After winning Stock Exchange of the year in Environmental Finance's Sustainable Investment Awards, Claire Dorrian, head of sustainable finance at London Stock Exchange, explains how it is innovating to help build on its strong track record.
Environmental Finance: What role do stock exchanges play in driving sustainable finance? How does the London Stock Exchange excel in that?
Claire Dorrian: Stock exchanges provide businesses with a platform to raise finance, enabling companies to unlock capital, which is key to helping the transition to a more sustainable economy and helping companies to hit their net zero carbon emission goals.
Exchanges have increasingly focused on providing guidance to help support issuers with understanding their disclosure requirements, which in turn helps investors gain access to consistent and comparable sustainability information, to inform their capital allocation decisions and drive sustainable investments.
The 2024 Annual Sustainable Investment Asset Owner survey by FTSE Russell, part of the London Stock Exchange Group (LSEG), found that 86% of asset owners with assets of $10 billion or more are implementing sustainable investment considerations into their investment strategies. That shows the importance of companies' disclosures to investors.
Where we stand out is our truly global multi-asset class offering across debt and equity capital markets. We see ourselves as a pioneer. For example, in 2015 we launched a dedicated green bond segment, which led to the creation of the Sustainable Bond Market. We were also the first exchange to launch a green equity offering, with the Green Economy Mark (GEM) in 2019.
EF: How has London Stock Exchange grown its offering in sustainable finance?
CD: Sustainable finance is a big focal point for a variety of different capital raising offerings, providing companies with the ability to raise international capital from sustainability-focussed investors.
In the decade since we launched the green bond segment, more than 180 different issuers have raised in excess of $428 billion across 888 bonds, including $38 billion in the year to date. As the market has continued to evolve, we have evolved our sustainable fixed income offering, expanding the green bond segment to the Sustainable Bond Barket in 2019 and becoming the first exchange to launch a transition bond segment back in 2021.
The Green Economy Mark offers investors a way to identify listed companies and funds that derive 50% or more of their total annual revenues from products and services that contribute to the global green economy, using the FTSE Russell Green Revenues Classification System as the methodology.
As at the end of June, 89 companies and funds have the Green Economy Mark, with a market capitalisation of £156.4 billion ($214.7 billion). We started with 74 companies and funds and a market capitalisation of £55 billion in 2019.
We were the first exchange to use the public markets to create a voluntary carbon market designation, helping investors to identify climate change mitigation projects to invest in and enabling dividends to be issued in the form of carbon credits.
The sustainability landscape has really evolved over the years. There is a need for constant evolution, whether that is looking at different asset classes, encouraging companies to continue to mitigate greenwashing risk, or enhancing transparency and disclosure.
As the London Stock Exchange is part of LSEG, we can leverage LSEG global data and analytics solutions to enhance our sustainability solutions for listed companies. We can make environmental, social and governance (ESG) scores and data available to clients and offer a deeper understanding around carbon performance, or data in the compliance and voluntary carbon markets as well.
We are always exploring new ways in which we can support companies on our markets to achieve their goals and their transition towards a more sustainable business model. That entails considering how we look at different data sets that companies might need, and how they are responding to the evolving regulatory landscapes. How we think about the private company space is also important.
EF: If it was a sector, the Green Economy Mark cohort would be the fifth largest in terms of capital raised over the past two years. What does its future and further development look like?
CD: We will launch the next cohort of Green Economy Mark companies later this month, and it is an opportunity for us to celebrate with the companies that have it. The Green Economy Mark is valued by both investors and corporates, and we are seeing that it is also useful for building client relationships and partnerships.
The Green Economy Mark highlights some businesses that you may not ordinarily associate with positive environmental impact. From low-cost computing to the circular economy, from advanced materials to clean power, they are all driving economic growth, creating green jobs, spurring technological innovation, and generating environmental benefits.
EF: Beyond listed offerings what else is the London Stock Exchange doing to support issuers in the sustainable finance space? What other tools are there that you offer?
CD: We have a wealth of information, tools, and data that companies and issuers can access. The Issuer Services platform is a hub for companies to access information to help them, for instance, understand relevant regulatory requirements or access dedicated training sessions that we have delivered with partners like the UN Sustainable Stock Exchanges Initiative. The platform offers ESG data and analytics tools to help companies understand the data that investors are using to assess sustainability risks and opportunities.
In order to support issuers in a quickly evolving disclosure landscape, we launched a sustainability reporting guidance document last year. This resource provides companies with practical frameworks and best practices to enhance transparency, align with global standards, and effectively communicate their sustainability strategy to investors. The guidance explains how companies can gain strategic value from the reporting process, rather than it being purely a compliance exercise.
Finally, we create platforms for open dialogue and knowledge exchange - helping companies navigate complex sustainability challenges and progress toward their ESG goals. One example of this is our Chief Sustainability Officer network, which we established for CSOs to share sustainability best practice.
Discover more about LSEG sustainable finance at the London Stock Exchange