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Jul 08, 2024

Sustainability and exchange listing standards: So happy together

Bolstering your green credentials may be easier than you think

Sponsored content Despite some increased negative rhetoric and a softening of language around the push for sustainability in some arenas, people continue voting with their dollars for more focus on sustainability. People vote not only by what they choose to buy, but also who they work for and, importantly, where they invest their money. Investors are increasingly demanding that the companies they support prioritize environmental sustainability and are backing companies that implement meaningful sustainability initiatives.

How does a company currently demonstrate it has made a credible commitment to its environmental promises and initiatives? So far, the only channel has been marketing. Corporations have been talking about sustainability for years, often in glossy reports filled with pictures of a bucolic environment and smiling people, but these reports are frequently met with skepticism.

GreenBiz reported in May 2023 that 96 percent of the S&P 500 and 81 percent of Russell 1000 companies are publishing sustainability reports. But according to Forbesreporting, only 38 percent of Americans believe corporations most or all of the time when they make claims about environmental commitment, and 41 percent say companies are doing a poor job at reducing their carbon footprint. Their skepticism also seems based in the reality that greenwashing news stories regularly appear in media. The millions of dollars companies spend on the creation of a sustainability report is not having the intended effect of making their consumers and investors believe a firm’s green efforts are done in earnest.

Conveniently, there is a historical example to use as a blueprint as a way for companies to build trust. In the early days of Wall Street, companies had a hard time building trust with the public and investors in a different area: their financial stability and outlook. Stock exchanges were the institutions that took on the mission of helping improve that trust gap and they have continued to adopt more and more stringent financial requirements over time for listing companies, including publishing various detailed accounting and financial reports and disclosures, appointing an approved transfer agent, obtaining permission to issue initial or subsequent shares, and so on.

The SEC has stated that the development of meaningful listing standards by exchanges was of substantial importance to earning the trust of markets and the investing public. The outcome of ever-improving listing standards has been steadily enhancing public and investor confidence in a listed company’s operations, stability, business conduct and ethics. As the last 200 years of history shows, this steady increase in confidence has been one of the root causes of the creation of some of the largest, most successful companies in history, which have created trillions of dollars in value for millions of people globally.

If the answer to a corporate credibility problem is abiding by a stock exchange’s listing standards, does this mean sustainability necessitates massive capital market disruption? The answer, thankfully, is no. The creation of a new securities exchange focused on green governance could exist alongside the current financial-focused exchanges to everyone’s benefit. Companies eager to earn missing trust from green-minded consumers and investors around sustainability efforts could dual-list on the new green exchange, with governance standards specifically designed to promote corporate sustainability efforts, without having to leave their incumbent primary exchanges.

Dual-listing is a well-understood and well-used tool for public companies, both in US markets and globally. As a result of a company dual-listing on the new green exchange, the green listing standards would mandate the transparency, structure and accountability around sustainability reporting. The standards let companies demonstrate to shareholders and stakeholders with verifiable data that they are not greenwashing and are credibly committed to the environment and their sustainability initiatives. They also present an opportunity for corporate officers to demonstrate the link between sustainability and improved financial performance. Done right, it is possible for consumers and investors to have faith in a company’s financials and its sustainability initiatives.

With apologies in advance to filmmaker Oliver Stone, we could rewrite a famous monologue from his film Wall Street: ‘The point is…green, for lack of a better word, is good. Green is right. Green works. Dual-listing on a green-focused exchange makes environmental commitments credible. It clarifies, cuts through and captures the essence of the corporate evolutionary spirit. Green in all its forms – carbon footprint reduction, biodiversity preservation, recycling programs, increased energy efficiency – will mark the upward surge of consumer, employee and shareholder satisfaction. And green – mark my words – will not only make US corporations more trusted, resilient and future-proofed against the effects of climate change, but it will also promote the eagerly awaited sustainability leadership of the United States of America on the world stage.’

To learn more about dual-listing on an exchange that will feature strong green governance listing standards and can help position a company for building trust and long-term financial success with consumers and investors, visit the Green Impact Exchange website.

Tomorrow’s blue chips will be green.

Alex Kontoleon is chief strategy officer of Green Impact Exchange

Alex Kontoleon

Chief strategy officer at Green Impact Exchange