Rio+20: Stock exchanges asking for more regulation

By Palle Ellemann, Senior Consultant at GES

Rio+20 has taken off! The city is buzzing with life and all over Rio you will see signs for Rio+20 and events taking place. Rio is a confident and proud host of Rio+20, but it has not always been like that. In the 1970s and the first half of the 1980s, Rio was suffering as a city in opposition to the military dictatorship that ruled Brazil up until 1985. The Eco 92 UN conference on environment and development was a turning point for the city, where almost USD 1bn was invested in infrastructure. The successful event boosted Rio’s confidence and the trend has been upwards since then. 20 years later, Rio is re-inviting the world to a Brazil full of confidence. Economic growth has been strong for a long period and Rio+20 is just the first leg in a series of events putting Brazil in the focus of the world. In 2014, Brazil will host the FIFA World Cup football tournament and Rio is the host of the Olympics in 2016. No wonder that Brazil is full of confidence.

GES has a special connection with the Rio+20, because our company was established shortly before the Eco 92 event in Rio and therefore also claims 20 years anniversary this year. GES is built on the premise that business and investors CAN make a better world. 20 years later we have come a long way with more than 1,000 institutional investors worldwide committed to the UN Principles for Responsible Investment, but there is still a lot of work to do. Hopefully, the Rio+20 events can renew and bring the commitments of governments, businesses and NGOs to the sustainability agenda to the next level.

Monday I joined the Sustainable Stock Exchanges Initiative 2012 Global Dialogue. The SSE Initiative was established in 2009 with the purpose of sharing practices and developing new ideas how stock exchanges can encourage ESG disclosure and improve companies’ sustainability performance. The leading stock exchanges in this field are the Brazilian Bovespa, the Johannesburg Stock Exchange, and NASDAQ OMX, where GES is providing the research for the sustainability indexes in the Nordic region.

The hot issue of the debate was whether or not to have more standardised regulation on ESG reporting for listed companies. The Vice Chairman for NASDAQ OMX, Meyer Frucher advocated together with Bovespa for a more level playing field. The two will bring the issue into the World Federation of Exchanges in order to secure a more consistent support for Global Compact among the stock exchanges and develop a standard for sustainable development in the industry. The European Parliament Rapporteur on CSR, Richard Howitt, was more reluctant to impose more regulation on stock exchanges and stressed that he was expecting within two years to have a unified framework for integrated sustainability reporting. The new framework is intended to be a driver for more consistent and better ESG reporting.

The session concluded with a signing ceremony, where NASDAQ OMX, Bovespa and the stock exchanges in Istanbul, Johannesburg and Egypt committed to promoting ESG among companies, investors and regulators. And the Secretary General of UNCTAD, Supachai Panitchpakdi, announced that moving forward UNCTAD will to a higher extent recognise the stock exchanges taking the lead on promoting ESG.

First day in Brazil is coming to an end. Now, off to Sao Paulo for engagement meetings in the coming days. During the next week, we will discuss sustainability with 10-12 companies in our investor clients’ portfolios and provide our input and ideas how these companies can better manage ESG risks and opportunities. This will be very interesting!

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