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London Stock Exchange beefs up sustainable investment offerings
Two major new initiatives designed to meet growing demand for sustainable finance products were launched by the London Stock Exchange (LSE) late last week, according to Business Green website.
The Green Economy Mark recognizes listed companies with 50 percent or more of revenues from products and services that contribute to the global green economy. The methodology underlying the mark incorporates the Green Revenues data model developed by LSE’s sister company FTSE Russell.
It can be used by both ‘pure-play’ green technology companies, as well as those working across industries that make significant contributions to the low carbon transition.
LSE said it will offer the Green Economy Mark to issuers on a voluntary basis.
The new classification was debuted alongside the launch of the Sustainable Bond Market (SBM), which aims to help meet growing demand for across the green bond market.
The SBM builds on the 2015 launch of the LSE’s Green Bond Segment by including new dedicated segments for social and sustainability bonds.
The new segments – or parts of the main market – aim to help investors distinguish between different types of sustainable or green bonds, based on independently verified frameworks and use of proceeds, LSE said.
In addition, the bourse has created a new Issuer-Level Segment for bonds by issuers whose core business activity is aligned with the green economy. The move enables eligible green economy businesses with more than 90 per cent green revenues to admit bonds to SBM, it said.
In a bid to alleviate concerns amongst some investors that proceeds from green bonds could be used for controversial or unsustainable projects, issuers on the SBM are mandated to produce annual post-issuance reports, provide transparency to investors on the ongoing use of proceeds, and demonstrate continued eligibility to SBM over the lifetime of the bonds.
Nikhil Rathi, chief executive of the LSE and director of international development, said the green economy classification for equities was the first to be launched by an exchange.
“We continue to see growing investor demand for actionable climate related financial information, with global asset allocations to green and sustainable finance increasing each year.
“The launch of the Sustainable Bond Market and the Green Economy Mark underlines our commitment to finding innovative solutions to support issuers and investors in the transition to a greener economy,” he said.
LSE also revealed it is consulting with issuers, investors, advisors and the wider market on principles and classification criteria of a potential Transition Bond Segment to support companies across industries in their transition to low-carbon, sustainable business models.
The latest moves comes after the LSE last month caused controversy when FTSE Russell ditched a decision to label oil and gas firms as “non-renewable” just three months after making the change. A spokesman for the LSE said that it had no further comment to make on the issue.
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