Sustainable Stock Exchanges Initiative

The United Nations (UN) Sustainable Stock Exchanges (SSE) initiative standards integrate environmental, social, and corporate governance (ESG) policies and practices into reporting guidance that stock exchanges can provide to their listed companies. Since the initial launch in 2009, the SSE has aimed at helping companies connect with investors and stakeholders in a multi-stakeholder environment which has led to 58 out of 82 exchanges having become a partner exchange as of 2016 (SSE 2016, 8-10). These stock exchanges that have joined the SSE network represent over 30,000 listed companies and represent over $55 trillion USD of market capitalization (SSE 2016, 17). These standards are an excellent example of top-down implementation of ESG policies. To achieve the UN sustainable development goals (SDGs), nearly $5-7 trillion USD per year would be required in financing (SSE 2016, 6). By developing and training stock exchanges that are composed of thousands of listed companies in ESG, these standards can make large impacts to the attainment of the SDGs.

The SSE standards also include metrics that evaluate the materiality of their own actions. The strongest aspect that they place on themselves and others within the exchange guidelines revolve around the SDG #5, gender equality. This focus on social capital aspects is estimated to represent a value of $28 trillion USD, or 26% of global annual GDP, if there is global gender parity (SSE 2016, 35). This strong emphasize on gender equality not only moves the globe towards attaining the SDG #5 goals, but also represents large financial implications for companies as well. This strong social capital focus is also supported by their other core strengths of climate change and stakeholder partnerships.

While the SSE standards work to tackle some of the most material elements to stock exchanges and the listed companies they are connected with, these standards do not place heavy emphasis on ethics and integrity. While woven into the different governance and business model implications, ethics is not brought up in the actual reporting guidance at all (SSE 2015). The usefulness and effectiveness of these standards is diminished slightly by this exclusion. While data integrity is spoken of multiple times, not including ethic behavior guidance can leave room open for green-washing and other untruthful practices when complying with the elements that are contained within these standards. Like other ESG frameworks, this framework requires support from additional frameworks that are explicitly called out as further tools for identifying important ESG reporting factors (SSE 2015, 26). However, even with this weakness, the SSE standards are a highly effective and useful set of standards that have broad reach into the global financial markets that are actually driving change towards attainment of SDGs.

Author: Logan Callen

References

NASDAQ. 2019. ESG Reporting Guide: A Support Resource for Companies. Accessed November 3, 2020. https://www.nasdaq.com/docs/2019/11/26/2019-ESG-Reporting-Guide.pdf.

S&P Dow Jones Indices. 2020. The S&P 500 ESG Index: Defining the Sustainable Core. Accessed November 3, 2020. https://www.spglobal.com/spdji/en/education/article/the-sp-500-esg-index-defining-the-sustainable-core.

Sustainable Stock Exchanges Initiative. 2015. Model Guidance on Reporting ESG Information to Investors: A Voluntary Tool for Stock Exchanges to Guide Issuers. Accessed November 3, 2020. http://www.sseinitiative.org/wp-content/uploads/2017/06/SSE-Model-Guidance-on-Reporting-ESG.pdf.

Sustainable Stock Exchanges Initiative. 2016. Sustainable Stock Exchanges (SSE) 2016 Report on Progress. Accessed November 3, 2020. http://www.sseinitiative.org/wp-content/uploads/2012/03/SSE-Report-on-Progress-2016.pdf.