On November 4th, the World Federation of Exchanges (WFE) released a set of 34 sustainability measures that include environmental, social and governance indicators. WFE recommends that its member exchanges implement these indicators into the disclosure requirements for listed companies.
The WFE is an industry trade organization made up of 99 organizational members, including 64 regulated exchanges (such as NASDAQ and NYSE) across the globe. More than 44,000 companies list on WFE exchanges. It acts to establish standards for publicly regulated securities markets and to ensure good international corporate governance.
WFE recommends reporting indicators such as ratios of CEO to median pay and male to female pay; employee turnover; workforce and board gender diversity; injuries; greenhouse gas emissions; water and waste management; child and forced labor; corruption and anti-bribery; and tax transparency. It also provides advice on how to roll out these new reporting metrics.
The guidance, while voluntary, could lead to greater corporate transparency and listed companies would benefit by attracting more long-term investors and identifying opportunities to save costs and lower risk. Long-term sustainability has gained traction in financial markets recently, particularly as institutional leaders warn that issues such a climate change will lead to financial crisis unless the private sector and its regulators do more to ensure transparency regarding current and future carbon emissions.
The WFE’s Sustainability Working Group, the largest working group within the WFE with a mandate to foster best sustainability practices for member exchanges, began developing the recommendations last year. Representatives from 22 global stock exchanges met over the course of 18 months to explore and come to consensus on the environmental, social and governance data to include.
Implementation of the WFE’s disclosure requirements can meet the commitments of the UN’s Sustainable Stock Exchanges initiative, for those member exchanges that have signed on. In fact, the WFE’s Sustainability Working Group provided input to the UN’s model guidance (published in September) as well, and the model guidance serves as a starting point for the guidelines developed by WFE.
An overview of the guidance can be found here and the specific measurements and breakdown of the recommendations can be found here.