The Nasdaq OMX Group is lending its voice to the growing
debate over the role of exchanges in requiring listed companies
to disclose their performance on ESG issues, as environmental,
social and governance matters are called. Nasdaq, however, is
seeking to promote ESG reporting standards for listed companies
without putting forth actual requirements, and some observers
say that amounts to more talk than action.
Meyer Sandy Frucher, vice chairman of Nasdaq OMX
Group in New York, says the exchanges approach of seeking
coordinated action among exchanges will prove more effective
than exchanges adopting reporting standards on their own. But
Nasdaq has neither defined which sustainability factors it
thinks are the most important for its listed corporations, nor
provided details on current discussions with other exchanges.
It does, however, support the reporting standards for companies
set out by the Amsterdam-based non-profit organization the
Global Reporting Initiative (GRI). Under these standards,
companies report key indicators of their performance on
economic, environmental and social issues, with the last broken
down into the subcategories of labor, human rights, society and
product responsibility. This year the exchange also plans to
host one conference a quarter on the topic.
Aviva Investors head of sustainable research and
engagement in London, believes more aggressive action is
necessary. Waygood says emerging-markets exchanges have taken
the lead on the issue. BM&FBovespa, Johannesburg Stock
Exchange and the Istanbul Stock Exchange are signatories to the
United Nations Principles for Responsible Investment, an
initiative that began in 2006 to encourage institutional
investors to embrace ESG, while the other major exchanges are
not. Many emerging-markets exchanges also provide
sustainability guidance for their listed companies.
BM&FBovespa has taken matters a step further. In 2012 the
Brazilian exchange began required each listed company to either
provide a sustainability report or explain why it does not.
South Africa, India and Hong Kong are also incorporating
sustainability into their listing rules. In many ways,
these emerging markets are running ahead of the
developed-country exchanges on this agenda, says Waygood.
Although Aviva pushes for greater disclosure from companies it
invests in, Waygood believes it necessary for regulators to
mandate greater disclosure. We consider that the
significant gap in corporate disclosure of sustainability
information is a market failure that requires government
intervention to correct, he says.
Frucher insists Nasdaq remains committed to ESG issues. To
encourage broader change, it has adopted ESG reporting for its
own operations. At the end of last year, Nasdaq OMX published
its first sustainability report based on GRI reporting
standards, and it was issued as a separate report rather than
an integrated one, which is combined with financial
statements. In that sustainability report, Nasdaq OMX said it
is purchasing renewable energy from wind turbine farms, and its
offices are being remodeled to LEED specifications. It also
reported on key indicators such as direct energy consumption by
its primary energy source and the benefits it provides to
full-time, permanent employees and to employees covered by