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Asia-Pacific Stock Exchanges Push for Tougher Sustainability Disclosure Policies

EHS Verdantix SSE

Will 2016 be a banner year for stock exchange sustainability reporting policies? The UN Sustainable Stock Exchanges (SSE) Initiative certainly hopes so with the goal to have “all World Federation of Exchanges [WFE] stock exchanges and SSE partner exchanges provide listed companies with guidance on sustainability reporting by the end of 2016”. In April 2016, for example, The Belarusian Currency and Stock Exchange joined the UN SSE Initiative as its 54th partner exchange and the Trop-X Seychelles Stock Exchange announced their commitment to publishing a sustainability reporting guidance document by the end of the year. 


To their credit, the UN SSE has been instrumental in establishing a consistent baseline for stock exchanges globally. In September 2015, a 36-page ‘model guidance’ document was published to provide a working template for stock exchanges to adopt. The World Federation Exchange (WFE) expanded this further by recommending 33 metrics including the seven ‘first generation’ sustainability indicators (employee turnover, energy, GHG emissions, injury rate, payroll, waste and water). As of April 2016, 15 stock exchanges have already published voluntary sustainability reporting guidance, with the first dating back to 2004 by the Johannesburg Stock Exchange (JSE). An additional 23 stock exchanges are currently committed to publishing a guidance document, with a further 39 SSE and WFE member stock exchanges yet to commit.

While the number of UN SSE signatories have grown from 6 to 48 members over the past four years, Verdantix analysis of the top twenty stock exchange’s by market capitalization found that nearly three-quarters were limited to optional voluntary disclosure policies. Only six of the top twenty stock exchanges had mandatory comply-or-explain policies - of which five are based in the Asia-Pacific regions of Hong Kong, India, Singapore and Taiwan. Similarly, the Shenzhen Stock Exchange and the Bursa Malaysia were the first to publish sustainability reporting guidelines after the JSE in South Africa.

For the most part, stock exchanges will rely on market norms and typically fall back on regulators to lead on the introduction and enforcement of strict mandatory sustainability disclosure requirements. For example, the London Stock Exchange’s comply-or-explain policy for corporate governance was introduced to align with the preexisting national UK Corporate Governance Code enforced by The Financial Reporting Council. There is also very little evidence to suggest that stock exchanges enforce mandatory disclosure rules with teeth. The New York Stock Exchange, for example, was fined $4.5 million by the US SEC in 2014 for failing to conduct business according to its own exchange policies from 2008 to 2012.

To learn more, peruse our Verdantix EH&S and sustainability research covering stock exchanges, The Future of Sustainability Disclosures, The Future of EH&S Information Management and more.