The Singapore Exchange is investing $20 million into expanding its sustainability initiatives, housed under a new platform.
SGX FIRST, which stands for Future in Reshaping Sustainability Together, is Asia’s only multi-partner, multi-asset exchange-led sustainability platform, says the bourse in a news release on Dec 15.
According to SGX, half the amount will go towards new environmental, social and 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 (CSR) commitments.
In addition, SGX will appoint its first Head of Sustainability and Sustainable Finance in the coming year.
“Through the SGX FIRST platform, we aim to equip investors and issuers in this region with greater ESG knowledge and provide them with better access to a wider range of ESG-related information,” says SGX CEO Loh Boon Chye, in a press release.
“This will complement the new risk management and investment products centred on ESG factors that will be developed in the next few years. With stronger collaboration within the ecosystem, we can make a difference in sustainability starting from Singapore, in Asia and eventually across the world.”
New futures
SGX says it will launch four futures contracts in partnership with FTSE Russell by January, 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 added benefit of improved ESG metrics. By striking a balance between improved ESG scores and a good representation of the underlying stock market, these risk management tools will help facilitate ESG integration into investment strategies and provide a hedging instrument for ESG-tracking investments,” says the bourse.
Third parties
Mandatory sustainability reporting was implemented since 2016 and all companies required to publish ESG reports have done so, says SGX.
See: 'Room for improvement' in overall sustainability reporting by Singapore-listed companies: SGX RegCo-CGIO joint review
SGX has also expanded its existing indexing partnership with FTSE Russell, Morningstar Sustainalytics and MSCI to provide ESG ratings on listed companies. Over 30 SGX-listed companies are initially covered, with plans to expand coverage in 2021.
“With the addition of third-party ratings, investors can form a more comprehensive view of companies for investment decisions and companies will be encouraged to embrace sustainability as an integral part of their business,” says SGX, and more ESG-focused investment and risk management products will be rolled out in the next three years.
New sustainability benchmarks and ESG-related indices will also be introduced, including Scientific Beta and Index Edge products.
Currently, more than 30% of assets tracking Scientific Beta’s indices already have ESG options and all its indices have advanced ESG and Climate Risk reporting. Scientific Beta will develop new climate change risk solutions for institutional investors in the next 12 months. Investors will be able to tap on these indexing solutions for responsible investing that aligns to Paris agreement climate change goals, says SGX.
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Carbon-neutral events
SGX is a component of several global ESG indices including FTSE4Good Index, Bloomberg ESG Data Index and MSCI World ESG Leaders Index. It currently purchases Renewable Energy Certificates (RECs) for its Singapore operations through its subsidiary Energy Market Company (EMC)’s Powerselect platform.
Corporate events are made carbon-neutral through the purchase of carbon offsets. To further manage and reduce its environmental footprint, SGX has embarked on a corporate carbon profiling exercise across all its offices and subsidiaries worldwide.
“MAS welcomes the launch of SGX’s sustainability initiatives and the FIRST platform today,” says Gillian Tan, Assistant Managing Director (Development & International) of the Monetary Authority of Singapore.
“SGX can play a critical role as the gateway for global investors to access the significant opportunities presented by Asia’s transition to a low-carbon, sustainable future.”
