To help investors identify companies that are legitimately seeking to reduce their exposure to sustainability risk, the World Federation of Exchanges (WFE) has published a set of principles for exchanges to develop ways of flagging companies that are pursuing decarbonization.
On Tuesday, the global trade group for exchanges and clearing houses issued the principles that set out a framework for exchanges to create an identifier for publicly-listed companies that are on “credible” paths to a low-carbon future.
The WFE said it developed the principles in response to global demand to support decarbonization and the allocation of capital towards “net zero.”
The principles “will bring clarity, consistency and rigour to the concept of transition equities and will contribute to international recognition among various offerings, thereby supporting cross-border investment activities,” the group said.
“Unlocking the level of capital needed for the transition will require leadership and market design by public markets,” said Nandini Sukumar, CEO of the WFE, in a release.
”The WFE Transition Equity Principles will bring greater consistency and credibility to transition equity offerings, while helping to build confidence among issuers, investors and other market participants,” she added.
The principles were developed with input from a committee made up of members of the WFE and other industry experts, led by a working group of chief sustainability officers and other executives.
The WFE said it’ll formally consult on the principles. Once the principles are finalized, it’ll issue guidance on their use.