The rise of Green Finance has begun to gain significant traction over the last few years, and has been almost exclusively driven by investors as there is a huge urge to invest in any asset labelled as “sustainable.” The term is usually used as a label for activities related to the interaction between the environment and finance and investment, usually in investing in financial products or services that actively provide benefits to the environment.
The London Stock Exchange (LSE) has been actively supporting the transition to a sustainable, low carbon economy for many years, and their position at the centre of financial markets across the globe puts them in the perfect position for them to support both issuers and investors in their journey to become green. The exchange recently held a webinar in conjunction with RISE London, the “Home of Fintech” where the senior advisor of green finance, Adrian Rimmer, spoke about how the exchange is working to help drive the shift towards this growing sector.
In this session, attendees were told the three key areas the LSE are focusing on when it comes to green finance; the first is helping to drive best practice and disclosure. According to Rimmer, one of the fundamental roles of a stock exchange is to have strong, trusted information flows between those seeking capital and those with capital to invest. “Climate disclosure is another part of what a quality marketplace does,” said Rimmer, “and so we’re spending a lot of time helping our issuers to understand what they should be doing and to match the information requirements of investors.”
They are also aiming to support the growth of new companies, with many new product services and even new industries being created and growing rapidly. They plan to help those companies scale up and gain a greater foothold in the market.
Lastly, they will look across all of the companies that are listed on their markets, and all the countries that control markets, for example issuing bonds, and help them to raise the capital they need to support the transition to a low carbon economy.
In conjunction with these aims, Rimmer also discussed a series of initiatives that have been launched to promote them and green finance itself, making it easier for both investors and issuers to recognise and partake in the transition.
One of these initiatives is the Green Economy Mark launched in 2019, which recognises companies, investment funds and equity issuers on the exchange that have at least 50% of their annual revenue coming from products and services that actively contribute to the global green economy. This is initiative is offered to issuers on a voluntary basis and incorporates the Green Revenues data model developed by FTSE Russell. This is particularly advantageous to investors as it helps them to understand what companies that are actively contributing to the transition and driving the green economy.
They also launched the Sustainable Bond Market (SBM), which provides dedicated segments for social and sustainability bonds, enabling investors to distinguish between different types of sustainable bonds. This initiative was born out of the rapid growth of companies wanting to issue sustainable bonds to clients, and so the SBM allows these companies to be more visible as well as giving them the opportunity to innovate in new ways.
It was clear from this webinar that the London Stock Exchange is leading the way in the growth of green finance, and will continue to provide support to issuers and investors as they navigate the global shift towards more sustainable economies.