30 June 2020
London Stock Exchange (LSE) impressed judges by both the breadth and depth of its sustainable investment innovation, including the launch of its Green Economy Mark (GEM) and sustainable bond market.
In October, LSE was the first exchange to launch a sustainable bond market (SBM) with clear segments for green, social and sustainability-labelled bonds to reflect that different investors are interested in different parts of the market. LSE also introduced a green issuer segment for those firms with over 90% of green revenue to issue unlabelled bonds to the SBM.
The LSE's GEM certifies that a stock generates at least half of its revenue from 'green' products and services. Launched in October with an initial 74 issuers, it is intended to incentivise disclosure of green revenue by companies. Several recent initial public offerings – including smart meter firm Calisen – have sought the GEM ahead of their listing as a useful tool for marketing to increasingly ESG-concerned investors.
LSE told Environmental Finance both initiatives reveal the value of LSE being part of a larger financial markets infrastructure group. The "robust" green revenue data collected by its indexes stablemate FTSE Russell has supported both innovations.
For LSE, integration across other units of the London Stock Exchange Group (LSEG) – including adding the GEM to its secondary market trading platform, Turquoise – is critical to support sustainable investment growth.
"Collaborating across LSEG’s businesses is key to our approach – leveraging FTSE Russell’s expertise to underpin the GEM and SBM, as well as adding benchmarking and analytics tools to drive visibility of these companies in secondary trading," said LSE interim chief executive Denzil Jenkins.
"Through these initiatives we are enabling both access to funding for innovative companies, as well as providing investors with the data and information they want to help inform their investment decisions. Integration of sustainable finance across markets infrastructure is key to supporting its continued growth and adoption."
In the near future, LSE said it was revising its ESG disclosure guidance to issuers and is examining other areas for innovation to support its issuers. EF