The World Federation of Exchanges (WFE), the global industry association for exchanges and clearing houses, has published new research uncovering environmental, economic, and cultural factors that drive Environmental, Social, and Governance (ESG) progress across the world’s exchanges.
Drawing on a decade of data from the WFE’s annual Sustainability Surveys, the paper, “Drivers of Exchange Sustainability Development”, authored by Dr Kaitao Lin, Senior Financial Economist at the WFE and Dr Ying Liu, Financial Economist at the WFE, provides the first multi-year analysis of what shapes ESG strategies across 66 exchanges in 54 jurisdictions. The findings reflect a complex interplay of jurisdiction-specific factors, from governance quality, education levels, climate exposure, and cultural attitudes.
Research key findings:
- Governance is a priority: Exchanges allocate the largest share of their ESG efforts, 39% on average, to governance. This focus is strongest in jurisdictions with high literacy and low corruption.
- Sustainability and reputation drive action: Over the decade, sustainability concerns and reputational motivations consistently ranked as the most powerful drivers of ESG action, with regulatory pressure having grown in influence since 2017.
- Accelerating ESG product growth: The share of exchanges offering sustainability-related products rose from 28% in 2014 to 86% in 2023, driven by rising investor demand and growing environmental imperatives.
- Local cultural contexts matter: Societies in which individuals prioritise a future-oriented perspective over a short-term point of view, are more likely to support ESG innovation. Conversely, risk-averse cultures, and those with high power distance, and those where traditionally masculine values are prioritised, may be slower to adopt ESG initiatives, especially in governance and social efforts.
- Domestic environmental factors influence ESG innovation: Jurisdictions with greater forest cover and higher climate variability are more likely to develop sustainability-related financial products, such as ESG ETFs and indices.
Nandini Sukumar, CEO of the WFE, said, “We encourage policymakers and regulators to design targeted ESG frameworks that reflect national circumstances. In markets where ESG awareness remains low, public education campaigns, governance reforms, or incentives for sustainable financial practices could stimulate demand and strengthen market readiness. In more advanced or environmentally exposed economies, exchanges are leading sustainability product innovation and ESG data standardisation.”
Pedro Gurrola-Perez, Head of Research at the WFE, said, “For exchanges, the results emphasise the need to align ESG strategies with the socio-economic, environmental, and cultural realities of their jurisdictions. Exchanges operating in risk averse societies may need to take a gradual approach when introducing ESG innovations, ensuring that stakeholders perceive these initiatives as credible and low-risk. Conversely, exchanges in jurisdictions with high environmental performance or strong regulatory frameworks may leverage their position to lead in sustainability product innovation, using ESG as a competitive advantage to attract investment and differentiate.”
Read the full paper here.
