Investors Say Stock Exchanges Need a Revised Strategy With Required ESG Reports

(September 14, 2010) — A group of institutional investors, with approximately $558 billion in assets under management, is pushing global listing authorities and stock exchanges to demand that sustainability reporting become a part of their listing rules.

To date, the coalition includes Aviva investors, French reserve fund FRR, SNS asset management, Triodos Investment Management, Mn Services, The Co-operative Asset Management and Northwest & Ethical Investments.

According to a statement by Aviva Investors, this coalition of investors will write to the CEOs of stock exchanges to make their demands, part of an engagement initiative launched by Aviva Investors and facilitated by the UN-backed Principles for Responsible Investment (PRI) in 2009. The mission of the group is to encourage a global listing environment that requires companies to become more mindful of a sustainability strategy.

“We…believe that stock exchanges can play a crucial role in helping to create more sustainable global capital markets because of their ability to directly influence and monitor the operations and strategy of companies seeking to access the equity markets. We are sending a strong signal that, all things being equal, Aviva Investors would prefer to trade on stock exchanges that maintained this listing provision,” said Paul Abberley, CEO of Aviva Investors London, in a statement.

James Gifford, Executive Director of the PRI added: “Disclosing ESG performance data in a systematic way gives investors additional confidence that a company is effectively managing its risks and opportunities. The Sustainable Stock Exchanges initiative, which is led and supported by investors, points to a clear business case for global stock exchanges to play a role in promoting transparent and sustainable financial markets.”

Yet, excluding changes at the Singapore, Johannesburg and Istanbul Exchange, Aviva Investors has said it is still waiting to see a serious commitment from stock exchanges to make noticeable changes.

Separately, the Institutional Investors Group on Climate Change (IIGCC) has outlined a list of guidelines to help pensions understand climate-related risks and opportunities in their portfolios. A report released in June by the IIGCC revealed that twice as many investors are asking stock and bond managers about their global-warming policies compared to two years earlier. However, integration of these policies into investment mandates has been slow to takeoff.

“The fact that asset owners now question their asset managers about their climate change policies prior to making a selection is a clear signal of increased awareness on climate change in the investment community,” said Ole Beier Sørensen, the new chairman of IIGCC. “This progress will be further strengthened if attention to climate change is applied throughout the decision‐making process, from investment manager selection to Investment Manager Agreements.”

The London-based Institutional Investors Group on Climate Change has 58 members who manage about 5 trillion euros ($6 trillion) of assets.