London Stock Exchange this year celebrated the launch of a dedicated transition bond segment and said it will "enable higher-emitting sectors to access the funds required to transition to low-carbon".
The transition bond segment will display notes from issuers who have a corporate strategy or transition framework that is aligned with the Paris Agreement goal of limiting global temperature rises to 2°C or less above pre-industrial levels.
London Stock Exchange said that to be included in the transition bond segment, issuers would have to present approved targets to achieve net zero and disclose and manage climate-related risks in line with standards such as the Transition Pathway Initiative.
The segment joined London Stock Exchange's green, social, sustainability and sustainability-linked bond segments, as well as its green revenues bond segment, that compose its sustainable bond market. To date, the market has admitted more than 260 bonds – of which more than half are labelled bonds, the remainder being unlabelled bonds from 'green economy' companies with at least 90% of their revenue from 'green' products and services – and raised more than £56 billion ($78 billion). In 2020, London Stock Exchange's sustainable bond market welcomed 39 bonds, raising £13 billion.
London Stock Exchange Group (LSEG) also this year announced it had become the first global exchange to commit to set a target of 'net zero' greenhouse gas emissions, through the Science Based Targets initiative (SBTi)-led Business Ambition for 1.5°C campaign.
Meanwhile, in 2020, increased demand for the London Stock Exchange's 'Green Economy Mark' – which it calls a world-first classification system for issuers that generate green revenues – saw the cohort of issuers grow by 24% since launch, totalling 92 issuers at year end.
2020 also saw rapid growth in the listing of ESG exchange-traded funds (ETFs). By year end, there were 138 ESG ETFs listed on London Stock Exchange; 61 new ESG ETFs listed on the exchange in 2020, accounting for nearly half of all new ETF listings on the market.
LSEG, as co-chair of the Sustainable Stock Exchanges (SSE) initiative, also contributed to 2020 draft guidance designed to support exchanges provide climate disclosure guidance to issuers.
Julia Hoggett, CEO of London Stock Exchange, told Environmental Finance: “Sitting at the heart of capital markets, stock exchanges play a vital role in facilitating investment in sustainable economic activities, while enabling companies to fund their transition to net-zero. Dedicated markets such as our Sustainable Bond Market (SBM) offer issuers a fundraising destination for a range of green, social and sustainability bonds. While our Green Economy Mark offers a simple way to identify London-listed companies generating revenue from environmental products and services beyond pure green sectors."
Launched earlier this year, SBM now includes the world’s first Transition Bond Segment which gives carbon-intensive companies with credible climate transition strategies a way to finance a capital-intensive shift towards more sustainable business models.
“Exchanges also have a unique and important role to play in driving change and helping issuers to adopt and implement climate reporting practices, which in turn helps provide investors with high quality and comparable data. That is why we are working closely with the SSE to publish climate disclosure guidance for listed companies on a global basis with the aim of making markets climate resilient,” Hoggett added.
