August’s report from Inter-governmental Panel on Climate Change (IPCC) has been described as a “code red for humanity” and subsequently UN Secretary General António Guterres urged all stakeholders to make the UN Climate Change Conference, COP 26, a success. In this Q&A, Cees Vermaas, CEO at The International Stock Exchange (TISE), looks at the role stock exchanges can play in helping us to meet our environmental, social and sustainable goals.

1. How are exchanges helping the fight against global climate change?

At their heart, stock exchanges bring together companies who issue securities, whether bonds, equities or other instruments, and investors who want to invest and trade in those investments. In doing so, exchanges are undertaking various initiatives to help the fight against global climate change but ultimately our key role is to facilitate the flow of capital into sustainable investments.

TISE has recently joined the United Nations’ Sustainable Stock Exchanges Initiative (UN SSE), which encourages the allocation of capital into sustainable investments. UN SSE is a UN Partnership Programme whose mission is to provide a global platform for exploring how exchanges, in collaboration with investors, companies (issuers), regulators, policymakers and relevant international organisations, can encourage sustainable investment, including the financing of the UN Sustainable Development Goals.

I recently had the pleasure of formally pledging TISE’s commitment to promoting sustainability performance and transparency in the capital markets during correspondence with the UN Secretary General, António Guterres. This was part of TISE’s admission to UN SSE where we are now one of the 108 Partner Exchanges undertaking initiatives to facilitate the flow of capital into sustainable investments.

"I recently had the pleasure of formally pledging TISE’s commitment to promoting sustainability performance and transparency in the capital markets"

2. What are the green and sustainable initiatives you have developed?

Membership of the UN SSE puts us at the heart of global efforts to encourage sustainable investment and this is now backed by our new sustainable market segment, TISE Sustainable. The segment was launched in July as a comprehensive and reputable enabler for increased capital allocation towards environmental, social or sustainable activities. TISE Sustainable is Europe’s most comprehensive sustainable market segment and provides qualifying issuers and their securities with enhanced connectivity, credibility, transparency and visibility among investors.

With a straightforward application process and no additional fee, the segment is available to all TISE-listed issuers – including both bond and equity issuers – who comply with at least one recognised framework or rating. Investors can take comfort from the fact that the displayed issuers must have demonstrated their compliance to qualify for inclusion and that they are undertaking ongoing public sustainability reporting.

"TISE Sustainable is now an integral part of our offering at TISE, which is a major European professional bond market"

3. How do these initiatives relate to your wider business?

TISE Sustainable is now an integral part of our offering at TISE, which is a major European professional bond market. To further enhance this position, in August, we launched our new Qualified Investor Bond Market (QIBM) which is a dedicated exchange offering for the listing of bonds marketed to ‘qualified investors’ and it provides several compelling differentiators to other European exchanges.

Following the introduction of the QIBM, which came on the back of a record first half of the year, we have also had a record August for new listings. There were 109 newly listed securities during the month, which is more than any other August since the Exchange was established in 1998. It means that there are now more than 3,000 securities, with a total value of more than £450 billion, listed on TISE. 

Among both bond and equity listings, we are seeing an increasing trend towards more green, social and sustainable issuances and as such, a growing demand for not just admission to the Official List but also for prominence among peers on TISE Sustainable. Examples include listings from the world’s largest recycler of aluminium, Novelis, the largest sustainable property developer in the UK, Canary Wharf Group and Pfleiderer, a German headquartered company with 125 years’ history of sustainably manufacturing wood products.

4. What sort of changes have you seen and do you expect to see in relation to green and sustainable finance?

What we have seen in the last few years is a significant increase in capital allocation towards green and sustainable finance and although ultimately it does remain a small proportion of total investment mandates, it is clearly an area of potentially huge growth.

At the same time, there has been a significant maturing of the sector, for example through the development of accompanying frameworks and ratings, as well as a range of governmental and regulatory policy initiatives at a global, regional and national level. These changes have been accelerated by the pandemic, which has also broadened the focus of market participants from a concentration on the environment to a more holistic view of sustainability.

What I expect to see in the future is a further maturing and consolidation of this integrated pursuit of environmental, social and sustainable objectives. One example of this is the ‘Just Transition’ initiative which seeks to ensure that the transition to a net-zero economy is fair and does not disadvantage specific sectors of society.

"I expect that following the IPCC report and COP 26, exchanges will continue to play an increased and vital role in ensuring the efficient financing of green, social and sustainable initiatives"

5. How will exchanges continue to underpin green and sustainable growth?

I expect that following the IPCC report and COP 26, exchanges will continue to play an increased and vital role in ensuring the efficient financing of green, social and sustainable initiatives. 

At TISE we will continue to explore initiatives which will assist in enhancing sustainable investment by liaising with our peers and other market participants through forums such as the UN SSE, as well as through our memberships of the International Organisation of Securities Commissions (IOSCO) and the World Federation of Exchanges (WFE), as well as the Association for Financial Markets in Europe (AFME) and the International Capital Market Association (ICMA).

Recognitions and memberships are hugely important in putting a stock exchange, such as TISE, at the heart of policy making decisions on the future of capital markets. We intend play our full role in not only helping to mitigate the risks of climate change but through initiatives, such as TISE Sustainable, being active in helping to finance solutions which we all need for a sustainable future.

 This Q&A originally appeared in the Autumn 2021 issue of The European.