The London Stock Exchange: assisting businesses on their way to achieving 'net-zero' emissions

Published on: 24 February 2022
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The London Stock Exchange has already played an important role in channelling capital to the green economy through its Green Economy Mark and Sustainable Bond Market. It is now considering expanding this to the voluntary carbon market.

The London Stock Exchange is shifting its focus to the green economy. Its Green Economy Mark, introduced in 2019, assists investors in identifying companies that generate the majority of their revenue from green sectors. Its Sustainable Bond Market has assisted issuers in raising over $140 billion in debt capital. It is also planning a novel initiative to direct funding to voluntary carbon markets.

"Stock exchanges exist to connect those who have capital with those who need capital to achieve a goal,"

said Julia Hoggett, CEO of the London Stock Exchange plc.

"Those objectives naturally change over time, as do companies, the nature of their businesses, and what generates growth."

"The City has a critical role to play in ESG and in facilitating a just transition to net zero... and as the London Stock Exchange Group, we have a fantastic opportunity to apply full force to the problem."

Speaking to the Climate Biz podcast at the end of last year, Hoggett, who took over as CEO of the London Stock Exchange early last year, outlined three roles that the London Stock Exchange Group in general, and the London Stock Exchange in particular, have in working to support the transition.

The first is to advocate for improved ESG and climate disclosure for investors. Last October, the London Stock Exchange became the first bourse to issue climate reporting guidance based on the UN Sustainable Stock Exchanges' Model Guidance on Climate Disclosure, which is consistent with the recommendations of the Task Force for Climate Related Financial Disclosures (TCFD).

LSEG companies provide a variety of ESG data products and green finance indexes to assist investors in identifying green investment opportunities. One of the oldest ESG equity indexes is FTSE Russell's FTSE4Good Index, which recently celebrated its 20th anniversary. The FTSE TPI Climate Transition Index series was recently launched by the company. It accounts for the risks and opportunities associated with the transition to a low-carbon economy using climate data from the Transition Pathway Initiative (TPI). Last November, LSEG and TPI announced a partnership to establish the TPI Global Climate Transition Centre at the London School of Economics, with the goal of expanding the TPI's stock universe from 400 to 10,000 and expanding coverage beyond global equities into other asset classes such as fixed income.

The second is assisting in the allocation of funds to the green economy. According to Hoggett, if the green economy were classified as a separate sector, it would be the fourth largest in terms of capital raising in the last three years. Since the London Stock Exchange launched its Green Economy Mark, which recognises London-listed companies that generate more than half of their revenues from green environmental products and services, 117 companies with a combined market capitalisation of £157 billion ($213 billion) have received it.

Source: LSEG news

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