Exchanges globally agree framework for green equities
The World Federation of Exchanges (WFE), the global body for exchanges and CCPs, today announced its industry-wide WFE Green Equity Principles, the first global framework for designating stocks and shares as green, thereby countering greenwashing and supporting the enhanced flow of funding towards more sustainable economies.
The Principles, agreed upon globally by members, bring the industry together with a harmonised definition. They are designed to be a framework, consisting of ‘’WFE Green Criteria for Equities’’ and the ‘’WFE Green Equity Classification.’’ The framework is based on the following five overarching pillars:
- Revenues/investments
- Use of a taxonomy
- Governance
- Assessment
- Disclosure
The purpose of the WFE Green Equity Principles is to enable:
Exchanges to:
- promote improved access to capital by issuers whose activities are primarily green; and
- provide investors with additional information on green activities to aid their capital allocation decisions.
Issuers to:
- raise their profiles among investors that are actively looking to deploy capital to companies committed to sustainability;
- use the classification as a marketing and communications tool; and
- increase visibility of their green credentials and commitment to the green economy which can help to mitigate against greenwashing.
Investors to:
- have information that will assist them with their investment decision-making.
Nandini Sukumar, CEO of the WFE, said: “This is a milestone in sustainable finance. The exchange industry has worked together over the last year to agree on the Principles which are a structured framework. The WFE Green Equity Principles provide a carefully evaluated structure within which exchanges set criteria for issuers and investors to demonstrate their green credentials. Investors should be able to have greater visibility of issuers who have green activities in a way that is rigorous and that counters greenwashing. Exchanges strive to bring clarity, consistency and rigour to the concept of green and to counter greenwashing.”
The WFE Green Equity Principles are the first step within a longer-term roadmap on which the industry has agreed. In subsequent phases, the WFE will publish an accompanying guidance note to the Green Equity Principles. The WFE will then open both to public consultation, seeking wider stakeholder feedback.
The work is taking place within the WFE’s Sustainability Working Group (SWG), the industry forum for all sustainability professionals in market infrastructure, and the group formally mandated to work on all public policy, industry-led standards and guidance on ESG globally for exchanges and CCPs.
About the World Federation of Exchanges (WFE)
Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 25% are in Asia-Pacific, 58% in EMEA and 17% in the Americas. WFE’s 91 member CCPs collectively ensure that risk takers post some $1.3 trillion (equivalent) of resources to back their positions, in the form of initial margin and default fund requirements. WFE exchanges are home to 57,656 listed companies, and the market capitalization of these entities is over $101.17 trillion; around $146.29 trillion (EOB) in trading annually passes through WFE members (at end of 2022).
The WFE is the definitive source for exchange-traded statistics and publishes over 350 market data indicators. Its free statistics database stretches back more than 40 years and provides information and insight into developments on global exchanges. The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities’ goals of ensuring the safety and soundness of the global financial system.
With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policy makers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system.
