Stock exchanges aren’t my natural habitat, although I did serve on the admissions panel and board of the ill-fated Social Stock Exchange some years ago. But I did find myself on the balcony when John O’Brien and his Anthropy team opened the London Stock Exchange on February 12th—and there I bumped into David Harris, who is head of Sustainable Finance Strategic Initiatives & Partnerships.
Inevitably, perhaps, I asked him what the London Stock Exchange Group, or LSEG, was up to behind the scenes—and was invited to come back and find out. The answer, I discovered, is that a great deal is going on in areas related to this series of posts. As a result, I have been spotlighting LEG’s work in recent presentations, including one yesterday to the Oxford University Sustainable Finance Students’ Society.
Rather than reviewing everything LSEG is doing here, it may be helpful if I take David’s lead and flag some key areas of its work—and then provide links to relevant online information and resources.
The “silly index”
One area I had known about for quite some years was the FTSE4Good indexes, with David sending me their 20-year anniversary report, published in 2023. In re-reading the report, I was taken by the introduction signed off by Arne Staal, CEO of FTSE Russell, and group head of Benchmarks & Indices at LSEG.
Here’s how he kicked off:
Twenty years ago, FTSE introduced a new kind of equity index amidst considerable public skepticism. The FTSE4Good index series, launched in 2001, used transparent metrics of environmental, social and governance (ESG) performance to select its constituents, incentivizing companies to improve their sustainability practices.
Some regarded the approach of the new index as a fad. In a newspaper column, one of the UK’s main business commentators even called it the “silly index.”
At the time, many investment professionals still considered ESG issues as irrelevant, and at worst as detrimental to returns. Two decades later the capital markets and investment approaches have changed beyond recognition.
Financial institutions around the world—including sovereign wealth funds, pension funds, insurance companies, asset managers and banks—now incorporate sustainability into their philosophy and processes as a matter of course.
The collective assets of signatories to the United Nations Principles for Responsible Investment (UN PRI) represent more than half of the world's institutional assets, reaching over $121 trillion in 2021 and covering over 4,500 firms.
The Transition Pathway Initiative
Another LSEG initiative I had already heard about, but in no great detail, was the Transition Pathway Initiative (TPI). David kindly provided a headline briefing on what is currently going on there, too.
And one question I had was quickly answered: how did TPI first come about? The answer, according to the TPI’s own website, proved to be:
TPI was initiated by a group of asset owners, including National Investing Bodies (NIBs) of the Church of England which, in its May 2015 Climate Change Policy had committed to developing a tool to assess the progress of companies’ transition to the global low carbon economy.
These organisations are recognised as responsible investors and regard the issue of climate change as one of the most pressing of our times, seeking to support investors’ understanding of climate change risk and opportunity. The Environment Agency Pension Fund (EAPF) and Church of England Pensions Board co-founded the Transition Pathway Initiative (TPI) in 2016 to provide information on transition risk for free to investors.
In 2021, the TPI turned from a voluntary initiative by asset owners into a not-for-profit limited company, which oversees the research by the LSE. EAPF is the vice-chair and Treasurer of the new limited company.
Established in 2022, the TPI’s goal has been to “become the go-to source for financial institutions on methods and data to advance the net zero transition.” Part of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science (LSE), the TPI Centre collaborates with a range of research and data partners. And FTSE Russell, part of the LSEG ecosystem, serves as the data partner on the management quality front.
I learned that the work involves developing detailed and transparent assessment methodologies based on publicly available information—with an eye to supporting the net zero transition within both financial and non-financial corporate and sovereign debt markets.
One key project in all of this has been the FTSE TPI Climate Transition Index, launched at the London Stock Exchange on 30th January 2020, and itself the result of 18 months of collaboration and partnership between the Pensions Board, FTSE Russell, and the TPI.
So how does this work?
The Index, we are told, “seeks to integrate TPI insights into the Board’s passive investments, providing further tools for their engagement with companies that need to transition. It takes account of five measures that relate to climate change in generating the under- and over- weighted stocks, including Fossil Fuel Reserves, Carbon Emissions and Green Revenues. Companies that score poorly on TPI’s Carbon Performance methodology are not included in the index. They remain eligible, but are only be included if their disclosures and carbon performance targets improve.”
FTSE Russell have described this as “the next generation of Climate Indexes”, with the index seen [to have produced] significant improvements in climate metrics relative to capitalisation weighted benchmarks: reductions in carbon intensity (~50% reduction), lower carbon emissions (~40% reduction) and fossil fuel reserves (~70% reduction).”
Green Economy
But the area that really hooked my interest was LSEG’s work on the Green Economy. Having coined the term “green growth” way back in 1986, this has been a key interest of mine for well over 40 years.
In the 2024 LSEG report on investment trends in the green economy, we were told that:
Transitioning to a more sustainable economic system that balances economic development with maintaining healthy global ecosystems requires significant investment, with estimates ranging from US$109 trillion to US$275 trillion by 2050 to address climate change alone.
These investments flow to products and services that help to reduce emissions and address other global environmental challenges, from renewables and clean water to green transport and waste management, benefitting a broad range of companies and value chains which make up the global green economy.
LSEG has been developing proprietary data, analytics and index solutions to measure a given company’s exposure to the green economy since 2008. Their approach includes a bottom-up assessment of more than 19,000 companies globally, with detailed green revenue data categorised across 133 green products and services defined by the FTSE Russell Green Revenue Classification System.
These tools help to identify green investment opportunities and track their performance but also calibrate the exposure of equity and bond portfolios to climate solutions and the green economy.
In a separate 2020 report, called Sizing the Green Economy: Green Revenues and the EU Taxonomy, FTSE Russell concluded that:
The greening of the global economy presents significant opportunities. However, investors and policymakers face a common challenge: How can green business activities be systematically identified, categorized, and measured across diverse sectors, supply chains and asset classes to mobilize investment at scale?
The EU Taxonomy is an ambitious regulatory initiative that aims to address this challenge. However, while the EU Taxonomy will set out a catalogue of green criteria, it leaves it to markets to assess individual companies against these criteria.
Yet in their current form, corporate disclosures are typically insufficient—FTSE Russell research has found that less than 30% of companies with green revenues provide disclosures that are granular enough to allow investors to systematically break out and quantify companies’ green business activities.
Policy advocacy
Another area that has interested me, both at SustainAbility and now at Volans, has been how key market actors can get involved in positive, legitimate and effective policy advocacy. This is something that Volans has been focusing on in recent work with partners like InfluenceMap and Unilever.
LSEG, too, has been active in this space. In 2022, for example, LSEG published a report on the theme, “Mobilising capital for a sustainable global economy.” They argued that:
To accelerate progress [...] the financial sector’s broader efforts to mobilise capital in line with sustainability goals, governments and regulators have an essential role. It is important that policymakers globally build on action taken so far to embed sustainability across the financial system and global economy in order to fully apply the power of capital markets.
By doing so, policymakers can help to drive growth and innovation in the global green economy, while supporting the transition across the broader economy in parallel, including traditionally carbon-intensive sectors.
Mandatory sustainability disclosure rules can be critical in this regard, helping to cut transaction costs and unlocking information that the financial sector needs to drive the global transition. With the International Sustainability Standards Board’s (ISSB) global baseline sustainability reporting standards in development, policymakers have a unique opportunity to facilitate significantly better availability and consistency of sustainability-related information
Alongside the Principles for Responsible Investment (PRI), the UN Sustainable Stock Exchanges Initiative (UNSSE) and WBCSD, the LSEG has called for ISSB adoption by 2025. Their argument ran as follows:
[...] there remain significant gaps in even the most basic sustainability-related data. For example, 2022 research shows that, of the 4,000 largest listed companies globally, over 40% do not disclose their operational carbon emissions.
Policymakers have an essential role to play in addressing this challenge, through the introduction of requirements on the disclosure of key sustainability-related information. The International Sustainability Standards Board’s (ISSB) standards that establish a global baseline of sustainability information for capital markets provide a unique opportunity to bring about global alignment in this area—promoting availability of consistent data across investment portfolios—and support effective economic and investment decisions.
Earlier in 2025, too, they published recommendations for improving the EU Sustainable Finance Regulation. They noted that “the European Union [...] has developed a comprehensive policy and regulatory framework to better integrate sustainability and climate priorities into the financial system to steer capital towards activities that support the transition to a low-carbon, sustainable economy.”
But, as this framework has been implemented, it has become clear that the complexity and detail involved could prove to be “a barrier to scaling adoption and impact.”
On November 8, the Budapest Declaration on the New European Competitiveness Deal set out a planned "simplification revolution” to reduce reporting requirements "by at least 25%" as part of the plan for Europe's sustainable prosperity and competitiveness. This reflects a broader acknowledgement of the need to review the EU framework and represents a critical opportunity to streamline the regulatory framework, making it more scalable and usable by the financial sector and the corporate community.
Simplifying the EU sustainable finance framework would enhance European competitiveness by reducing compliance complexity, fostering innovation, and enabling businesses to allocate resources more effectively toward sustainable growth.
As I trawled back and forward through all these documents, one diagram that caught my eye on the SSEI website was this one—which potentially offers a useful benchmark to track future progress across the world’s stock exchanges as key influencers in financial markets:
Clearly, recent events in the USA—and ricochet effects in other parts of the world—will have significant impacts on the scale and speed of the green transition. But LSEG’s work offers a way of tracking the ups and downs of this key part of the global economy—alongside the ongoing efforts by thoughtful parts of the financial sector to influence policy frameworks to make the transition both simpler and speedier.
John Elkington is Founder & Global Ambassador at Volans. His personal website can be accessed here. His latest book is Tickling Sharks: How We Sold Business on Sustainability (Fast Company Press, 2024). Available on Amazon and through good bookshops:
What readers say:
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