With stock exchanges in Malaysia, Singapore and Hong Kong reviewing their sustainability reporting guidance for listed companies, Asia is taking a leading role in promoting corporate transparency. This is a positive development not only for the region but also for the global economy.
Why? Because increased transparency on sustainability impacts is an essential means by which exchanges contribute to building the trust needed to ensure well-functioning, stable and resilient capital markets.
That’s my message in brief but of course there’s more to say.
One of the most exciting aspects of the work I do at GRI is engaging with stock exchanges around the world to raise awareness about all of the ways sustainability reporting by listed companies can benefit capital markets, business and society.
Stock markets are crucial components of the global economy. They bring companies and investors together and create pools of capital that facilitate corporate and economic growth. An ever increasing number of market regulators and stock exchanges worldwide are calling upon their listed companies to disclose their ESG impacts, risks and performances.
Already 11 exchanges reference GRI - the world’s most trusted and widely used standard for sustainability reporting.
The Asia-Pacific region has an important role in this debate, not only as a growing powerhouse on the world economic stage, but also because the region is disproportionally affected by critical sustainability issues such climate change, human rights, corruption and many others.
In recent years, capital market players in Singapore, Taiwan, Thailand, India and Pakistan have encouraged or required listed companies to report on sustainability matters using GRI.
Here are two good reasons why more of Asia’s stock markets should join the sustainability club:
Investors need sustainability information
Investment decisions are based on trust. The best decisions require as much relevant information about an investment as possible. This includes financial reporting as well as many other risks areas that are not reflected in financial reports. In his way, sustainability information that is non-financial (risk that is not reported in financial statements) really represents a risk for investors.
This is why transparency on sustainability impacts leads to stronger risk management, empowering informed decision-making by both organizations and investors, while enhancing stakeholder trust.
Other important global initiatives such as the World Federation of Exchanges (WFE) also seem to share this perspective. WFE has gone so far as to create the Sustainability Working Group which includes representatives from a number of Asian stock exchanges: BSE India Limited, Bursa Malaysia, Japan Exchange Group, Korea Exchange, Shenzen Stock Exchange, Singapore Exchange, Stock Exchange of Thailand, and Taiwan Stock Exchange.
A recent report from this group indicates that investor inquiries regarding sustainability information are on the rise. So it only makes sense that stock exchanges should encourage transparency of sustainability information to respond to this clear growing demand in the market.
Stock exchanges are well positioned to promote sustainability
I believe stock exchanges can play a role in fostering inclusive and sustainable development and that they are uniquely positioned to promote improvements in corporate sustainability. Companies are keen to have access to capital to further business objectives, which is why they meet stock exchange listing requirements and issue shares on the market.
The desire to tap into these pools of capital is a powerful motivator for businesses, which is why stock exchanges can do a great deal to promote ESG reporting. Doing so will help catalyze a shift towards inclusive and sustainable economic growth.
And stock exchanges have a number of means of encouraging better decision making through transparency: via recommendations and listing requirements, by participating in sustainability initiatives and leading by example and reporting on the stock exchange’s own sustainability impacts.
This piece was exclusively written for Eco-Business. Teresa Fogelberg is GRI’s deputy chief executive and heads the Government Relations, International Organizations, Development and Advocacy Team, which works to enable smart policy on sustainability around the world.
This includes engaging with capital markets, national regulators, governments, the United Nations and other international organizations. GRI is an international independent organization that helps businesses, governments and other organizations understand and communicate the impacts of business on critical sustainability issues such as climate change, human rights, corruption and many others.