The World Federation of Exchanges (WFE), the global industry group for exchanges and CCPs, has today published its 10th annual Sustainability Survey revealing a decade of progress within the exchange industry, and capturing the dramatic change in the wider attitude of market participants towards sustainability, since our first survey.
A reduction in concerns amongst exchanges about a lack of resources, as well as business and economic concerns for developing sustainability capabilities, demonstrates the attention and investment the industry has been channelling into this area. This investment mirrors the significant rise in demand for ESG products from investors, showing that over the past decade exchanges have been investing to meet a need.
Encouragingly, the milestone achieved last year was met again, with every exchange that responded continuing their participation in at least one WFE Sustainability Principle and ESG initiatives, showing that this is sustained progress. More exchanges are implementing more initiatives, indicating a deepening engagement with ESG transparency.
| 10 Year Key Highlights | 2023 | 2014 |
| Respondents that offer ESG-related products | 41 | 16 |
| Respondents reporting investor demand for ESG products | 96% | 64% |
| Number of exchanges offering green bonds | 34 | 8* |
| Number of exchanges encouraging/mandating ESG disclosures from issuers | 98% | 38% |
| Respondents that implement sustainability initiatives linked to the UN SDGs | 81% | 36% |
| Respondents that publish their own sustainability report (including sustainability information in annual report) | 86% | 30% |
| Respondents that receive specific investor queries on sustainability reports of listed companies or sustainability related indices or financial products | 96% | 38% |
*8 exchanges were recorded as offering green bonds in 2016 – this data was not collected prior to 2016.
| 2023 Key Highlights | 2023 | 2022 |
| Respondents that participate in at least one WFE Sustainability initiative | 100% | 100% |
| Respondents included as a constituent of one or more indexes tracking the firms' sustainability or ESG performance | 33% | 26% |
| Respondents that implement initiatives that correspond to all five of the WFE’s Sustainability Principles | 70% | 70% |
| Respondents that implement sustainability initiatives linked to the UN SDGs | 78% | 76% |
| Respondents that have targets in place to increase female representation | 46% | 30% |
Investor interest in ESG
The survey showed that investor interest in ESG products is increasing, prompting exchanges to facilitate the listing, trading, and oversight of these offerings. Most exchanges (96%) acknowledged investor demand for ESG disclosure, with 45% observing a strong demand. 98% of exchanges reported investor interest in ESG products, and 82% of exchanges offered ESG-related products in 2023, with green bonds/sukuks remaining the most popular ESG product.
Exchanges remain the primary promoters of ESG disclosure ensuring the quality of data needed by investors continues to improve and issuers are well placed to respond to international demand. The survey found that 53% of exchanges included the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in the reporting guidance or reporting requirements for listed companies and 33% are planning to do so.
Carbon Markets
Ten of the respondents confirmed the existence of carbon markets within their jurisdiction. Among them, four exchanges highlighted the presence of both voluntary and compliance and carbon markets in their respective regions. Regarding the most traded environmental products, seven out of those ten respondents indicated that their platforms facilitated trading carbon offsets through spot markets, followed by platforms for trading carbon allowances and the auction of carbon offsets, both present in four jurisdictions.
Looking ahead
In keeping with last year’s survey results, the key challenges for exchanges remain primarily the lack of reliable ESG data and insufficient resources for implementing initiatives. Additionally, regulatory initiatives to combat greenwashing and promote integrity in voluntary carbon markets highlight the need for continued vigilance and collaboration across the industry, so we can expect continued focus on these issues in the near term.
Nandini Sukumar, CEO of the WFE commented, “With ten years of ESG survey data behind us, it is clear that exchanges are leading the finance industry in its effort to achieve sustainability. The 2023 data shows further progress as exchanges continue to foster transparency, promote responsible investment practices, and provide increasingly innovative ESG-related products. As an industry, we are playing a pivotal role in advancing the global transition by closing the climate funding gap required to achieve a more sustainable future.”
The full report can be read here.
