First of all, let’s discuss the concept of SSE. Essentially SSE is a joint initiative of the United Nations Conference on Trade and Development (UNCTAD), the UN Global Compact, the United Nations Environment Programme Finance Initiative (UNEP-FI), and the UN-supported Principles for Responsible Investment (PRI). In the year 2009 UN started this project to promote sustainability of the global stock exchanges.
The objective of SSE: The main objective of SSE initiative is to encourage sustainable investment by enhancing corporate transparency and performance on Environment, Social and Governance (ESG) aspects.
The SSE initiatives mainly cover six of the 17 UN Sustainable Development Goals which are
Now let’s discuss how this works practically and it’s relation with stock exchanges.
There is no uniform definition of what constitutes an ESG index but generally we can say it is an index of listed companies that have been evaluated for their performance against a range of environmental, social, and governance criteria.
Like The OMXS30 ESG Futures are futures based on an ESG-screened version of the benchmark OMX Stockholm 30 Index (It is the Nasdaq Stockholm’s tradable index and consists of the 30 largest capitalized Swedish shares). Companies that derive more than a certain proportion of their revenues from defined activities (e.g. alcohol, tobacco, fossil fuels, pornography) are excluded from the index. The ESG screening is done by a third-party ESG provider.
BSE is the first stock exchange from Asia to join Sustainable Stock Exchange Initiative.
After the statement of the United Nations Secretary-General Antonio Guterres who said in June 2020 that “The pandemic has demonstrated the fragility of our world. It has laid bare risks we have ignored for decades: inadequate health systems; gaps in social protection; structural inequalities; environmental degradation; the climate crisis.”
Now let’s see how the investors are participating in ESG funds before and after covid :
Data from the global fund-flow tracker, EPFR, revealed that equity funds that offered SRI or ESG investing saw record inflows of $168.74 billion in 2020, a huge jump from the $63.35 billion seen in 2019. In addition, a BlackRock survey in December 2020, conducted on 425 investors across 27 countries representing an estimated $25 trillion in assets under management (AUM), revealed that investors plan to double their ESG investments over the next five years. This would take the ESG AUM from 18 percent in 2020 to 37 percent by 2025. As of early 2021, about $2.96 trillion had been invested globally with an ESG focus. Europe leads in terms of growth in sustainable assets, followed by the Americas and Asia Pacific. (Source: Moneycontrol)
Let’s see how securities regulators can support the SDGs: an action plan
(Credits: Mohammed Omran, Executive Chairman , Financial Regulatory Authority, Egypt)
Last but not least how it can brings revolution, essentially company comes in secondary market for fund raising with a vision of expansion and development if ESG is implemented significantly then it will invite structural change in core operations in many industries.
So we can say in coming days on reality ground if business takes care the society, society will take care the business.
Happy Reading.. !!!
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