28 January 2021
On 15 December 2020, Singapore Exchange (“SGX”) announced its S$20 million investment in a multi-pronged expansion of its sustainability capabilities and initiatives. Half of this amount will go towards new environmental, social and corporate governance (“ESG”)-focused products, services and platforms, while the other half will be channelled into capacity building for the financial ecosystem, strengthening internal capabilities and increasing corporate social responsibility commitments.
A newly launched platform called SGX FIRST (Future in Reshaping Sustainability Together) will house SGX’s sustainability initiatives. This platform is Asia’s only multi-partner, multi-asset exchange-led sustainability platform.
These initiatives span across asset classes including fixed income, equities, and indices, as explained below.
SGX plans to enhance data access and transparency of sustainable bonds in the region by bringing regional issuers onto the Nasdaq Sustainable Bond Network Initiative (“Nasdaq Network”), providing a valuable component of global data onto the network and quality data to regional clients in collaboration with Nasdaq. The Nasdaq Network aims to be the leading source of information on green, social and sustainability bonds, both listed and unlisted, to help global investors conduct due diligence, selection and monitoring of these bonds. SGX is the exclusive partner in Asia for the Nasdaq Network, which covers over 4,500 bonds to-date, originating mainly from the USA and Europe.
Mandatory sustainability reporting was implemented in 2016 and all companies required to publish ESG reports have done so. Singapore Exchange Regulation (SGX RegCo) has shared with SGX-listed companies recommended areas for improvement based on its first review of the published sustainability reports. It has also encouraged companies to adopt the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and will update its sustainability guidance to highlight the importance of climate reporting.
SGX informs that more ESG-focused investment and risk management products will be rolled out in the next three years. Building on Scientific Beta’s strengths in ESG and leadership in multi-factor indices, asset owners and managers can look forward to innovative approaches in quantifying sustainable development for investment purposes.
SGX aims to launch four futures contracts in partnership with FTSE Russell, based on the FTSE Emerging Markets, FTSE Asia ex-Japan, FTSE Emerging Markets Asia and FTSE Blossom Japan ESG-themed indices. The FTSE ESG indices have risk/return characteristics similar to benchmark market-cap weighted indexes, maintain industry neutrality, and deliver the added benefit of improved ESG metrics. These risk management tools will strike a balance between improved ESG scores and a good representation of the underlying stock market. They will also facilitate ESG integration into investment strategies and provide a hedging instrument for ESG-tracking investments.
New sustainability benchmarks and ESG-related indices will also be layered alongside existing flagship multi-factor indices offered by the SGX Group including Scientific Beta and Index Edge products. Scientific Beta will develop new climate change risk solutions for institutional investors in the next 12 months, enabling responsible investment in alignment with Paris Agreement climate change goals.