Exchanges and ESG Initiatives – SWG Report and Survey

This section is split into five parts: a general overview of responses; how to encourage ESG disclosure; sustainability products; initiatives and events and, to conclude, the feasibility of a sustainability report.

General Overview

Fifty six responses were received, representing 93% of WFE members.

Figure 2: Responses by Region

The following exchanges responded:

Americas (11) Asia-Pacific (21) EMEA (24)
Bermuda Stock Exchange Australian Securities Exchange Abu Dhabi Securities Exchange
BM&FBOVESPA BSE Limited Amman Stock Exchange
Bolsa de Comercio de Buenos Aires Bursa Malaysia Athens Exchange
Bolsa de Comercio de Santiago China Financial Futures Exchange BME Spanish Exchange
Bolsa de Valores de Colombia Colombo Stock Exchange Borsa Istanbul
Bolsa Mexicana de Valores GreTai Securities Market Bourse de Luxembourg
CBOE Holdings, Inc. HoChiMinh Stock Exchange Cyprus Stock Exchange
CME Group Hong Kong Exchanges and Clearing Deutsche Börse
Intercontinental Exchange, Inc. Indonesia Stock Exchange Dubai Financial Market
Nasdaq Japan Exchange Group Irish Stock Exchange
TMX Group Korea Exchange Johannesburg Stock Exchange
National Stock Exchange of India Limited Kazakhstan Stock Exchange
NZX Limited Malta Stock Exchange
Shanghai Securities Exchange Moscow Exchange
Shanghai Futures Exchange Muscat Securities Exchange
Shenzhen Stock Exchange Oslo Børs
Singapore Exchange Qatar Stock Exchange
Stock Exchange of Thailand Saudi Stock Exchange (Tadawul)
Taiwan Futures Exchange (Taifex) SIX Swiss Exchange
Taiwan Stock Exchange Stock Exchange of Mauritius
Zhengzhou Commodity Exchange Tel-Aviv Stock Exchange
The Egyptian Exchange
The Nigerian Stock Exchange
Wiener Börse

Distribution by legal status

Of the 56 respondents 21 (38%) were publically listed companies, 16% were demutualised entities and 14% private limited companies, mainly owned by their members.

Figure 3: Respondents by legal status

Distribution by size

There was a relatively even distribution of respondents by size of exchange as defined by annual revenues. 43% of respondents were small exchanges, 30% were medium-sized and 27% were large exchanges. Size was determined by annual revenue distributions, using the following classification:

  • Revenues < 100million USD
  • 100million USD < Revenues > 500million USD
  • 500 million USD < Revenues

Figure 4: Respondents by size of exchange

Sustainability initiatives or events

Of the total 56 respondents, 37 (66%) said they had participated in an initiative or event prior to the survey. Listed and large exchanges were more likely to have participated in a sustainability initiative.


WFE members have been involved in a wide variety of ESG initiatives. The Global Compact Joint Initiative, the Sustainable Stock Exchanges (SSE) initiative and the WFE Sustainability Working Group were the most frequently cited. Twenty-one WFE member exchanges are presently part of the WFE Sustainability Working Group and 17 Exchanges are SSE

In addition to joining groups and committees, many exchanges mentioned hosting and participating in ESG-related educational events and developing ESG tools for their markets. Raising awareness by hosting educational for or developing tools to help listed companies discover best practices, etc. is also widespread. Several exchanges mentioned they were providing, sponsoring or participating in educational initiatives. Such initiatives are
sometimes organised in collaboration with regulators and can be accompanied by Listed Companies Awards.

Below are just a few examples from the SWG Survey of events and initiatives that WFE members have been involved in:

  • Latin-American Sustainable Investment Forum Conference with Sustainalytics, the Dutch Embassy and Deloitte – topics included responsible investment, sustainable indices, social risk, environmental and corporate governance analyses, sustainability
    and capital analyses;
  • Climate Summit with the UNPRI and Integrated Reporting Roundtable Program;
  • Participation in the International Forum on Sustainability;
  • Annual ESG Investor Briefing;
  • Support for an annual Sustainability Reporting Award;
  • Developing an Environmental and Social Primer, the most recent version with the country’s CPA, to help issuers understand the ESG landscape and the resources available to them;
  • Market opens for ESG-related initiatives and education events to raise the profile among the issuer community;
  • Support for sustainability rankings and workshops
  • Responsible Investor Asia Conference and annual listed company award for companies promoting women’s interests.

As evidenced by the list above, many of the exchanges are already acting as a kind of nexus between listed companies and market participants on the one hand and ESG experts. These events and tools, individualized for each exchange’s market, help educate companies new to the ESG space and serve as vehicles to encourage, recognise and celebrate the efforts of
many companies already active in the area.

Finally, a large number of exchanges have signed local or global social responsibility charters, such as UN Global Compact or UN PRI and have engaged in environmental protection projects in their communities, such as planting trees, organizing a charity event to encourage recycling and green and low-carbon lifestyles or participating in antidesertification projects.

More generally, exchanges feel they have an important role to play in promoting and improving transparency on global capital markets. For example, Deutsche Börse Group has created a dedicated transparency standard – the “Prime Standard”3 – which offers companies access to the capital market via a premium segment. These companies have to meet a higher international transparency requirement.

Special Focus on the World Federation of Exchanges Sustainability Working Group

The Sustainability Working Group (SWG) was created in March 2014. Recognising that exchanges are a legitimate engine for promoting improvements in sustainability and ESG, the group is best positioned to create best practice standards in this area, and to suggest sustainability recommendations to the WFE membership as a whole. In its first months, the SWG has managed to achieve many of its goals. First and foremost, the formation of a forum for the discussion of sustainability and ESG concerns that is private, candid, and specific to the needs of stock exchanges. Participation in this group is large with more than 50 participants across 11 time zones, representing the 21 member exchanges. Current members are:
  • Bolsa de Valores de Colombia
  • Borsa İstanbul
  • BSE India Limited
  • Bursa Malaysia
  • CBOE Holdings, Inc.
  • CME Group
  • Deutsche Börse AG
  • Intercontinental Exchange, Inc.
  • Japan Exchange Group, Inc.
  • Johannesburg Stock Exchange
  • Korea Exchange
  • Nasdaq
  • National Stock Exchange of India Limited
  • Shenzhen Stock Exchange
  • Singapore Exchange
  • Stock Exchange of Mauritius
  • Stock Exchange of Thailand
  • Taiwan Stock Exchange Corp.
  • The Egyptian Exchange
  • TMX Group Inc.
In addition to the SWG, a number of the members are also members of other high-profile campaigns on sustainability and ESG disclosure. This makes this an influential and dynamic working group, pushing for change on these key issues.

Encouraging ESG Disclosure

The SWG Survey questioned participants on the level of ESG disclosure demanded of listed companies by exchanges or regulators. Fifty seven percent of respondents (32 out of 56) mentioned that listed companies on their markets were required to disclose some ESG information beyond corporate governance (see Figure 6). More specifically, WFE members were asked if the exchange or local regulator required any kind of ESG disclosure (beyond corporate governance), whether mandatory or voluntary, by listed companies. Among the 32 members who mentioned having requirements in place, nearly half of them (15) said that both the regulator and the exchange required ESG disclosure in some form. There was some regional disparity here, though, as is seen in the figure below.

Exchanges were also asked how listed companies comply with the ESG disclosure requirement of exchanges. Eight exchanges had voluntary disclosure policies in place, while three exchanges required mandatory disclosure (see Figure 7).

By contrast, for ESG disclosure required by a regulator, 12 out of 17 respondents replied that mandatory disclosure was required for listed companies. There were fewer voluntary disclosure requirements, with 14% of regulators’ requirements being voluntary, compared to 73% of exchanges’ requirements.

The type of data or information most frequently requested for disclosure, beyond corporate governance, related to environmental issues, with 20 exchanges requiring some form of disclosure. Nevertheless, most sustainability disclosure requirements, when they go beyond corporate governance, are covering the three ESG dimensions i.e. Environmental, Social and Corporate Governance. 18 exchanges said that in their jurisdiction, listed companies were only required to disclose corporate governance information.

Figure 8: Types of Information required for disclosure

Further to this, according to a report by CK Capital: “The number of disclosure policies increased significantly in the early and mid-2000s, reaching a peak of 30 policies in 2012. In total, 100 of the 167 policies (60%) were enacted in developed countries, with the remainder (67 of 167, or 40%) implemented in emerging market countries” (Capital, 2012). The chart below demonstrates the continued growth in sustainability disclosure policies.

Sustainability disclosure policies by year and country classification


When asked how listed companies provide ESG data, answers varied. 27 respondents said listed companies provided the data using annual reports, with 16 providing the data in a specific report and an additional 10 using a form system. Six respondents said the data was provided through the company’s website. Disclosure on company websites is generally used in addition to annual reports and/or specific reports.

Figure 9: How do listed companies provide ESG data?

Moreover, when asked whether the exchange or local regulator gather or maintain records of ESG metrics, 22 exchanges reported that either or both the regulator and the exchange recorded or collected this data from listed companies. Exchanges appear to be in charge of gathering and/or archiving ESG data more often than regulators. As such they have a key role to play in the harmonization and publication of ESG data from companies listed on their markets.

Figure 10: Does the exchange or local regulator directly gather and/or maintain records of ESG metrics submitted by listed companies?

When asked to what extent listed companies are expected to make their ESG disclosures public, 30 respondents said that disclosures are expected to be public in part or in full, with the majority being expected to make their ESG and Sustainability disclosure in full (see Figure 11). No exchange said listed companies are expected to make private disclosure to an exchange or regulatory body.

Figure 11: What extent are listed companies expected to make their ESG disclosures public?

Deutsche Börse’s information portal for sustainable securities is an example of a publicly accessible online portal where the exchange gathers and disseminates ESG Data. The portal4 provides market participants with ESG data for around 1,800 companies from all over the world as well as specific Carbon Disclosure Project data and potentially allows companies to be selected based on ESG criteria or on the weighting of these criteria.

The disclosure of non-financial information has evolved over the past two decades in different ways. Issues such as transparency and materiality are becoming a new paradigm for businesses and exchanges are exploring different ways of incentivising disclosure.

For example, initiatives such as BM&FBOVESPA’s “Report or Explain for Sustainability or Integrated Reports” (See Special focus on the Brazilian Experience below), as well as the start of the disclosure of answers from companies belonging to BM&FBOVESPA’s ISE Index are useful tools currently available inside BM&FBOVESPA to deal with these new challenges. Since 2012, the Corporate Sustainability Index (ISE) has requested companies to take part in the authorization process for dissemination of the questionnaire responses. Over the years, the number of companies in the ISE portfolio has grown as well as the number of companies that authorize the publication of their answers. Currently, in the 2015 Portfolio, 85% of the total of the new portfolio have disclosed their responses.

Similarly, the Johannesburg Stock Exchange’s listing requirement that companies must report annually on the extent to which they apply the principles of the Third King Code on Governance, or to explain any deviations from the Code, is an example of a combination of mandatory and voluntary approaches that have been very effective in encouraging greater transparency and enabling investor engagement on company disclosures. In terms of voluntary disclosure, the JSE SRI Index moved to assessing only publicly available data from 2013 to enable greater data accessibility for investors.

ESG disclosure can also be encouraged with Best Practice Guides provided by Exchanges. For example, Deutsche Börse Group released a Best Practice Guide5 in September 2013 for the integration of sustainability-related information in a company’s capital market communication. It was considered necessary to encourage and support small and mediumsized enterprises in integrating sustainability-related information in their capital market communication. The Guide reinforces the idea that ESG information goes beyond a company’s financial figures to illuminate other facets of a particular company and is therefore significant to its well-founded evaluation and reliable assessment of the risk/return profile of an investment. The guidelines were developed by market participants for market participants and therefore take a capital market perspective. Adherence to the Guide is voluntary; it contains no specifications on topics/indicators because the selection and weighting of particular ESG issues by the management provides important information to investors/analysts.

Special Focus on the Brazilian Experience

The Brazilian example is a good illustration of how successful an exchange can be in promoting ESG disclosure on a voluntary basis. Indeed, Brazil has been very successful in its transparency initiatives and voluntary disclosure of non-financial information. BM&FBOVESPA’s approach is to make recommendations and encourage the voluntary adoption of best practices, while monitoring the listed companies and providing all the support and tools they require, always focusing on the medium term. At BM&FBOVESPA, listed companies are not required to pay any fee if they do not publish sustainability reports and there is no obligation or enforcement mechanism to force Brazilian companies to publish such information.

Aiming to provide investors and other interested parties quick access to ESG information, BM&FBOVESPA in 2012 launched a recommendation entitled “Report or Explain for Sustainability or Integrated Reports” which encouraged all listed companies to file a document promoting accountability of listed companies in the capital market. If the listed company wants, it can say whether it publishes a regular sustainability report, or explain why it doesn’t. After that, BM&FBOVESPA is responsible for collecting available information and compiling a list to publish to the market.

CVM, the Brazilian Securities and Exchange Commission, has established a mandatory rule for E&S disclosure in 2009 and created an item in the Reference Form, which made disclosure on environmental policy and environmental costs mandatory for companies listed on the Brazilian stock exchange. From 2016 on, companies must comply with the new topics of the Reference Form and must, in relation to sustainability practices, make public (i) if the company discloses sustainability practices; (ii) the methodology adopted; (iii) if this information is audited or revised by independent entities; and (iv) the website where this information can be found. The new rule also includes an item of risk factors related to sustainability issues.

In line with that, the fourth annual update of the “Report or Explain for Sustainability or Integrated Reports” database shows how this issue has remained on the agenda of listed companies. These companies continue to publish non-financial information or explain why not, 311 firms are adhering to the initiative, representing 71.65% of all of the companies listed on the exchange (see graph 1 below). The 2015 database contains the titles of the companies that had responded through the “Formulário de Referência” (Reference Form) by May 31.

This year, “Report or Explain” mapped the methodologies adopted by companies to prepare their reports. According to the table below, 81 companies already prepare their reports according to the GRI G4 methodology (one year before the G4 had definitively substituted the previous versions of the GRI); of these companies, 9 companies published the Integrated Reporting. In addition, this year “Report or Explain” counted the titles used by the companies for the document. Results show that a wide variety of titles is still being adopted: the majority of the companies (65) use “Sustainability Report”, followed by “Annual Report” (43) and “Annual and Sustainability Report” (26).

Methodology of the report Number of companies
GRI G4 72
Without information 41
GRI G3.1 34
GRI G4 and IIRC 9
COP (Global Compact) 1
Total 160

Name of the report Number of companies
Sustainability Report 65
Annual Report 43
Annual and Sustainability Report 26
Social and Environmental Responsibility Report 7
Social Report 6
Integrated Reporting 5
Social and Environmental Report 2
Integrated Report 1
Others 5
Total 160
The complete list of the “Report or Explain for Sustainability or Integrated Reports” is available on BM&FBOVESPA website:

Exchanges and Sustainability and ESG index creation

Respondents disclosed that at least 22 different sustainability- and ESG-related indices have been created by members of the WFE. Four new indices were launched in 2014 by WFE members. There are also a number of indices planned for the near future. Five exchanges mentioned they are working on launching an ESG Index. The region with the most sustainability-related indices is EMEA, with 41% of sustainability-linked indices found in this region.

Figure 12: Number of sustainability or ESG indices by region

Organization Index Name Launch Date Number of companies
CME Group Dow Jones Sustainability indices 1999 ~1000
Johannesburg Stock Exchange JSE SRI Index 2004 82
BM&FBOVESPA Corporate Sustainability Index (ISE) 2005 40
Shenzhen Stock Exchange Taida environmental index 2007 40
BME Spanish Exchanges FTSE4Good IBEX 2008
Intercontinental Exchange, Inc. NYSE Bloomberg Clean Energy Indices, Other Indices 2008 Various
Indonesia Stock Exchange SRI – KEHATI Index 2009 25 Stocks
Korea Exchange SRI Index 2009 70
The Egyptian Exchange S&P/EGX ESG 2010 30
Nasdaq Green Family 2010 50
Taiwan Stock Exchange Taiwan RAFI® EMP 99 Index / Taiwan HC 100 Index 2010 & 2014 99 / 100
Bolsa Mexicana de Valores IPC Sustentable 2011 28
Deutsche Börse AG STOXX Global ESG Leaders Indices 2011 339
Japan Exchange Group S&P/TOPIX 150 Carbon Efficient Index 2011 150
BSE Limited S&P BSE Carbonex and S&P BSE Greenex 2012
Shanghai Stock Exchange SSE Environmental Protection Industry Index 2012 40
Bourse de Luxembourg Lux RI Fund Index 2013 20
Qatar Stock Exchange QE Al Rayan Islamic Index 2013 18
Borsa Istanbul BIST Sustainability Index 2014 15
TMX Group S&P/TSX 60 ESG Index 2014 60
SIX Swiss Exchange SXI Sustainability 25 Index 2014 25
Wiener Börse VÖNIX and CEERIUS NA NA

All types of exchanges, whatever their size is in terms of revenues, are producing ESG or Sustainability indices. Indeed, 27% of ESG indices are produced by small exchanges.

Figure 13: Number of ESG or Sustainability indices by size of exchange

When asked whether the exchange currently offers any other ESG- or sustainability-related financial products, 19 respondents said they did or that they had plans to do so in the near future. Among the ESG or sustainability products quoted, the most frequent were ETFs based on ESG indices or other SRI investment funds and issued products.

Figure 14: Does your exchange currently offer any other ESG or sustainability-related financial products?

A number of academic studies6 have considered the economic effects of corporate sustainability performance. Most of them have highlighted a positive influence of sustainability performance on economic performance. However the direction of the causality is not clear and other empirical papers such as Ulrich Oberndorfer, Marcus Wagner and Andreas Ziegler (2011)7 also implied that stock markets may penalize firms selected for
inclusion in sustainability stock indices.

Overall, it seems that there is a lack of empirical / academic information providing an absolute view on the impact of good ESG practices on share price performance.

In 2014, the STOXX® Europe Sustainability index had a better performance (+6.2%) than the benchmark index STOXX® Europe 600 (+4.4%) while in the United States, the DJSI U.S. also performed better (+10.8%) than the Dow Jones Industrial Average (+7.5%).

Exchanges Producing Sustainability Reports

Many, if not most, exchanges produce their own sustainability. 30% of WFE members currently produce a sustainability report, with 65% using a GRI8 or GRI-influenced framework. The survey asked whether the respondent produced its own sustainability report. 17 respondents replied that they did, while 39 said they did not.

Of the 17 respondents that did produce their own sustainability report, 11 based their report on the GRI framework; one used the Corporate Social Responsibility framework whilst 5 others did not use any specific framework.

Figure 15: Is your exchange producing a sustainability report?

Figure 16: If so, does it follow a specific reporting framework?