[AS PPREPARED FOR DELIVERY]
Ladies and gentlemen,
I am pleased to be with you today at this high-level dialogue on Sustainable Stock Exchanges, co-hosted by UNCTAD, the United Nations Global Compact, the Principles for Responsible Investment Initiative and the UNEP Finance Initiative. We are committed to working with our co-organizers in the spirit of "One UN" to better address the pressing needs of sustainable development.
This is the third time I've had the privilege of addressing this unique forum. At both the 2009 event in New York, and the 2010 event held in Xiamen, China, I have enjoyed the exceptional exchange of views that takes place among the key constituents of this event: investors, stock exchange officials and capital market regulators from around the world. This meeting falls at a crucial moment for reflection and action over the state of the global economy, and the future of stable, sustainable development. The twentieth anniversary of the Earth Summit is a historic milestone requiring a stock taking of what we have done, and deliberations on how we proceed in the future.
As we meet here, the world economy is still reeling from the aftermath of the worst financial crisis in 70 years. The recovery has remained very fragile, with some countries at risk of a 'double-dip' recession. Today, the MSCI World Index and the Emerging Markets index are at the same level as they were in 2006. More than half a decade of growth in capital markets has been wiped out by the financial crisis and the ensuing economic recession and debt crisis it spawned. High-risk investments, involving complex derivative products and short-term maturity profiles have not served the economic development of the global economy well. Indeed, the fallout from the meltdown has hit many of the investors in this room directly, and has raised serious questions about finance-led globalization.
With the sluggish growth in the world economy, many labour markets around the world have shown some tentative signs of recovery. After the sharp increase in 2009, unemployment rates in most developing countries have begun to fall slightly over the past two years. Yet, continued uncertainty in the global economy, particularly over financial and fiscal conditions in parts of the European Union, have dampened job creation. Today there are still millions of unemployed in both developed and developing countries, and wage growth is still low; the credit markets remain sclerotic and low central bank interest rates are not being passed onto business or consumers, retarding a rebound in global production, investment, trade and consumption. Most significantly - especially for the world's most vulnerable - this has led to significant setbacks for poverty reduction and the achievement of the Millennium Development Goals.
Running in parallel to these economic development challenges are ongoing environmental challenges. According to the International Energy Agency, global growth of GHG emissions are estimated to have increased by more than 6 per cent in 2010, a historical record. And according to estimates of analysts at Pricewaterhouse Coopers, global carbon intensity - that is carbon emissions per unit of GDP - has increased for the first time in many years. PWC observed that, and I quote, "Instead of moving too slowly in the right direction, we are now moving in the wrong direction".
Ladies and gentlemen,
Environmental, social and governance issues - so-called ESG issues - are critical for creating a world economy that is more stable, inclusive and sustainable. It is imperative that we move away from an exclusive focus on short-term profitability, not just because this is good for the environment or society, but because it is also a more accurate understanding of how business works: sustainable long-term growth is better than unsustainable short-term profitability for companies, their shareholders, their employees and their customers. To meet the challenge of transitioning to a more sustainable economy, a wide range of actions and instruments will need to be implemented. High-quality ESG disclosure is an important component of this policy mix, and provides the information needed by investors, policy makers, corporate managers and other stakeholders.
The usefulness of ESG disclosure is evident. What we measure affects what we do; and if our measurements are flawed, decisions may be distorted. Choices between promoting GDP and protecting the environment may be false choices, once environmental degradation is appropriately included in our measurement of economic performance. If our metrics of performance are flawed, so too may be the conclusions that we draw. Those were the findings of the Commission on the Measurement of Economic Performance and Social Progress, convened by the French President in 2009.
Investors are increasingly aware of the need to take ESG issues into greater consideration. UNCTAD research has found that among the largest 100 pension funds in the world, ESG criteria are being applied to more than 50% of the assets under management. Investors are also increasingly vocal in their demands for improved ESG disclosure: the Corporate Sustainability Reporting Coalition - a group launched last year that has already attracted investors with over 2 trillion dollars in assets under management - is calling for national regulations on ESG disclosure on a 'report or explain' basis.
The two other key partners in this process are regulators and stock exchanges themselves. As we heard in the sessions this morning, stock exchanges in several countries are engaged in pioneering work, especially in developing countries, where exchanges and regulators are taking the lead in promoting new sustainability indices and new ESG reporting rules. We welcome the work done by these exchanges and today's collaborative dialogue sends an important signal to listing authorities around the world that they play an important role in promoting the ESG agenda.
Ladies and gentlemen,
I'd like to conclude my speech today by making an announcement on behalf of the quartet of organizers of the Sustainable Stock Exchanges initiative. Since 2009, our dialogues with stock exchanges have highlighted best practices and promoted a sharing of experiences and lessons learned. Going forward we would like to publicly recognize those exchanges that are committed to promoting sustainability. Therefore, today we are issuing an open invitation to stock exchanges around the world, to commit to the following pledge:
"We voluntarily commit, through dialogue with investors, companies and regulators, to promoting long term sustainable investment and improved environmental, social and corporate governance disclosure and performance among companies listed on our exchange".
This aspirational statement, along with practical examples of concrete actions, will help to work towards the goal of the Sustainable Stock Exchanges initiative to facilitate the sharing of best practices, and help further our wider goal of transitioning to a sustainable economy.
I would like to end now, by welcoming to the front of the room a group of "founding signatories" to help launch this new phase of the Sustainable Stock Exchanges initiative. Please give a round of applause for these stock exchange leaders.