Q&A with Deutsche Börse: Transparency Is the Foundation for Responsible Investing

Mar 5, 2018 2:00 PM ET

Deutsche Börse is an international provider of capital markets infrastructure and one of the largest stock exchanges in the world. We spoke with Kristina Jeromin, Head of Group Sustainability, who told us about the company’s efforts to drive progress and innovation in sustainable finance and the role of sustainability reporting in long-term oriented investing.​

Kristina Jeromin: The entire financial world is in the midst of a vast transformation. As an international infrastructure provider, based in Frankfurt, we believe it is also our responsibility to bring all relevant parties together, to drive sustainable progress and innovation forward. One current project is the Accelerating Sustainable Finance Initiative, which Deutsche Börse Group launched in May 2017 together with other key players from Frankfurt’s financial community.

The Sustainable Finance Initiative is based on the conviction that current global challenges, such as climate change and digitalization, require innovative and solution-oriented action. Crucial to such action is the transformation to a more sustainable financial system worldwide. The participants in the Frankfurt Sustainable Finance Initiative aim to actively work towards implementing sustainable milestones, such as the United Nation's Sustainable Development Goals, the realization of the Paris Climate Agreement and also the design of a green finance system, a focus of the German G20 presidency. The idea is to drive forward the holistic mobilization of sustainable financial market infrastructures, as a means of supporting the positive development of business and society, while also ensuring the protection of the natural environment.

Maintaining a stable and resilient market is a top priority of any stock exchange. What do you see as the relation between that goal and the practice of corporate sustainability reporting?
Sustainability reporting enables organizations to consider their impacts on a wide range of sustainability issues, helping them to be more transparent about the risks and opportunities they face.
As an organizer of international financial markets, Deutsche Börse Group sees it as its natural obligation to provide the basic conditions to initiate, support, and reward responsible trading. Knowledge is one of the prerequisites for responsible trading, and this knowledge depends on comprehensive, transparent information, which is accessible to all market players. We therefore promote initiatives enhancing transparency, which is the basis for integral investment strategies. We positioned our ESG Best Practice Guide as a guideline for companies affected by the EU Directive on Non-financial reporting, at various dialogue events, with representatives from the government, industry and society. The guide presents internationally valid reporting methods including selected best-practice examples and, by giving seven recommendations, offers a structured approach to an intelligent and efficient way of dealing with sustainability topics in capital market communications.

Over the past few years, have you seen an increase in investor interest in ESG data from your listed companies and, if so, why?
We have indeed seen an increase in investor interest in ESG data. ESG information has both legal and business dimensions. A company may be required to disclose information regarding climate change, cybersecurity, environmental impacts, and social impacts under state and federal regulations. How the company responds to these requirements can have legal consequences. How a company manages and reports on sustainability issues can also affect its operations, financial performance, corporate governance, and reputation. The growth in demand for ESG data is due to the increased prevalence of long-term oriented investors and the development of sustainable, responsible, and impact investing. More and more investors see this information as useful in helping them to reduce risk, improve returns, and make better informed investment decisions.
The term “non-financial reporting’ is often used as a synonym for sustainability or CSR reporting, but this term makes little sense within the financial services field. Can you explain?
The term “non-financial reporting” creates the impression that ESG performance is independent from financial performance. This impression is incorrect, due to the fact that sustainability topics can have drastic impacts on a company’s financial performance. With the emergence of integrated reporting (the intelligent combination of financial and sustainability reporting), companies are assessing the link between ESG and financial performance. The more companies focus on compelling linkages between these realms, and provide evidence on how sustainability drives value, the more fit-for-purpose ESG information will be for investors.
How does Deutsche Börse approach its own sustainability reporting, and how does GRI's framework help in this process?
Organizing capital markets, characterized by transparency, safety and integrity, is not only the public-service mission and core business of Deutsche Börse Group, but it is also its most important value contribution to society. What we ask of ourselves: to not simply comply with reporting obligations uncritically, but to help shape the reporting of tomorrow.

Firmly convinced that transparency increases trust and thereby creates safety, we support initiatives on sustainability reporting such as the Global Reporting Initiative, the German Sustainability Code and the International Integrated Reporting Council. We also strive to lead by example and offer our stakeholders information which is relevant to them. In our corporate reporting Deutsche Börse Group continues to adhere to the concept of embedding social responsibility and sustainability in all business areas. Our integrated reporting creates transparency on how we identify material opportunities and risks.
Since the 2012 reporting period, Deutsche Börse Group has published a combined report, which includes both information from the traditional financial report as well as details on the company’s sustainability performance. The GRI reporting framework’s principles of stakeholder inclusiveness and materiality have been instrumental in helping us identify opportunities and risks to our core business activities, analyze them and translate them into specific action. Based on our materiality analysis and stakeholder engagement, we are fully aware of our responsibility to act as a dialogue platform for sustainable finance.
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