-reaching strategy, Henderson has partnered with the company Biomimicry 3.8 to create a set of Principles of Ethical Biomimicry Finance, now available on license to responsible asset managers.

Henderson is well placed to take the long view of various social investing movements. Her comment serves a reminder that impact investing is just beginning to prove itself. The jury is still out, and it’s probably a good thing the early hype seems to be dying down. However keen we are on impact investing (and we are keen) it is not a silver bullet for solving the world’s problems.

At the same time, it’s a good thing that the sector is growing. More deals, more collaboration and more experimentation may serve to take us closer to a time when all businesses are, as Henderson would have it, positive impact businesses.

For more about Hazel Henderson see this interview in Green Money Journal.

Hazel has recently released Mapping the Global Transition to the Solar Age: From Economism to Earth Systems Science from the UK’s Institute of Chartered Accountants of England and Wales (ICAEW) and Tomorrow’s Company. It will appear soon in the US from Cosimo Publications, NY.