The combination of driving capital towards the low carbon transition, data transparency and policy advocacy is greening capital markets.
- The London Stock Exchange has created a thriving Sustainable Bond Market, as well as introducing a Green Economy Mark for equities.
- Climate and ESG data is essential for providing transparency, but a balance must be struck between not over-burdening companies and giving investors meaningful data.
- Policy advocacy can help drive commonality and disclosure.
When Emmanuel Faber, Chair of the International Sustainability Standards Board (ISSB), launched the ISSB’s inaugural sustainability disclosure standards in late June at the London Stock Exchange, this was another significant step forward in the mainstreaming of climate finance across capital markets.
The ISSB standards seek to introduce greater transparency into companies’ progress in reducing carbon emissions, and if adopted in policy frameworks, may help to enable capital into businesses involved in the green economy and to deliver data that promotes transparency.
Driving capital to create a sustainable future
The London Stock Exchange’s capital markets have evolved to the point where our markets have a range of sustainability focused asset classes, including equities, funds, fixed income, and ETFs. We started integrating sustainability into our markets in 2015, when we introduced a Green Bond Segment, and have since established a thriving Sustainable Bond Market, which attracts green, social, sustainable, sustainability-linked and transition bonds. Overall, more than 500 different financial instruments have been displayed on the Sustainable Bond Market, raising over $210 billion in capital.
To facilitate green growth, we introduced a Green Economy Mark in 2019 for London-listed companies and funds that derive 50% or more of their revenues from products and services that contribute to environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction, and the circular economy. In the four years since this was launched, we’ve seen consistent growth and we now provide the Mark to over 110 companies. In fact, over the past two years (June 2021 – June 2023) the Green Economy Mark cohort has raised a total of £6.16bn through 85 IPOs and follow-on issuances.
There’s also a sharper focus on carbon markets. As many more companies set net zero targets and strategies, they’re looking at not only how they decarbonise their operations, but also how they offset any residual emissions. We developed a designation for London-listed companies and funds that direct capital into projects that are mitigating climate change and can generate carbon credits.
Balancing the data challenge
Turning to the second dimension of mainstreaming climate finance, you need sustainability data to be readily available for both investors and for corporates. As a major market infrastructure company, we provide the market with a wide range of sustainability focused data including green revenues, carbons emissions and ESG data. Of course, ESG data is on a path of improvement that requires the right balance between companies not feeling overburdened by the level of disclosures that they need to make, and investors feeling that they've got high-quality information. Investors don’t want to rely always on estimated data. Achieving this balance is a goal of the ISSB standards.
Advocating on policy and regulation
The third dimension relates to policy and advocacy. We’ve endorsed the development of ISSB’s standards since work started after COP26 in 2021: a framework that governments need to back as it puts climate front and centre in boards’ decision making. We've also supported the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, and have reported against TCFD ourselves as a listed company since 2017.
We worked with the UN Sustainable Stock Exchange initiative to produce guidance and support for companies interested in implementing TCFD’s recommendations. Similarly, we are supportive of global economy wide adoption of ISSB’s standards and what that can mean in terms of more commonality and disclosure transparency across markets. We believe the standards give policymakers a unique opportunity to accelerate company disclose by 2025. To achieve this, we need to support governments in implementing robust and globally aligned policy frameworks for sustainable finance.
But it's not about having standards that are exclusive to public companies and applying different standards for private companies, because how a business raises capital makes little difference to its environmental impact.
Returning to the ISSB, the launch of its disclosure standards will help green capital raising and data transparency. Given adequate support from governments and regulators, important steps like this bring climate goals a little nearer.
Republication or redistribution of LSE Group content is prohibited without our prior written consent.
The content of this publication is for informational purposes only and has no legal effect, does not form part of any contract, does not, and does not seek to constitute advice of any nature and no reliance should be placed upon statements contained herein. Whilst reasonable efforts have been taken to ensure that the contents of this publication are accurate and reliable, LSE Group does not guarantee that this document is free from errors or omissions; therefore, you may not rely upon the content of this document under any circumstances and you should seek your own independent legal, investment, tax and other advice. Neither We nor our affiliates shall be liable for any errors, inaccuracies or delays in the publication or any other content, or for any actions taken by you in reliance thereon.
Copyright © 2023 London Stock Exchange Group. All rights reserved.
The content of this publication is provided by London Stock Exchange Group plc, its applicable group undertakings and/or its affiliates or licensors (the “LSE Group” or “We”) exclusively.
Neither We nor our affiliates guarantee the accuracy of or endorse the views or opinions given by any third party content provider, advertiser, sponsor or other user. We may link to, reference, or promote websites, applications and/or services from third parties. You agree that We are not responsible for, and do not control such non-LSE Group websites, applications or services.
The content of this publication is for informational purposes only. All information and data contained in this publication is obtained by LSE Group from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data are provided "as is" without warranty of any kind. You understand and agree that this publication does not, and does not seek to, constitute advice of any nature. You may not rely upon the content of this document under any circumstances and should seek your own independent legal, tax or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither We nor our affiliates shall be liable for any errors, inaccuracies or delays in the publication or any other content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the publication and its content is at your sole risk.
To the fullest extent permitted by applicable law, LSE Group, expressly disclaims any representation or warranties, express or implied, including, without limitation, any representations or warranties of performance, merchantability, fitness for a particular purpose, accuracy, completeness, reliability and non-infringement. LSE Group, its subsidiaries, its affiliates and their respective shareholders, directors, officers employees, agents, advertisers, content providers and licensors (collectively referred to as the “LSE Group Parties”) disclaim all responsibility for any loss, liability or damage of any kind resulting from or related to access, use or the unavailability of the publication (or any part of it); and none of the LSE Group Parties will be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, howsoever arising, even if any member of the LSE Group Parties are advised in advance of the possibility of such damages or could have foreseen any such damages arising or resulting from the use of, or inability to use, the information contained in the publication. For the avoidance of doubt, the LSE Group Parties shall have no liability for any losses, claims, demands, actions, proceedings, damages, costs or expenses arising out of, or in any way connected with, the information contained in this document.
LSE Group is the owner of various intellectual property rights ("IPR”), including but not limited to, numerous trademarks that are used to identify, advertise, and promote LSE Group products, services and activities. Nothing contained herein should be construed as granting any licence or right to use any of the trademarks or any other LSE Group IPR for any purpose whatsoever without the written permission or applicable licence terms.
COP28 offers a chance to act on disclosure and transition plans