The World Federation of Exchanges (WFE) and the United Nations Sustainable Stock Exchanges (SSE) initiative have published guidance in a joint paper called How Derivatives Exchanges can Promote Sustainable Development.
The document was produced by an international advisory group comprising derivatives and stock exchange representatives and experts from the sector as well as from the wider ecosystem.
The project, which builds on an initial WFE White Paper on the subject, is in response to demand from several derivatives exchanges to the SSE to further expand on the subject.
Although the position of stock exchanges and equity markets has been well-explored over the past decade, the report notes that the potential role of derivatives and derivatives markets is less understood.
The report highlights the progress being made but also fills the gaps by identifying ways in which derivatives exchanges can play a role in supporting the sustainability transition.
It provides an Action Menu that recommends engaging in partnerships, driving standardisation, enhancing transparency and linking market participation to sustainability. The list also includes introducing ESG data products and listing tradeable ESG products.
The 71 member SSE Derivatives Exchanges Advisory Group was chaired by CME Group’s Julie Winkler, Chief Commercial Officer and Owain Johnson, Managing Director and Global Head of Research and Product Development.
They said, “This report represents the first work by the SSE to extend beyond equity markets and stock exchanges into listed derivative markets. It reviews the current approaches of derivatives exchanges in sustainability and suggests areas of further work and reflection.”
They added, “Without the risk management products and the forward price discovery that exchanges can bring, a transition to a more sustainable future will be more difficult, costly, and significantly less efficient.”
Nandini Sukumar, Chief Executive Office, WFE noted, “Derivatives exchanges have long been an important part of the WFE, and we are proud to publish today’s report jointly with UN SSE and provide guidance and recommendations to our members on what it means to be a sustainable derivatives exchange.”
She added, “We are looking forward to engaging on this topic further in the future and show that the industry is moving forwards to a sustainable future.”
©Markets Media Europe 2021