by Vikas Vij - Investors increasingly want access to information on ESG factors in order to evaluate listed companies. Leading global stock exchanges now recognize that corporate disclosure on sustainability performance is an important element in the creation of a stable financial system that advances consistent economic growth. Stock exchanges can be the critical lever to foster collaboration between investors, regulators and companies to improve corporate transparency and performance on ESG issues.
In pursuit of this objective, the World Federation of Exchanges (WFE) had released guidelines in 2015 for ESG-related metrics that companies should release to investors. Companies listed on the Federation’s 64 global exchanges were urged to report on 30+ metrics to help investors in their decision making. A key driver behind this move was the growing demand of large investors to have more comparable disclosures on sustainability to arrive at more accurate market valuations.
Now Singapore Exchange (SGX) has taken the lead to announce the launch of SGX Sustainability Indices. SGX’s partner, Sustainalytics, provided the ESG research and ratings for SGX-listed companies. The Sustainability Indices suite comprises four new indices, which include SGX-listed companies that are considered to be clear front-runners in ESG standards when compared to their peers.
According to Loh Boon Chye, CEO of SGX, investors across the world are placing increasing importance on ESG, resulting in significant growth of AUM (assets under management) allocated to ESG strategies and growing demand for transparent benchmarking tools.
SGX Sustainability Indices provide a transparent avenue through which investors can assess the sustainability practices of SGX-listed companies and identify ESG leaders in Singapore. They will also help to further profile SGX-listed companies with strong relevant credentials among a growing pool of ESG-aware international investors.
Commenting on the launch of SGX Sustainability Indices, David Smith, Head of Corporate Governance at Aberdeen Asset Management said that the company fully supports the integration of ESG into the investment process. As a long-term investor, Aberdeen firmly believes in the need to consider and fully understand all risks, rather than narrowly defined financial risks, that relate to a company’s long-term success.
Image Credit: Flickr via rogerbucher.com